SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                            SCHEDULE 14A INFORMATION
                PROXY STATEMENT PURSUANT TO SECTIONProxy Statement Pursuant to Section 14(a) OF THE SECURITIES EXCHANGE ACT OFof the
                Securities Exchange Act of 1934 (AMENDMENT NO.(Amendment No. )

Filed by the Registrant [X]/X/
Filed by a Party other than the Registrant [ ]/ /

Check the appropriate box:

[X]/X/ Preliminary Proxy Statement
[ ]/ / Confidential, for Use of the Commission Only (as permitted by
    Rule 14a-6(e)(2))
[ ]/ / Definitive Proxy Statement
[ ]/ / Definitive Additional Materials
[ ]/ / Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12


                              Voyageur Tax Free Funds, Inc.
                   Voyageur Intermediate Tax Free Funds, Inc.
                          Voyageur Insured Funds, Inc.
                            Voyageur Investment Trust
                          Voyaguer Investment Trust II
                           Voyaguer Mutual Funds, Inc.
                         Voyageur Mutual Funds II, Inc.
                         Voyageur Mutual Funds III, Inc.
               ---------------------------------------------------VOYAGEUR FUNDS, INC.
- -----------------------------------------------------------------------------
                (Name of Registrant as Specified in itsIts Charter)


 [Insert Name]
        ----------------------------------------------------------------------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
    Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
    14a-6(i)(3).
[ ]/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)(1) and 0-11.

    [X] No fee required.

    (1)1) Title of each class of securities to which transaction applies:

       
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    (2)----------------------------------------------------------------------
    2) Aggregate number of securities to which transaction applies:

       
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    (3)----------------------------------------------------------------------
    3) Per unit price or other underlying value of transaction computed
       pursuant to Exchange Act Rule 0-11 (Set(set forth the amount on which the
       filing fee is calculated and state how it was determined):

        
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    (4)----------------------------------------------------------------------
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    (5)----------------------------------------------------------------------

    5) Total fee paid:

       
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[ ]----------------------------------------------------------------------

/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
    0-11(a)(2) and identify the filing for which the offsetting fee was
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    (1)1) Amount Previously Paid: 

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    (2)___________________________________________________________________________
    2) Form, Schedule or Registration Statement No.:

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    (3)___________________________________________________________________________
    3) Filing Party:

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    (4)___________________________________________________________________________
    4) Date Filed:
                      
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                               [PRELIMINARY COPY]___________________________________________________________________________
 

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                            SCHEDULE 14A INFORMATION
                Proxy Statement Pursuant to Section 14(a) of the
                Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:

/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
    Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12


                          VOYAGEUR TAX FREEINSURED FUNDS, INC.
- -----------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)


 -----------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

    1) Title of each class of securities to which transaction applies:

       
       ----------------------------------------------------------------------
    2) Aggregate number of securities to which transaction applies:

       
       ----------------------------------------------------------------------
    3) Per unit price or other underlying value of transaction computed
       pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
       filing fee is calculated and state how it was determined):

        
       ----------------------------------------------------------------------
    4) Proposed maximum aggregate value of transaction:

        
       ----------------------------------------------------------------------

    5) Total fee paid:

       
       ----------------------------------------------------------------------

/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
    0-11(a)(2) and identify the filing for which the offsetting fee was
    paid previously. Identify the previous filing by registration statement
    number, or the Form or Schedule and the date of its filing.

    1) Amount Previously Paid: 

    ___________________________________________________________________________
    2) Form, Schedule or Registration Statement No.:

    ___________________________________________________________________________
    3) Filing Party:

    ___________________________________________________________________________
    4) Date Filed:
                      
    ___________________________________________________________________________
 

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                            SCHEDULE 14A INFORMATION
                Proxy Statement Pursuant to Section 14(a) of the
                Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:

/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
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/ / Definitive Proxy Statement
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/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12


                   VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
                            VOYAGEUR INVESTMENT TRUST
                          VOYAGEUR INVESTMENT TRUST II- -----------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)


 -----------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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    1) Title of each class of securities to which transaction applies:

       
       ----------------------------------------------------------------------
    2) Aggregate number of securities to which transaction applies:

       
       ----------------------------------------------------------------------
    3) Per unit price or other underlying value of transaction computed
       pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
       filing fee is calculated and state how it was determined):

        
       ----------------------------------------------------------------------
    4) Proposed maximum aggregate value of transaction:

        
       ----------------------------------------------------------------------

    5) Total fee paid:

       
       ----------------------------------------------------------------------

/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
    0-11(a)(2) and identify the filing for which the offsetting fee was
    paid previously. Identify the previous filing by registration statement
    number, or the Form or Schedule and the date of its filing.

    1) Amount Previously Paid: 

    ___________________________________________________________________________
    2) Form, Schedule or Registration Statement No.:

    ___________________________________________________________________________
    3) Filing Party:

    ___________________________________________________________________________
    4) Date Filed:
                      
    ___________________________________________________________________________
 

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                            SCHEDULE 14A INFORMATION
                Proxy Statement Pursuant to Section 14(a) of the
                Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:

/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
    Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12


                           VOYAGEUR MUTUAL FUNDS, INC.
- -----------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)


 -----------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

    1) Title of each class of securities to which transaction applies:

       
       ----------------------------------------------------------------------
    2) Aggregate number of securities to which transaction applies:

       
       ----------------------------------------------------------------------
    3) Per unit price or other underlying value of transaction computed
       pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
       filing fee is calculated and state how it was determined):

        
       ----------------------------------------------------------------------
    4) Proposed maximum aggregate value of transaction:

        
       ----------------------------------------------------------------------

    5) Total fee paid:

       
       ----------------------------------------------------------------------

/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
    0-11(a)(2) and identify the filing for which the offsetting fee was
    paid previously. Identify the previous filing by registration statement
    number, or the Form or Schedule and the date of its filing.

    1) Amount Previously Paid: 

    ___________________________________________________________________________
    2) Form, Schedule or Registration Statement No.:

    ___________________________________________________________________________
    3) Filing Party:

    ___________________________________________________________________________
    4) Date Filed:
                      
    ___________________________________________________________________________
 

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                            SCHEDULE 14A INFORMATION
                Proxy Statement Pursuant to Section 14(a) of the
                Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:

/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
    Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12


                         VOYAGEUR MUTUAL FUNDS II, INC.
- -----------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)


 -----------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

    1) Title of each class of securities to which transaction applies:

       
       ----------------------------------------------------------------------
    2) Aggregate number of securities to which transaction applies:

       
       ----------------------------------------------------------------------
    3) Per unit price or other underlying value of transaction computed
       pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
       filing fee is calculated and state how it was determined):

        
       ----------------------------------------------------------------------
    4) Proposed maximum aggregate value of transaction:

        
       ----------------------------------------------------------------------

    5) Total fee paid:

       
       ----------------------------------------------------------------------

/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
    0-11(a)(2) and identify the filing for which the offsetting fee was
    paid previously. Identify the previous filing by registration statement
    number, or the Form or Schedule and the date of its filing.

    1) Amount Previously Paid: 

    ___________________________________________________________________________
    2) Form, Schedule or Registration Statement No.:

    ___________________________________________________________________________
    3) Filing Party:

    ___________________________________________________________________________
    4) Date Filed:
                      
    ___________________________________________________________________________
 

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                            SCHEDULE 14A INFORMATION
                Proxy Statement Pursuant to Section 14(a) of the
                Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:

/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
    Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12


                         VOYAGEUR MUTUAL FUNDS III, INC.
90- -----------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)


 -----------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required
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    1) Title of each class of securities to which transaction applies:

       
       ----------------------------------------------------------------------
    2) Aggregate number of securities to which transaction applies:

       
       ----------------------------------------------------------------------
    3) Per unit price or other underlying value of transaction computed
       pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
       filing fee is calculated and state how it was determined):

        
       ----------------------------------------------------------------------
    4) Proposed maximum aggregate value of transaction:

        
       ----------------------------------------------------------------------

    5) Total fee paid:

       
       ----------------------------------------------------------------------

/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
    0-11(a)(2) and identify the filing for which the offsetting fee was
    paid previously. Identify the previous filing by registration statement
    number, or the Form or Schedule and the date of its filing.

    1) Amount Previously Paid: 

    ___________________________________________________________________________
    2) Form, Schedule or Registration Statement No.:

    ___________________________________________________________________________
    3) Filing Party:

    ___________________________________________________________________________
    4) Date Filed:
                      
    ___________________________________________________________________________
 

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                            SCHEDULE 14A INFORMATION
                Proxy Statement Pursuant to Section 14(a) of the
                Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:

/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
    Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12


                          VOYAGEUR TAX FREE FUNDS, INC.
- -----------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)


 -----------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

    1) Title of each class of securities to which transaction applies:

       
       ----------------------------------------------------------------------
    2) Aggregate number of securities to which transaction applies:

       
       ----------------------------------------------------------------------
    3) Per unit price or other underlying value of transaction computed
       pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
       filing fee is calculated and state how it was determined):

        
       ----------------------------------------------------------------------
    4) Proposed maximum aggregate value of transaction:

        
       ----------------------------------------------------------------------

    5) Total fee paid:

       
       ----------------------------------------------------------------------

/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
    0-11(a)(2) and identify the filing for which the offsetting fee was
    paid previously. Identify the previous filing by registration statement
    number, or the Form or Schedule and the date of its filing.

    1) Amount Previously Paid: 

    ___________________________________________________________________________
    2) Form, Schedule or Registration Statement No.:

    ___________________________________________________________________________
    3) Filing Party:

    ___________________________________________________________________________
    4) Date Filed:
                      
    ___________________________________________________________________________
 

 


LOGO


                                                                January 28, 1998

Dear Shareholder:

A Joint Meeting of Shareholders of certain funds within the Delaware Investments
family of funds is being held in Philadelphia on March 17, 1999. This proxy
statement relates to funds that were previously part of the Voyageur fund
family. We ask that you take the time to review the enclosed proxy statement and
provide us with your vote on the important issues affecting your fund.

The enclosed proxy statement describes eight separate proposals that affect some
or all of the funds. In addition to the election of Board members and
ratification of the selection of auditors, the proposals include a change in the
designation of investment objectives from "fundamental" to non-fundamental, a
change in the fundamental policy concerning diversification of investments,
approval of new, standardized investment management agreements which contain fee
increases, fee decreases or potential fee decreases, and approval of new,
standardized sub-advisory agreements. Also, new standardized "fundamental"
investment restrictions are proposed for the funds and the current restrictions
are proposed to be made "non-fundamental." The proposed changes will allow the
Boards to modify the objectives and "non-fundamental" restrictions in the future
without the delay and expense of holding a shareholder meeting. Finally,
shareholders are being asked to approve management's proposal to reorganize the
funds into Delaware business trusts to take advantage of various advantages
under Delaware law.

We realize that this proxy statement will take time to review, but your vote is
very important. Please familiarize yourself with the proposals presented and
mark, sign and return your proxy card (or cards) in the enclosed postage-paid
envelope. You may also call toll-free to vote by telephone, or you may vote
using the Internet. The insert accompanying this proxy statement describes how
to vote using these methods.

If we do not receive your completed proxy card(s) after several weeks, you may
be contacted by our proxy solicitor, Shareholder Communications Corporation, who
will remind you to vote your shares and will review with you the various ways in
which you can register your vote.

Thank you for taking this matter seriously and participating in this important
process.

Sincerely,


LOGO


Jeffrey J. Nick
Chairman and President
Chief Executive Officer


                                       i




                QUESTIONS AND ANSWERS ABOUT THIS PROXY STATEMENT

We encourage you to read the attached proxy statement in full; however, the
following are some typical questions that shareholders might have regarding this
proxy statement.

Q: WHY IS DELAWARE INVESTMENTS SENDING ME THIS PROXY STATEMENT?

Investment companies are required to obtain shareholders' votes for certain
types of action. As a shareholder, you have a right to vote on certain major
policy decisions, such as those included here.

Q: WHAT ARE THE ISSUES CONTAINED IN THIS PROXY STATEMENT?

There are eight different proposals presented here and they are outlined in the
Notice at the beginning of the proxy statement. The Notice describes which
proposals apply to which funds.

Q: HOW WOULD THE BROAD-BASED PROPOSALS AFFECT ME AS A FUND SHAREHOLDER?

o    Changing the designation of a fund's investment objective from
     "fundamental" to "non-fundamental" would allow the a Fund's Board of
     Directors, without additional shareholder approval, to make future
     adjustments to the investment objective to give greater flexibility to
     respond to market, regulatory or industry changes. Approval of this change
     would not alter any fund's current investment objective.

o    Allowing certain state - specific tax-free funds to change their
     diversification status from diversified to non-diversified would give those
     funds greater flexibility in selecting appropriate investments from a
     smaller universe of available choices.

o    Adopting a standardized list of "fundamental" investment restrictions
     across all funds would help provide operational efficiencies and make it
     easier to monitor compliance with these restrictions.

o    Converting all existing investment restrictions to "non-fundamental" would
     allow a Fund's Board of Directors to analyze and approve changes to the
     fund's existing investment restrictions, without additional shareholder
     approval, to further the goal of standardization of investment
     restrictions.

o    Approval of the proposed fee increases, fee decreases or fee breakpoints
     for certain funds would ensure management fee levels that will enable those
     funds to continue to receive high quality investment management services.

o    Approval of new standardized investment management agreements for each fund
     (and standardized sub-advisory agreements where applicable) would help
     provide operational efficiencies.

o    The reorganization of funds from Minnesota corporations into Delaware
     business trusts would provide both consistency across the Delaware
     Investments fund family and flexibility of fund operations.

Q: HOW DO THE BOARD MEMBERS FOR MY FUND RECOMMEND THAT I VOTE?

The Board members for all the funds recommend that you vote in favor of, or FOR,
all of the proposals described above.

Q: WHOM DO I CALL FOR MORE INFORMATION ON HOW TO PLACE MY VOTE?

Please call your fund at 1-800-523-1918 or call Shareholder Communications at
1-800-858-0073 for additional information on how to place your vote.

                                   PLEASE VOTE

                             YOUR VOTE IS IMPORTANT

                                       ii

LOGO


                                                              1818 Market Street
                                                          Philadelphia, PA 19103

                          Combined Proxy Statement and
             Notice of Joint Annual/Special Meeting of Shareholders
                          to be Held on March 17, 1999
To the Shareholders of: Voyageur Funds, Inc. Voyageur Mutual Funds II, Inc. Delaware-Voyageur US Government Securities Fund Delaware-Voyageur Tax-Free Colorado Fund Voyageur Insured Funds, Inc. Voyageur Mutual Funds III, Inc. Delaware-Voyageur Tax-Free Arizona Insured Fund Aggressive Growth Fund Delaware-Voyageur Minnesota Insured Fund Growth Stock Fund Voyageur Intermediate Tax Free Funds, Inc. Tax-Efficient Equity Fund Delaware-Voyageur Tax-Free Minnesota Intermediate Fund Voyageur Tax Free Funds, Inc. Voyageur Mutual Funds, Inc. Delaware-Voyageur Tax-Free Minnesota Fund Delaware Voyageur Tax-Free Arizona Fund Delaware-Voyageur Tax-Free North Dakota Fund Delaware-Voyageur Tax-Free California Fund Delaware-Voyageur Tax-Free Idaho Fund Delaware-Voyageur Tax-Free Iowa Fund Delaware-Voyageur Minnesota High Yield Municipal Bond Fund Delaware-Voyageur Tax-Free New York Fund Delaware-Voyageur Tax-Free Wisconsin Fund
This is your official Notice that a Joint Annual/Special Meeting of Shareholders of each open-end registered investment company within the Delaware Investments family listed in bold faced type above (each a "Company") will be held on Wednesday, March 17, 1999 at 10:00 a.m. at the Union League, 140 South SeventhBroad Street, Minneapolis,Philadelphia, Pennsylvania. Each separate fund within a Company may be referred to as a "Fund." The purpose of the meeting is to consider and act upon the following Proposals and Sub-Proposals that apply either to particular Companies or Funds, and to transact any other business that properly comes before the meeting and any adjournments thereof. Proposal One: To Elect a Board of Directors for the Company Proposal One applies to all Companies. Proposal Two: To Approve the Redesignation of the Fund's Investment Objective from Fundamental to Non-Fundamental Proposal Two applies to all Funds Proposal Three: To Approve a Change in the Fund's Fundamental Policy Concerning Diversification of Investments
Proposal Three only applies to the following Funds: Voyageur Insured Funds, Inc. Voyageur Mutual Funds II, Inc. Delaware-Voyageur Tax-Free Arizona Insured Fund Delaware-Voyageur Tax-Free Colorado Fund Delaware-Voyageur Minnesota Insured Fund Voyageur Tax Free Funds, Inc. Voyageur Intermediate Tax Free Funds, Inc. Delaware-Voyageur Tax-Free Minnesota Fund Delaware-Voyageur Tax-Free Minnesota Intermediate Fund
Proposal Four: To Approve Standardized Fundamental Investment Restrictions for the Fund (Includes Seven Sub-Proposals) iii
4A: Industry Concentration 4E: Investing in Commodities 4B: Borrowing Money and Issuing Senior 4F: Making Loans Securities 4G: Redesignation of all Current Fundamental 4C: Underwriting of Securities Investment Restrictions as Non-Fundamental 4D: Investing in Real Estate
Proposal Four applies to all Funds. Proposal Five: To Approve a New Investment Management Agreement for the Fund Proposal Five applies to all Funds. Proposal Six: To Approve a New Sub-Advisory Agreement for the Fund Proposal Six only applies to the following Funds: Voyageur Funds, Inc. Delaware-Voyageur US Government Securities Fund Voyageur Mutual Funds III, Inc. Growth Stock Fund Proposal Seven: To Ratify the Selection of Ernst & Young LLP as Independent Auditors for the Company Proposal Seven applies to all Companies. Proposal Eight: To Approve the Restructuring of the Company from a Minnesota 55402 NOTICECorporation into a Delaware Business Trust Proposal Eight applies to all Companies. Please note that a separate vote is required for each Proposal or Sub-Proposal that applies to your Company or your Fund. Please vote your Proxy promptly to avoid the need for further mailings. Your vote is important. LOGO Jeffrey J. Nick Chairman, President and Chief Executive Officer TABLE OF CONTENTS
Page ---- NOTICE OF JOINT ANNUAL/SPECIAL MEETING OF SHAREHOLDERS PROXY STATEMENT Proposal One: To Elect a Board of Directors for the Company Proposal Two: To Approve the Redesignation of the Fund's Investment Objective from Fundamental to Non-Fundamental Proposal Three: To Approve a Change in the Fund's Fundamental Policy Concerning Diversification of Investments Proposal Four: To Approve Standardized Fundamental Investment Restrictions for the Fund (Includes Seven Sub-Proposals) 4A: Investing in Concentration 4B: Borrowing Money and Issuing Senior Securities 4C: Underwriting of Securities 4D: Investing in Real Estate 4E: Investing in Commodities 4F: Making Loans 4G: Resdesignation of all Current Fundamental Investment Restrictions as Non-Fundamental Proposal Five: To Approve a New Investment Management Agreement for the Fund Proposal Six: To Approve a New Sub-Advisory Agreement for the Fund Proposal Seven: To Ratify the Selection of Ernst & Young LLP as Independent Auditors for the Company Proposal Eight: To Approve the Restructuring of the Company from a Minnesota Corporation Into a Delaware Business Trust and the Dissolution of the Minnesota Corporation EXHIBITS Exhibit A: Outstanding Shares as of Record Date A-1 Exhibit B: Shareholders Owning 5% or More of a Fund as of October 31, 1998 B-1 Exhibit C: Executive Officers of the Companies C-1 Exhibit D: Shareholdings by Directors and Nominees in the Delaware Investments Funds as of October 31, 1998 D-1 Exhibit E: Lists of Current Fundamental Investment Restrictions E-1 Exhibit F: Information Relating to Investment Management and Sub-Advisory Agreements F-1 Exhibit G: Actual and Hypothetical Expense Tables G-1 Exhibit H: Similar Funds Managed by the Investment Managers and Sub-Advisers H-1 Exhibit I: Form of Investment Management Agreement I-1 Exhibit J: Form of Sub-Advisory Agreement J-1 Exhibit K: Form of Agreement and Plan of Reorganization K-1 Exhibit L: Comparison and Significant Differences for Delaware Business Trusts L-1 and Minnesota Corporations
LOGO 1818 Market Street Philadelphia, PA 19103 1-800-523-1918 PROXY STATEMENT JOINT ANNUAL/SPECIAL JOINT MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 11, 1997 A special joint meeting of shareholders will be held at 9:00 a.m. on Friday, April 11, 1997 at [90 SOUTH SEVENTH STREET, SUITE 4400, MINNEAPOLIS, MINNESOTA 55402] for the following mutual funds (individually a "Fund" and collectively the "Funds"), each of which is a series of one of the registered investment companies listed above (individually a "Company" and collectively the "Companies"): VOYAGEUR TAX FREE FUNDS, INC. Minnesota Tax Free Fund North Dakota Tax Free Fund VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC. Minnesota Limited Term Tax Free Fund National Limited Term Tax Free Fund VOYAGEUR INSURED FUNDS, INC. Arizona Insured Tax Free Fund Minnesota Insured Fund National Insured Tax Free Fund VOYAGEUR INVESTMENT TRUST California Insured Tax Free Fund Florida Insured Tax Free Fund Florida Tax Free Fund Kansas Tax Free Fund Missouri Insured Tax Free Fund New Mexico Tax Free Fund Oregon Insured Tax Free Fund Utah Tax Free Fund Washington Insured Tax Free Fund VOYAGEUR INVESTMENT TRUST II Florida Limited Term Tax Free Fund VOYAGEUR MUTUAL FUNDS, INC. Arizona Tax Free Fund California Tax Free Fund Iowa Tax Free Fund Idaho Tax Free Fund Minnesota High Yield Municipal Bond Fund National High Yield Municipal Bond Fund National Tax Free Fund New York Tax Free Fund Wisconsin Tax Free Fund VOYAGEUR MUTUAL FUNDS II, INC. Colorado Tax Free Fund VOYAGEUR MUTUAL FUNDS III, INC. Aggressive Growth Fund Growth Stock Fund Growth and Income Fund International Equity FundMARCH 17, 1999 Meeting Information. The meeting will be held for the following purposes: 1. For shareholders of each Company to elect a Board of Directors or Trustees. 2. For shareholders of each Fund to approve a new Investment Advisory Agreement, except for International Equity Fund, National Insured Tax Free Fund, National Limited Term Tax Free Fund, National Tax Free Fund and Growth and Income Fund. 3. For shareholders of Growth Stock Fund only, to approve a Sub-Advisory Agreement. 4. For shareholders of each of International Equity Fund, National Insured Tax Free Fund, National Limited Term Tax Free Fund and National Tax Free Fund, to approve the liquidation of their respective Fund and the distribution of such Fund's net assets to shareholders. For each Fund, approval of the liquidation will be considered approval of an amendment to the articles of incorporation of such Fund's Company required to effect the liquidation. 5. For shareholders of Growth and Income Fund, a series of Voyageur Mutual Funds III, Inc., to approve an Agreement and Plan of Reorganization pursuant to which all of the assets of the Fund would be acquired by a newly formed series of VAM Institutional Funds, Inc., also called Growth and Income Fund ("New Growth and Income Fund") and shareholders of the Fund would become shareholders of New Growth and Income Fund. A vote in favor of the Plan will be considered a vote in favor of an amendment to the articles of incorporation of Voyageur Mutual Funds III required to effect the Plan. 6. For shareholders of each Company, to ratify the Board of Directors'/Trustees' selection of _______________ as the independent public accountants of such Company for the current fiscal year. 7. To transact such other business as may properly come before the meeting. EACH COMPANY'S BOARD OF DIRECTORS OR TRUSTEES UNANIMOUSLY RECOMMENDS APPROVAL OF EACH ITEM LISTED ON THIS NOTICE OF SPECIAL MEETING OF SHAREHOLDERS. Shareholders of record on February 10, 1997 are the only persons entitled to notice of and to vote at the meeting. Your attention is directed to the attached Proxy Statement. We hope you can attend. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE UPCOMING MEETING, PLEASE FILL IN, SIGN, DATE AND MAIL THE ENCLOSED PROXY OR PROXIES AS PROMPTLY AS POSSIBLE IN ORDER TO SAVE FURTHER SOLICITATION EXPENSE. WE RESPECTFULLY ASK FOR YOUR COOPERATION IN RETURNING YOUR PROXY PROMPTLY. A stamped return envelope is included for your convenience. If you are present at the meeting, you may then revoke your proxy and vote in person, as explained in the Proxy Statement in the section entitled "SPECIAL JOINT MEETING OF SHAREHOLDERS--APRIL 11, 1997." Dated: February 21, 1997 Thomas J. Abood Secretary [PRELIMINARY COPY] PROXY STATEMENT VOYAGEUR TAX FREE FUNDS, INC. VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC. VOYAGEUR INSURED FUNDS, INC. VOYAGEUR INVESTMENT TRUST VOYAGEUR INVESTMENT TRUST II VOYAGEUR MUTUAL FUNDS, INC. VOYAGEUR MUTUAL FUNDS II, INC. VOYAGEUR MUTUAL FUNDS III, INC. 90 South Seventh Street, Suite 4400 Minneapolis, Minnesota 55402 SPECIAL JOINT MEETING OF SHAREHOLDERS--APRIL 11, 1997 The enclosed proxy is solicited by the Board of Directors or Trustees (hereafter referred to as "Board of Directors") of each open-end registered investment company within the Delaware Investments family listed above (individuallyon the accompanying Notice (each a "Company" and collectively) is soliciting your proxy to be voted at the "Companies") in connection with a special joint meetingJoint Annual/Special Meeting of shareholders of each CompanyShareholders to be held on April 11, 1997, andWednesday, March 17, 1999 at 10:00 a.m. at the Union League, 140 South Broad Street, Philadelphia, Pennsylvania or any adjournments thereof (theof the meeting (hereafter, the "Meeting"). Purpose of Meeting. The seriespurpose of the Meeting is to consider a number of Proposals and Sub-Proposals that either apply to particular Companies, or to individual funds within the Companies (each a "Fund"). The Proposals and Sub-Proposals, as well as the Companies or Funds to which they apply, are listed in the accompanying Notice. The Board of Directors urges you to complete, sign and return the Proxy Card (or Cards) included with this Proxy Statement, or use one of the other voting methods described in the insert accompanying this Proxy Statement, whether or not you intend to be present at the Meeting. It is important that you return the signed Proxy Card(s) or use one of the other voting methods described in the insert accompanying this Proxy Statement, promptly to help assure a quorum for the Meeting. General Voting Information. The persons designated on the Proxy Card as proxies will vote your shares as you instruct on each Proxy Card. If your signed Proxy Card is returned without any voting instructions, your shares will be voted "FOR" each of the nominees for election as Director and "FOR" each other Proposal or Sub-Proposal concerning your Company or Fund. The persons designated as proxies will also be authorized to vote in their discretion on any other matters which may come before the Meeting. If you sign and return a Proxy Card, you may still attend the Meeting to vote your shares in person. If your shares are held of record by a broker-dealer and you wish to vote in person at the Meeting, you should obtain a Legal Proxy from your broker of record and present it at the Meeting. You may also revoke your proxy at any time before the Meeting: (i) by notifying Delaware Investments in writing; (ii) by submitting a later signed Proxy Card; or (iii) by voting your shares in person at the Meeting. Each shareholder may cast one vote for each full share and a partial vote for each partial share of a Fund or Company that they own on the record date, which is January 18, 1999. Exhibit A shows the number of shares of each Fund and Company that were outstanding on the record date and Exhibit B lists the shareholders who own 5% or more of each Fund. It is expected that this Proxy Statement and the accompanying Proxy Card(s) will be mailed to shareholders of record on or about January 28, 1999. This proxy solicitation is being made largely by mail, but may also be made by officers or employees of the Companies (individually a "Fund"or their investment managers or affiliates, through telephone, facsimile, oral or other communications. Shareholders may provide proxy instructions by returning their Proxy Card by mail or fax and collectivelymay also communicate proxy instructions through the "Funds"Internet or by telephone via touch-tone voting. Delaware Management Company ("DMC") are set forth in, the table below. The costs of solicitation, including the cost of preparing and mailing the Notice of Meeting of Shareholders and this Proxy Statement, will be borne by Lincoln National Corporation ("LNC") and will not be an expenseinvestment manager for each of the Funds, and the mailing will take place on approximately February 21, 1997. Representatives of Voyageur Fund Managers, Inc. ("VFM"), the current investment adviser of each Fund, may, without cost to the Funds, solicit proxies on behalf of management ofitself and the Funds by means of mail, telephone or personal calls. The address of VFM is that of the Companies, as listed above. VFM has engaged Shareholder Communications Corporation ("SCC") to assist in the solicitation. Representatives of SCC may telephone shareholders who have not voted, encouraging them to vote. The estimated cost of engaging SCC, all of which will be paidshared by LNCDMC and the Companies, is set forth below:
Range ----- Voyageur Funds, Inc..................................................................................$_____ to $_____ Voyageur Insured Funds, Inc..........................................................................$_____ to $_____ Voyageur Intermediate Tax Free Funds, Inc............................................................$_____ to $_____ Voyageur Mutual Funds, Inc...........................................................................$_____ to $_____ Voyageur Mutual Funds II, Inc........................................................................$_____ to $_____ Voyageur Mutual Funds III, Inc.......................................................................$_____ to $_____ Voyageur Tax Free Funds, Inc.........................................................................$_____ to $_____
Votes Required to Approve each Proposal or Sub-Proposal. Three Proposals within this Proxy Statement affect all shareholders of a Company as a whole, regardless of whether or not by your Fund, is $_____. A proxy may be revoked before the Meeting by giving written noticeCompany consists of revocation to the Secretarya number of the applicable Company, or at the Meeting prior to voting. Unless revoked, properly executed proxies in which choicesindividual Funds. These Proposals are not specified by the shareholders will be voted "for" each item for which no choice is specified, in accordance with the recommendation of the applicable Company's Board of Directors. In instances where choices are specified by the shareholders in the proxy, those proxies will be voted or the vote will be withheld in accordance with the shareholder's choice. With regard to the election of directors,Directors, the ratification of the selection of the independent auditors and the reorganization of the Company from a Minnesota corporation to a Delaware business trust. All shareholders of a Company will vote together on these Proposals. The remaining Proposals or Sub-Proposals contained in this Proxy Statement only affect particular Funds and, therefore, only shareholders of those Funds are permitted to vote on those Proposals or Sub-Proposals. The amount of votes may be cast in favorof a Company or withheld; votesFund that are withheldneeded to approve the different Proposals or Sub-Proposals varies. The voting requirements are described within each Proposal or Sub-Proposal. Abstentions and broker non-votes will be excluded entirely from the vote and will have no effect. Abstentions may be specified on all proposals other than the election of directors and will be counted as presentincluded for purposes of determining whether a quorum of shares is present at the Meeting. They will be treated as votes present at the Meeting, with respect to the itembut will not be treated as votes cast. They therefore would have no effect on Proposals which the abstention is noted, and willrequire a plurality or majority of votes cast for approval, but would have the same effect as a vote "against" such item. Under"AGAINST" on Proposals requiring a majority of votes present or a majority of outstanding voting securities for approval. (These different voting standards are explained in the Rulesvarious Proposals.) DMC will reimburse banks, brokers or dealers for their reasonable expenses in forwarding soliciting materials to shareholders. Each Fund's most recent Annual Report and Semi-Annual Report to Shareholders were previously mailed to shareholders. Copies of these reports are available upon request, without charge, by writing or calling the Funds at the address and telephone number shown on the top of the New York Stock Exchange, ifprevious page of the Proxy Statement. Proposal One: To Elect a proposal is considered "non-discretionary," then brokers who hold Fund shares in street name for customers are not authorized to vote on such proposal on behalf of their customers who have not furnished the broker specific voting instructions. If a broker returns a "non-vote" proxy, indicating a lack of authority to vote on a proposal, then the shares covered by such non-vote shall not be counted as present for purposes of calculating the vote with respect to such proposal. So far as the Board of Directors is aware, no matter other than those described in this Proxy Statement will be acted upon at the Meeting. Should any other matters properly come before the Meeting calling for a vote of shareholders, it is the intention of the persons named as proxies in the enclosed proxy to act upon such matters according to their best judgment. Only shareholders of record of each Fund on February 10, 1997, may vote at the Meeting or any adjournment thereof. As of that date, there were issued and outstanding common shares of each Fund (shares of beneficial interest with respect to series of Voyageur Investment Trust and Voyageur Investment Trust II) as follows:
Common Shares ------------- VOYAGEUR TAX FREE FUNDS, INC. Minnesota Tax Free Fund ("Minnesota Fund") North Dakota Tax Free Fund ("North Dakota Fund") VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC. Minnesota Limited Term Tax Free Fund ("Minnesota Limited Term Fund") National Limited Term Tax Free Fund ("National Limited Term Fund") VOYAGEUR INSURED FUNDS, INC. Arizona Insured Tax Free Fund ("Arizona Insured Fund") Minnesota Insured Fund ("Minnesota Insured Fund") National Insured Tax Free Fund ("National Insured Fund") VOYAGEUR INVESTMENT TRUST California Insured Tax Free Fund ("California Insured Fund") Florida Insured Tax Free Fund ("Florida Insured Fund") Florida Tax Free Fund ("Florida Fund") Kansas Tax Free Fund ("Kansas Fund") Missouri Insured Tax Free Fund ("Missouri Insured Fund") New Mexico Tax Free Fund ("New Mexico Fund") Oregon Insured Tax Free Fund ("Oregon Insured Fund") Utah Tax Free Fund ("Utah Fund") Washington Insured Tax Free Fund ("Washington Insured Fund") VOYAGEUR INVESTMENT TRUST II Florida Limited Term Tax Free Fund ("Florida Limited Term Fund") VOYAGEUR MUTUAL FUNDS, INC. Arizona Tax Free Fund ("Arizona Fund") California Tax Free Fund ("California Fund") Iowa Tax Free Fund ("Iowa Fund") Idaho Tax Free Fund ("Idaho Fund") Minnesota High Yield Municipal Bond Fund ("Minnesota High Yield Fund") National High Yield Municipal Bond Fund ("National High Yield Fund") National Tax Free Fund ("National Fund") New York Tax Free Fund ("New York Fund") Wisconsin Tax Free Fund ("Wisconsin Fund") VOYAGEUR MUTUAL FUNDS II, INC. Colorado Tax Free Fund ("Colorado Fund") VOYAGEUR MUTUAL FUNDS III, INC. Aggressive Growth Fund ("Aggressive Growth Fund") Growth Stock Fund ("Growth Fund") Growth and Income Fund ("Growth and Income Fund") International Equity Fund ("International Fund")
Each shareholder of a Fund is entitled to one vote for each share held. None of the matters to be presented at the meeting will entitle any shareholder to cumulative voting or appraisal rights. A list of those persons who, to the knowledge of Fund management, beneficially owned more than 5% of the voting shares of any class of any of the Funds as of ________, 1997, is set forth in Schedule 1 to this Proxy Statement. In the event that sufficient votes are not received for the adoption of any proposal, an adjournment or adjournments of the Meeting may be sought. Any adjournment would require a vote in favor of the adjournment by the holders of a majority of the shares present at the Meeting (or any adjournment thereof) in person or by proxy. In such circumstances, the persons named as proxies will vote in favor of any proposed adjournment. COPIES OF EACH FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS ARE AVAILABLE TO SHAREHOLDERS UPON REQUEST. IF YOU WOULD LIKE TO RECEIVE A COPY, PLEASE CONTACT THE FUNDS AT 90 SOUTH SEVENTH STREET, MINNEAPOLIS, MINNESOTA 55402 OR CALL (800) 553-2143 AND ONE WILL BE SENT, WITHOUT CHARGE, BY FIRST-CLASS MAIL WITHIN THREE BUSINESS DAYS OF YOUR REQUEST. The following table illustrates which Proposals areCompany This Proposal applies to be voted upon by shareholders of a Fund: Proposal Number ----------------------------------- Fund 1 2 3 4 5 6 - -------------------------------------------------------------------------------- Aggressive Growth Fund X X X - -------------------------------------------------------------------------------- Arizona Insured Tax Free Fund X X X - -------------------------------------------------------------------------------- Arizona Tax Free Fund X X X - -------------------------------------------------------------------------------- California Insured Tax Free Fund X X X - -------------------------------------------------------------------------------- California Tax Free Fund X X X - -------------------------------------------------------------------------------- Colorado Tax Free Fund X X X - -------------------------------------------------------------------------------- Florida Insured Tax Free Fund X X X - -------------------------------------------------------------------------------- Florida Limited Term Tax Free Fund X X X - -------------------------------------------------------------------------------- Florida Tax Free Fund X X X - -------------------------------------------------------------------------------- Growth and Income Fund X X X - -------------------------------------------------------------------------------- Growth Stock Fund X X X X - -------------------------------------------------------------------------------- Idaho Tax Free Fund X X X - -------------------------------------------------------------------------------- International Equity Fund X X X - -------------------------------------------------------------------------------- Iowa Tax Free Fund X X X - -------------------------------------------------------------------------------- Kansas Tax Free Fund X X X - -------------------------------------------------------------------------------- Minnesota High Yield Municipal Bond Fund X X X - -------------------------------------------------------------------------------- Minnesota Insured Fund X X X - -------------------------------------------------------------------------------- Minnesota Limited Term Tax Free Fund X X X - -------------------------------------------------------------------------------- Minnesota Tax Free Fund X X X - -------------------------------------------------------------------------------- Missouri Insured Tax Free Fund X X X - -------------------------------------------------------------------------------- National High Yield Municipal Bond Fund X X X - -------------------------------------------------------------------------------- National Insured Tax Free Fund X X X - -------------------------------------------------------------------------------- National Limited Term Tax Free Fund X X X - -------------------------------------------------------------------------------- National Tax Free Fund X X X - -------------------------------------------------------------------------------- New Mexico Tax Free Fund X X X - -------------------------------------------------------------------------------- New York Tax Free Fund X X X - -------------------------------------------------------------------------------- North Dakota Tax Free Fund X X X - -------------------------------------------------------------------------------- Oregon Insured Tax Free Fund X X X - -------------------------------------------------------------------------------- Utah Tax Free Fund X X X - -------------------------------------------------------------------------------- Washington Insured Tax Free Fund X X X - -------------------------------------------------------------------------------- Wisconsin Tax Free Fund X X X - -------------------------------------------------------------------------------- BACKGROUND INTRODUCTION The Meeting has been called as a result of the proposed Merger, as defined and discussed below. If the Merger is consummated, it will result in the automatic termination of the investment advisory agreements between the Funds and VFM, necessitating shareholder approval of new agreements. In addition, shareholders are being asked to elect eight members to each Company's Board of Directors, including one director from the current Boards who has been nominated for reelection. The remaining members of the current Boards are expected to resign immediately prior to closing of the Merger. All of the proposals on which shareholdersall Companies. You are being asked to vote other than the reorganization of Growth and Income Fund, are contingent upon consummationto elect each of the Merger.following nominees to the Board of Directors for your Company: Jeffrey J. Nick, Walter P. Babich, Anthony D. Knerr, Ann R. Leven, Thomas F. Madison, Charles E. Peck, Wayne A. Stork, and Jan R. Yoemans. With the exception of Jan R. Yeomans, each nominee is currently a member of the Board of Directors for each Company. If elected, these persons will serve as Directors until the Mergernext Annual or Special Meeting of Shareholders called for the purpose of electing Directors, and/or until their successors have been elected and qualify for office. It is not consummated,expected that any nominee will withdraw or become unavailable for election, but in such a case, the currentpower given by you in the Proxy Card may be used to vote for a substitute nominee or nominees as recommended by the existing Boards of Directors. Directors will remain in office,and Nominees. Presented below is information about the current Investment Advisoryage, position with the Companies, principal occupation and Sub-Advisory Agreements will remain in effect, International Equity Fund, National Insured Tax Free Fund, National Limited Term Tax Free Fund and National Tax Free Fund will not be liquidated and KPMG Peat Marwick LLP will remain the Funds' independent public accountants. THE PROPOSED MERGER VFM currently serves as the investment adviser to each Fund and provides the Funds with administrative, accounting, transfer agency and dividend disbursing services. Voyageur Fund Distributors, Inc. ("VFD"), a wholly owned subsidiary of VFM, acts as the distributorpast business experience of each Fund's shares. VFM is an indirect wholly owned subsidiarycurrent Director and nominee. With the exception of Dougherty Financial Group, Inc. ("DFG"), which is owned 49.83% by Michael E. Dougherty and 49.83% equally by James O. Pohlad, Robert C. Pohlad and William M. Pohlad (the "Pohlads"). On January 15, 1997, DFG, Mr. Dougherty, and the Pohlads entered into an Agreement and Plan of Merger with LNC (the "Merger Agreement"). The Merger Agreement provides that a wholly owned subsidiary of LNC will be merged with and into DFG, causing DFG to become a wholly owned subsidiary o f LNC. This transaction is referred to herein as the "Merger." Prior to the closing date of the Merger (the "Closing Date") a reorganization will be completed (the "Reorganization") whereby certain assets of DFG and its subsidiaries, including all of the assets of VFM used solely or primarilyThomas F. Madison, each current Director joined each Company's Board in the private accounts investment advisory business of VFM, will be sold by DFG to certain newly organized limited liability companies. Thus, these assets will not be acquired by LNC in connection with the Merger. LNC, with headquarters in Fort Wayne, Indiana, is a diversified organization with operations in many aspects of the financial services industry, including insurance and investment management. Delaware Management Company, Inc. ("DMC"), an indirect wholly owned subsidiary of LNC, and its affiliate, Delaware International Advisers Ltd., serve as the investment advisers to the investment companies in the Delaware Group of Investment Companies (the "Delaware Group"), which currently includes 16 open-end funds and two closed-end funds (comprising 48 separate investment portfolios). Delaware Distributors, L.P. ("Delaware Distributors"), also an indirect wholly owned subsidiary of LNC, serves as the national distributor for each open-end fund in the Delaware Group. DMC through its Delaware Investment Advisers division, Delaware International Advisers Ltd. and certain other subsidiaries of Delaware Management Holdings, Inc. ("DMH") also provides investment advice with respect to separately managed accounts of institutional and other clients. DMH, through its subsidiaries, is responsible for the management of approximately $32 billion. Under the Merger Agreement, holders of DFG common stock will receive LNC common stock with a value of approximately $69 million. This amount is subject to certain adjustments, including a downward adjustment in the event that the aggregate net assets of the Funds, other than those Funds for which liquidation has been proposed, and certain other investment companies managed by VFM (collectively, the "Voyageur Funds") as of the Closing Date is less than 90% but equal to or greater than 80% of the aggregate net assets of the Voyageur Funds as of January 14, 1997. In connection with the Reorganization, all issued and outstanding shares of DFG common stock other than those owned by Mr. Dougherty and the Pohlads will be redeemed and all outstanding options (other than those held by certain optionholders receiving compensation under the Merger Agreement) will be canceled. As a result, immediately prior to consummation of the Merger, the issued and outstanding shares of DFG will be owned 50% by Michael E. Dougherty, 16 2/3% by James O. Pohlad, 16 2/3% by Robert C. Pohlad and 16 2/3% by William M. Pohlad. The closing of the Merger (the "Closing") is subject to a number of conditions, including a condition that Voyageur Funds which collectively represent at least 90% of the aggregate net assets of the Voyageur Funds as of the Closing Date will, by shareholder vote, have approved new investment advisory agreements and, with respect to the open-end Voyageur Funds, the Boards of Directors of such Funds shall have approved new distribution agreements. In addition, the aggregate net assets of the Voyageur Funds as of the Closing Date shall not be less than 80% of the aggregate net assets of the Voyageur Funds as of January 14, 1997, and the net assets of each of Minnesota Insured Fund, Minnesota Tax Free Fund, Florida Insured Tax Free Fund, Colorado Tax Free Fund and Arizona Insured Tax Free Fund as of the Closing Date shall not be less than 80% of their net assets as of January 14, 1997. CONSUMMATION OF THE MERGER If the Merger is consummated, LNC will own indirectly all of the outstanding voting securities of VFM, which in turn will own all of the outstanding voting securities of VFD. Such new ownership will constitute a change in control of VFM and VFD and will cause the current investment advisory agreements and distribution agreements of each Fund to terminate automatically in accordance with their terms, as required by the Investment Company Act of 1940, as amended (the "1940 Act"). Such terminations will necessitate adoption of new agreements for the provision of investment advisory and distribution services. Shareholder approvals of the new investment advisory agreements are required under the 1940 Act and are proposed and described below under "Proposal Two--Proposal to Approve New Investment Advisory Agreements." Shareholder approvals of new distribution agreements are not required. However, such agreements have been approved byThomas F. Madison joined the Board of Directors of each Company effective as of such approval. Each Company, on behalf of the Funds in such Company, will enter into new distribution agreements with both VFD1994. Jeffrey J. Nick* (45), Chairman, President, Chief Executive Officer and Delaware Distributors that will be identical in all material respects to such Company's current distribution agreement. Delaware Distributors and VFD will act as the co-principal distributors of the Funds' shares. Delaware Distributors, an indirect wholly owned subsidiary of LNC, is the national distributor for all of the mutual funds in the Delaware Group. Under their distribution agreements, VFD and Delaware Distributors will receive payments pursuant to the Funds' Rule 12b-1 Plans of Distribution. The Plans of Distribution, including the Rule 12b-1 fees payable thereunder, will not change as a result of the Merger. Each Company has also entered into an administrative services agreement with VFM which, pursuant to its terms, will terminate automatically upon consummation of the Merger. Under the administrative services agreements, VFM acts as the Funds' dividend disbursing, transfer, administrative and accounting services agent to perform dividend-paying functions, to calculate each Fund's daily share price, to maintain shareholder records and to perform certain regulatory and compliance related services for the Funds. Following consummation of the Merger, each Company will enter into a shareholder services agreement with Delaware Service Company, Inc. ("Delaware Service") pursuant to which Delaware Service will serve as the shareholder servicing, dividend disbursing and transfer agent for each Fund and a fund accounting agreement with Delaware Service pursuant to which Delaware Service will serve as the accounting agent for each Fund. Delaware Service is an indirect, wholly owned subsidiary of LNC. In order to provide continuity in the provision of these services to the Funds, the Merger Agreement requires Dougherty Financial Group LLC ("DFG LLC"), one of the limited liability companies to be formed in the Reorganization discussed above, to provide certain transition services to LNC or one of its subsidiaries after Closing. Accordingly, upon Closing, DFG LLC will enter into a Transition Services Agreement with DMH, an indirect parent company of Delaware Service and a wholly owned subsidiary of LNC, pursuant to which, for a period of up to two years following the Closing Date, DFG LLC shall provide to DMH certain specified services which may include the following: (a) human resources, supervision, general administrative, accounting and employee benefits; (b) fund accounting; (c) transfer agency; (d) legal, tax and compliance; (e) support services for brokers, wholesalers, marketing, customer support, fulfillment, securities trading, investment management, the unit investment trust business and the closed-end funds businesses; (f) hardware and software systems and maintenance; and (g) third-party vendor relationships. Payments under the Transition Services Agreement will be the responsibility of DMH and not of the Funds. To provide continuity of management of the Funds, LNC has offered employment contracts to Andrew McCullagh and Elizabeth Howell, which have been accepted. Either Mr. McCullagh or Ms. Howell acts as the portfolio manager for each of the Funds that is being asked to approve a new investment advisory agreement other than the following: Florida Limited Term Tax Free Fund, Florida Insured Tax Free Fund, Florida Tax Free Fund, Iowa Tax Free Fund, New York Tax Free Fund, Wisconsin Tax Free Fund, National High Yield Municipal Bond Fund, Growth Stock Fund and Aggressive Growth Fund. LNC has also offered employment to and received acceptances from others involved in the investment process with Mr. McCullagh and Ms. Howell, including assistant portfolio managers and research analysts. In addition, Frank C. Tonnemaker, current president of VFD, has accepted an employment contract with LNC. Mr. Tonnemaker is expected to serve in a senior marketing role with responsibility for overseeing the transition of the Funds' management and distribution. PROPOSAL ONE ELECTION OF DIRECTORS Listed below are the nominees for director to be elected by the shareholders of each Company. Current members of each Company's Board of Directors are Clarence G. Frame, Thomas F. Madison, Richard F. McNamara, James W. Nelson and Robert J. Odegard. Upon closing of the Merger, all of such individuals other than Mr. Madison will resign, and the nominees set forth below will take office. Such individuals have been nominated for election by the current disinterested directors of the Companies. The election of such nominees is contingent upon consummation of the Merger. It is intended that the enclosed proxy will be voted for the shares represented thereby for the election of the persons named below as directors of each Company unless such authority has been withheld in the proxy. The term of office of each person elected will be until the next regular meeting of shareholders or until his or her successor is duly elected and shall qualify. Mr. Madison has been a director of each Company since May 1, 1994. Messrs. Babich, Knerr, Longstreth, Peck and Stork and Ms. Leven are currently directors of each investment company in the Delaware Group. Pertinent information regarding each nominee for the past five years is set forth following his or her name below. Principal Occupation and Business Experience Name and Age During Past 5 Years - -------------------------------------------------------------------------------- Walter P. Babich (age 69) Director and/or Trustee of each of the 1834 investment companies in the Delaware Group;Investments family; President and Director of Delaware Management Holdings, Inc., 1997 to present; President, Chief Executive Officer and Director of Lincoln National Investment Companies, Inc., 1996 to present; Director of Delaware International Advisers Ltd., 1998 to present; Director of Vantage Global Advisors, Inc., 1996 to present; Director of Lynch & Mayer Inc. (investment adviser), 1997 to present; Managing Director of Lincoln National UK plc, 1992-1996; Senior Vice President of Lincoln National Corporation responsible for corporate planning and development, 1989-1992. Walter P. Babich (71), Director and/or Trustee of each of the 34 investment companies in the Delaware Investments family; Board Chairman of Citadel Constructors, Inc. (commercial building construction), 1988 to present; Partner of I&L Investors, 1988 to 1991;1988-1991; Partner of Irwin & Leighton 1986 to 1988.Partnership (building construction), 1986-1988. Anthony D. Knerr (age 58)(59), Director and/or Trustee of each of the 1834 investment companies in the Delaware Group; founderInvestments family; Founder and Managing Director, Anthony Knerr & Associates (strategic consulting company to major non-profit institutions and organizations), 1991 to present; founderFounder and Chairman of Thethe Publishing Group, Inc., 1988 to 1990; 1988-1990; Executive Vice President/Finance and Treasurer of Columbia University, 1982 to 1988; lecturer in1982-1988; Lecturer of English at Columbia University, 1987 to 1989.1987-1989. Ann R. Leven (age 56)(57), Director and/or Trustee of each of the 1834 investment companies in the Delaware Group; Director of _________ investment companies sponsored by Aquila Management Corporation, 1985 to present;Investments family; Treasurer, National Gallery of Art, 1994 to present; Director of four investment companies sponsored by Acquila Management Corporation, 1985 to February, 1998; Deputy Treasurer of the National Gallery of Art, 1990 to 1994; Treasurer and Chief Fiscal Officer of the Smithsonian Institution, 1984 to 1990;1984-1990; Adjunct Professor at Columbia Business School, 1975 to 1992.1975-1992. -2- W. Thacher Longstreth (age 76)Longstreth(1) (77), Director and/or Trustee of each of the 1834 investment companies in the Delaware Group;Investments family; Philadelphia City Councilman, 1984 to present; Consultant,Consultant20 , Packard Press, 1988 to present; President,Senior Partner, MLW Associates (business consulting), 1983 to present; Director, Healthcare Services Group, 1983 to present; Director Emeritus, Tasty Baking Company, 1991 to present; Director, MicroLeague Micromedia, Inc. (computer game publisher), 1996 to present; Director, Tasty Baking Company, 1968 to 1991;1968-1991; Vice Chairman, The Winchell Company 1983 to 1988.(financial printing), 1983-1988. Thomas F. Madison (age 60)(62), Director and/or Trustee of each of the 16 Voyageur34 investment companies since 1994;in the Delaware Investments family; President and CEOChief Executive Officer of MLM Partners, Inc. since 1993;, 1993 to present; Chairman of the Board of Communications Holdings, Inc., since 1996; previously,1996 to present; Vice Chairman--Office of the CEO of The Minnesota Mutual Life Insurance Company, from February to September, 1994; President of U.S. WEST Communications-- Markets from 1988 to 1993. Mr. Madison currently serves on the board of directorsDirector of Valmont Industries Inc. (irrigation systems and steel manufacturing), 1987 to present; Director of Eltrax Systems, Inc. (data communications integration), 1993 to present; Director of Minnegasco, and Span Link Communications (software). *Jeffrey J. Nick (age 43) President, Chief Executive Officer and, 1995 to present; Director of Lincoln National Investment Companies, Inc.; Managing Director, Lincoln National UK plc, 1992ACI Telecentrics (outbound telemarketing and telecommunications), 1997 to present; responsible for corporate planning and development, Lincoln National Corporation, 1989Director of Aon Risk Services, 1996 to 1992; previously, Arthur D. Little, Inc. (management consultancy); Chase Investment Bank (merchant banking).present; Director of Digital River, 1997 to present. Charles E. Peck (age 71)(72), Director and/or Trustee of each of the 1834 investment companies in the Delaware Group;Investments family; Retired; Secretary/Treasurer, Enterprise Homes, Inc., 1992 to present; Chairman and Chief Executive Officer of The Ryland Group, Inc., 1981 to 1990. *WayneWayne A. Stork (age 59)Stork* (61), Chairman President, Chief Executive Officer,and Director and/or Trustee of 17each of the 34 investment companies in the Delaware Group (which excludes Delaware Pooled Trust, Inc.), Delaware Management Holdings, Inc., DMH Corp., Delaware International Holdings Ltd. and Founders Holdings, Inc.; Chairman and Director of Delaware Pooled Trust, Inc., Delaware Distributors, Inc.Investments family and Delaware Capital Management, Inc.; Chairman, President, Chief Executive Officer and Director of DMH Corp., Delaware Distributors, Inc. and Founders Holdings, Inc.; Chairman, President, Chief Executive Officer, Chief Investment Officer and DirectorDirector/Trustee of Delaware Management Company, Inc. and Delaware Management Business Trust; Chairman, President, Chief Executive Officer and Chief Investment Officer of Delaware Management Company (a series of Delaware Management Business Trust); Chairman, Chief Executive Officer and Chief Investment Officer of Delaware Investment Advisers (a series of Delaware Management Business Trust); Chairman, Chief Executive Officer and Director of Delaware International Advisers Ltd., Delaware International Holdings Ltd. and Delaware Management Holdings, Inc.; President and Chief Executive Officer of Delvoy, Inc.; Chairman of Delaware Distributors, L.P.; Director of Delaware Service Company, Inc. and Delaware Investment & Retirement Financial Services, Inc.; during During the past five years, Mr. Stork has served in various executive capacities at different times within the Delaware Investments organization. Jan R. Yeomans (50), Vice President and Treasurer of the 3M Corporation, 1994 to Present; Director of Benefit Funds and Financial Markets for the 3M Corporation, 1987-1994; Manager of Benefit Fund Investments for the 3M Corporation, 1985-1987; Manager of Pension Funds for the 3M Corporation, 1983-1985; Consultant - ---------------------- * Denotes directors who will beInvestment Technology Group of Chase Econometrics, 1982-1983; Consultant for Data Resources, 1980-1982; Programmer for the Federal Reserve Bank of Chicago, 1970-1974. Board and Committee Meetings. During the twelve months ended October 31, 1998, each Company held [(Delaware to advise:) _________] Board meetings. Each Board of Directors has an Audit Committee for the purpose of meeting, at least annually, with the Company's independent auditors and officers to oversee the quality of financial reporting and the internal controls of the Company, and for such purposes as the Board of Directors may from time to time direct. The Audit Committee of each Company consists of the following four Directors appointed by the Board, all of whom are considered to be independent because they are not "interested persons" (asas defined byin the Investment Company Act of 1940, Act)as amended (the "1940 Act"): Ann R. Leven, Chairperson, Walter P. Babich, Anthony D. Knerr and Thomas F. Madison. Members of the Companies upon closing ofAudit Committee serve for three years or until their successors have been appointed and qualified. The Audit Committee held [(Delaware to advise:) ________] meetings for each Company during the Merger. As of Januarytwelve months ended October 31, 1997, the current officers and directors of each Fund as a group beneficially owned less than 1% of each class of outstanding shares of such Fund, except for John G. Taft who owns beneficially approximately 2% of Voyageur Aggressive Growth Fund's Class A shares and 4% of International Equity Fund's Class A shares. The1998. Each Board of Directors also has a Nominating Committee, which meets for the purpose of proposing nominees to serve as Directors. Nominees are considered by the full Board of Directors for each Fund and, when appropriate, by shareholders at annual or special shareholder meetings. The Nominating Committee of each Company has established an Audit Committee which consists of eachthe following three Directors appointed by the Boards, two of whom are considered to be independent Directors: Wayne A. Stork, Anthony D. Knerr and W. Thacher Longstreth. [(Delaware please confirm:) This Committee met once during the past year for the purpose of determining the proposed list of nominees for this Meeting.] The selection and nomination of the current directors. Ifindependent Director nominees is committed to the nominees named above are elected anddiscretion of the Merger is consummated, it is expected that the Auditpresent independent Directors. Each Nominating Committee will be reconstituted atconsider suggestions for the first meeting- ------------- (1) W. Thacher Longstreth is a current member of the BoardsBoard of Directors following the Closing. The Audit Committee met two times during the most recently ended fiscal year for each Company. The Companies doMr. Longstreth is retiring from each Company's Board and, therefore, is not have nominating or compensation committees. The functionsa nominee. *This nominee is considered to be performed byan "interested person" of each Company, as that term is defined in the Audit Committee areInvestment Company Act of 1940, as amended, because he is affiliated with the investment manager and distributor of the Companies. -3- Board of Directors nominations from shareholders. Shareholders who wish to recommend annuallysuggest candidates for nomination to the Board of Directors for a firmCompany at any future annual meeting should identify the candidate and furnish a written statement of the person's qualifications to the Nominating Committee at the principal executive offices of the Companies. Board Compensation. Each independent certified public accountants to audit the books and records ofDirector receives compensation from each Company for the ensuing year; to monitor that firm's performance; to review with the firm the scope and results of each audit and determine the need, if any, to extend audit procedures; to confer with the firm and representatives of each Company on matters concerning the Funds' financial statements and reports including the appropriateness of its accounting practices and of its financial controls and procedures; to evaluate the independence of the firm; to review procedures to safeguard portfolio securities; to review the purchase by each Company from the firm of non-audit services; to review all fees paid to the firm; and to facilitate communications between the firm and each Company's officers and directors. For the most recently ended fiscal year of each Company, there were five meetingswhich he/she is a member of the Board of Directors. The only nomineeinterested Directors are compensated by the investment manager and do not receive compensation from the Companies. Each independent Director currently receives a total annual retainer fee of $38,500 for directorserving as a Director for all 34 Companies within the Delaware Investments family, plus $3,145 for each set of Board meetings attended (generally, seven sets of regular meetings). Members of the Audit Committee currently receive additional annual compensation of $5,000 from all Companies, in the aggregate, with the exception of the chairperson, who receives $6,000. Under the terms of each Company's retirement plan for Directors, each independent Director who, at this Meeting, Mr. Madison, attended all meetingsthe time of his or her retirement from the Board of Directors, has attained the age of 70 and of committees of which he was a member that were held while he was servingserved on the Board of Directors for at least five continuous years, is entitled to receive payments from the Company for a period of time equal to the lesser of the number of years that such person served as a Director or onthe remainder of such committee. No compensationperson's life. The annual amount of such payments will be equal to the amount of the annual retainer that is paid by any Company or Fund to its officers or directors, except that each director who is not an employee of VFM or any of its affiliates currently receives an annual fee of $26,000 for serving as a director of allDirectors of the open-end and closed-end investment companies for which VFM actsCompany at the time of such person's retirement. If an eligible Director of each Company within the Delaware Investments family had retired as investment adviser, plus a $500of October 31, 1998, he or she would have been entitled to annual payments in an amount equal to the annual retainer fee fornoted in the previous paragraph. The following table identifies the amount each special in-person meeting attended by such director. Set forth below is the compensationDirector received by each current director from each Company forduring its most recently endedlast fiscal year andyear. Each Director other than Thomas Madison joined the aggregate compensation received by each such director from all closed-end and open-end investment companies managed by VFM duringboard of Directors of the calendar year ended December 31, 1996.Companies on May 1, 1997.
DIRECTOR COMPENSATION ------------------------------------------------------------------------ FROM EACH COMPANY MR. FRAME MR. McNAMARA MR. MADISON MR. NELSON MR. ODEGARD - ------------------------ ------------------------------------------------------------------------Jeffrey J. Walter P. Anthony D. Ann R. W. Thacher Thomas F. Charles E. Wayne A. Company Name Nick Babich Knerr Leven Longstreth Madison Peck Stork ------------ ---- ------ ----- ----- ---------- -------- ---- ----- Tax Free Voyageur Funds, Inc. None $ $ $ $ $ Intermed. Tax Free$ None Voyageur Insured Funds, Inc. None $ $ $ $ $ Insured$ None Voyageur Intermediate Tax Free Funds, Inc. None $ $ $ $ $ $ None Voyageur Mutual Funds, Inc. None $ $ $ $ $ $ None Voyageur Mutual Funds II, Inc. None $ $ $ $ $ $ None Voyageur Mutual Funds III, Inc. None $ $ $ $ $ Investment TrustNone Voyageur Tax Free Funds, Inc. None $ $ $ $ $ Investment Trust II $ None Total Compensation From All $ $ $ $ TOTAL COMPENSATION FROM FUND COMPLEXNone Companies in the Delaware Investments Family for the 12 months ended December 31, 1998 None $ $ $ $ $
AfterOfficers. Each Board of Directors and the Merger,senior management of the Companies appoint officers each director whoyear, and from time to time as necessary. The following individuals are executive officers of one or more of the Companies: Jeffrey J. Nick, Wayne A. Stork, David K. Downes, Richard G. Unruh, Paul E. Suckow, Michael P. Bishof, George M. Chamberlain, Jr., Joseph H. Hastings, Patrick P. Coyne, Mitchell L. Conery, Paul A. Matlack, Gary A. Reed, Babak Zenouzi, Gerald T. Nichols, Christopher S. Beck, George H. Burwell, Robert L. Arnold, Gerald S. Frey, Roger A. Early, John B. Fields, Paul Grillo, Cynthia L. Isom, Frank X. Morris, James F. Stanley and Paul Dokas. Exhibit C includes biographical information and the past business experience of such officers, except for Mr. Nick and Mr. Stork, whose information is set forth above along with the other Directors and nominees. The Exhibit also identifies which officers are also officers of DMC. The above officers of the Companies own shares of common stock and/or options to purchase shares of common stock of Lincoln National Corporation ("LNC"), the ultimate parent of DMC. While in the employ of Oppenheimer Management Corporation, Mr. Paul E. Suckow was the subject of an Administrative Proceeding brought by the U.S. Securities and Exchange Commission ("SEC"). As a result of this proceeding, Mr. Suckow was found to have violated Section 34(b) of the 1940 Act by failing properly to disclose material facts in certain books and records by order of the SEC dated December 1, 1992. Mr. Suckow was suspended from the business for 120 days. Management's Ownership of the Funds. Attached to this Proxy Statement as Exhibit D is a list of the Directors' and nominees' shareholdings of the various Funds within the Delaware Investments family on an individual basis. Exhibit A lists the aggregate holdings by all of the Directors, nominees and executive officers as a group. Required Vote. Each Director of a Company shall be elected by a plurality of votes cast by shareholders of a Company, regardless of the votes of individual Funds within the Company. This means that the nominees receiving the largest number of votes will be elected to fill the available Board positions. -4- Proposal Two: To Approve the Redesignation of the Fund's Investment Objective from Fundamental to Non-Fundamental This Proposal applies all Funds. The investment objective of each Fund is designated as "fundamental," which means that any changes, even those not resulting in significant changes in the way a fund is managed or to risks to which it is subject, require shareholder approval. Under the 1940 Act, a Fund's investment objective is not an employeerequired to be fundamental. However, many investment companies have elected to designate their investment objectives as fundamental. This practice arose largely as a result of DMCcomments provided by state securities regulators in their review of fund registration statements during the state registration process, as well as because of historical drafting conventions. In light of the enactment of the National Securities Markets Improvement Act of 1996, which eliminated state securities administrative review of investment company registration statements, and in order to provide the Boards of Directors with enhanced flexibility to respond to market, industry or regulatory changes, each Fund's Board of Directors has approved the redesignation from fundamental to non-fundamental of each Fund's investment objective. Directors may change a non-fundamental investment objective at any time without the delay and expense of soliciting proxies and holding a shareholder meeting. For a complete description of the investment objective of your Fund, please consult your Fund's prospectus. The redesignation from fundamental to non-fundamental will not alter any Fund's current investment objective. If this Proposal is approved, however, Fund management intends to request that the Directors consider a number of modifications to the language used to define certain Funds' investment objectives. The requested modifications are designed to modernize and standardize the expression of such investment objectives, but if the modifications are implemented, neither the principal investment design nor the day-to-day management of the Funds would be materially altered. If at any time in the future, the Directors approve a change in a Fund's non-fundamental investment objective, either in connection with the currently anticipated modernization and standardization or otherwise, shareholders will be given notice of the change prior to its affiliates will receive an annual feeimplementation. Required Vote. Approval of $_____. VOTE REQUIRED EACH COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF SUCH COMPANY VOTE IN FAVOR OF THE FOREGOING NOMINEES TO SERVE AS NEW DIRECTORS OF SUCH COMPANY. Thethis proposal for a Fund requires the vote of a majority of shares of each Company represented at the meeting and entitled to vote, provided at least a quorum (10%"majority of the outstanding shares) isvoting securities" of the Fund, which means the vote of: (i) more than 50% of the outstanding voting securities of the Fund; or (ii) 67% or more of the voting securities of the Fund present at a meeting, if the holders of more than 50% of the outstanding voting securities are present or represented in person or by proxy, whichever is sufficient forless. If the electionreclassification of any Fund's investment objective from fundamental to non-fundamental is not approved by shareholders of a particular Fund, that Fund's investment objective will remain fundamental and shareholder approval (and its attendant costs and delays) will continue to be required prior to any change in investment objective. At meetings of the above nominees. Unless otherwise instructed,Directors held in July and September, 1998, the proxies will vote forDirectors considered the above nominees. In the event any of the above nominees are not candidates for election at the meeting, the proxies will vote for such other persons asenhanced management flexibility to respond to market, industry or regulatory changes that would accrue to the Board of Directors if each relevant Fund's fundamental investment objective were redesignated as non-fundamental and each Fund's Board of Directors unanimously approved the proposed change. The Board of Directors unanimously recommends that you vote FOR the redesignation of the investment objective of your Fund as non-fundamental. Proposal Three: To Approve a Change in the Fund's Fundamental Policy Concerning Diversification of Investments This Proposal applies only to the following Funds:
Voyageur Insured Funds, Inc. Voyageur Mutual Funds II, Inc. Delaware-Voyageur Tax-Free Arizona Insured Fund Delaware-Voyageur Tax-Free Colorado Fund Delaware-Voyageur Tax-Free Minnesota Insured Fund Voyageur Tax Free Funds, Inc. Voyageur Intermediate Tax Free Funds, Inc. Delaware-Voyageur Tax-Free Minnesota Fund Delaware-Voyageur Tax-Free Minnesota Intermediate Fund
Mutual funds generally diversify their investments among many different securities. They are, however, free to choose the extent to which they will diversify their investments, provided they meet certain minimum limits set forth in the 1940 Act and/or the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). Generally, in order to be diversified under the 1940 -5- Act, a fund may designate. Nothingnot invest more than 5% of its total assets in a single issuer (except U.S. government securities, as defined in the 1940 Act), or purchase more than 10% of the outstanding securities of a single issuer. This limit only applies to 75% of the fund's total assets, which means that any fund which is diversified under the 1940 Act may invest up to 25% of its assets in a single security. If a fund elects to be "non-diversified" under the 1940 Act, it must still operate within the diversification requirements of the Internal Revenue Code, which are similar to the 1940 Act diversification requirements, but apply only to 50% of a fund's assets, rather than 75%. As to the remaining 50% of fund assets, a fund may buy as few as two separate securities, each representing 25% of the value of the fund. The Funds listed above currently indicatesare classified and operate as "diversified" funds, as that such a situation will arise. PROPOSAL TWO PROPOSAL TO APPROVE NEW INVESTMENT ADVISORY AGREEMENTS INTRODUCTION As discussed above, the Merger will cause the current investment advisory agreement of each Fund (individually a "Current Agreement" and collectively the "Current Agreements") to terminate automaticallyterm is defined in accordance with its terms, as required by the 1940 Act. Such terminationsManagement has recommended to the Directors that the Funds change their classification to "non-diversified," which means that they will necessitate adoptionoperate within the more flexible diversification restrictions contained in the Internal Revenue Code. Each of the above Funds seeks to achieve its objective through investment in fixed income securities, the interest on which is exempt from federal income taxation and income taxation in the relevant state ("municipal securities"). Funds with this investment profile are often referred to as "state-specific tax-free funds." Many state-specific tax-free funds operate as non-diversified funds for 1940 Act purposes because the universe of available investments for such funds is relatively small. These funds, however, continue to meet the diversification requirements of the Internal Revenue Code. Management of the Funds listed above has recommended to the Directors that those Funds change their diversification policies from diversified to non-diversified. This change requires shareholder approval under the 1940 Act. In approving the proposed change and concluding that it would recommend such a change to the Funds' respective shareholders, the Directors considered: (i) the relatively small market for municipal securities; (ii) the fact that many state-specific tax-free funds, including most of the other Delaware-Voyageur state-specific tax-free Funds within the Delaware Investments family, operate as non-diversified funds under the 1940 Act; and (iii) the previous experience of the Funds' investment manager in managing the Funds and the relative difficulty it experienced in locating attractive investments. At their September, 1998 Board meetings, the Directors unanimously approved the proposed change. The Funds' diversification policies are found in their prospectuses. In the event that shareholders approve the proposed change, each of the Funds listed above would amend its current prospectus disclosure describing its diversification policy. Any future change from non-diversified to diversified status by eacha Fund would not require shareholder approval under the 1940 Act. If the proposed change is not approved, the Funds will continue to operate within the 1940 Act limitations. Required Vote. Approval of this proposal for a Fund requires the vote of a new investment advisory agreement"majority of the outstanding voting securities" of the Fund, which means the vote of: (i) more than 50% of the outstanding voting securities of the Fund; or (ii) 67% or more of the voting securities of the Fund present at a meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy, whichever is less. The Board of Directors unanimously recommends that you vote FOR the change in diversification policy. Proposal Four: To Approve Standardized Fundamental Investment Restrictions for the provision of such services (individually a "New Agreement"Fund (This Proposal involves separate votes on Sub-Proposals 4A through 4G) This Proposal applies to all Funds. Proposal Overview Each Fund is subject to investment restrictions which establish percentage and collectivelyother limits that govern the "New Agreements").Fund's investment activities. Under the 1940 Act, each Fund's New Agreement mustinvestment restrictions relating to certain activities are required to be "fundamental," which means that any changes require shareholder approval. Funds, in their discretion, are permitted to deem other restrictions fundamental, and they may also adopt "non-fundamental" restrictions, which can be changed by the board of directors without shareholder approval. Of course, any change in a fund's investment restrictions, whether fundamental or not, would be approved by the board of directors and reflected in the fund's prospectus or other offering documents. Unlike investment objectives and policies, which are often different for each Fund, investment restrictions for Funds tend to be the same or similar, because they are based on legal or regulatory requirements that apply to all Funds. Over the years, however, as new Funds were created or added to the Delaware Investments family (including Voyageur Funds within this proxy statement), investment restrictions relating to the same activities were expressed in a variety of different ways. Many older Funds are subject to investment restrictions that were adopted in response to regulatory, business or industry conditions that no longer exist. In -6- addition, a number of Funds adopted fundamental restrictions in response to state laws and regulations that no longer apply because they were preempted by the National Securities Markets Improvement Act of 1996. As a result, a number of fundamental restrictions are no longer required to be fundamental, and some previously required restrictions are no longer required at all. The Directors, together with Fund management and the investment managers and sub-advisers, have analyzed the current fundamental investment restrictions of each Fund, and have concluded that six new standardized fundamental investment restrictions should be adopted for each Fund. The proposed investment restrictions relate only to activities that are required under the 1940 Act to be the subject of fundamental policies and restrictions. Management believes that a modern, standardized list of restrictions will enhance the ability of the Funds to achieve their objectives because the Funds will have greater investment management flexibility to respond to changes in market, industry or regulatory conditions. In addition, standardized restrictions are expected to enable the Funds to operate more efficiently and to more easily monitor compliance with investment restrictions. Most of the Funds currently have fundamental investment restrictions that govern the same activities covered by the proposed fundamental investment restrictions, and a number of Funds currently have other fundamental investment restrictions governing additional activities. Management is recommending that all current fundamental investment restrictions for each Fund be re-classified as non-fundamental, at the same time that the six new standardized fundamental investment restrictions are adopted for each Fund. If the current fundamental restrictions are made non-fundamental, the Directors would be able to modify or eliminate the current restrictions without the costs or delays associated with a shareholder vote. The proposed changes will not affect any Fund's investment objective and will not change the way any Fund is currently being managed or operated, since all current investment restrictions will remain in place as non-fundamental restrictions. If, as proposed, the current fundamental investment restrictions are reclassified as non-fundamental, management intends in the future to recommend that the Board of Directors approve certain modifications designed to result in a more modern and standardized list of investment restrictions for the various Delaware Investments Funds. The recommendations by management will likely involve the modification or elimination of current restrictions. The Board of Directors will determine separately for each Fund whether elimination or modification of a common investment restriction is appropriate for that Fund. The six new proposed fundamental investment restrictions are described below within the relevant Sub-Proposals. In addition, Exhibit E contains a list of the current fundamental investment restrictions for each Fund which are proposed to be reclassified as non-fundamental. Unless all of the Sub-Proposals are approved by shareholders of a particular Fund, none of the Sub-Proposals will be adopted for that Fund. Required Vote. Approval of each Sub-Proposal for a Fund requires the vote of a "majority of the outstanding voting securities" of the Fund, which means the vote of: (i) more than 50% of the outstanding voting securities of the Fund; or (ii) 67% or more of the voting securities of the Fund present at a meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy, whichever is less. The Directors have voted to adopt each of the proposed standardized fundamental investment restrictions for the Funds, as well as to approve the reclassification of the existing fundamental investment restrictions as non-fundamental, and unanimously recommend that you vote FOR each Sub-Proposal 4A through 4G for your Fund. Sub-Proposal 4A: To adopt a new fundamental investment restriction concerning the concentration of the Fund's investments in the same industry. Under the 1940 Act, a Fund's policy of concentrating its investments in securities of companies in the same industry must be fundamental. A mutual fund concentrates its investments, for purposes of the SEC, if it invests more than 25% of its "net" assets (exclusive of cash, U.S. government securities and tax-exempt securities) in a particular industry or group of industries. Having the concentration policy apply to "net" assets represents a recent change by the SEC staff from its previous concentration standard which applied to 25% of a Fund's "total" assets. The change would slightly reduce a Fund's ability to concentrate, since the "net" assets figure is lower than "total" assets of a Fund because liabilities are subtracted. Each Fund currently has a fundamental investment restriction prohibiting it from concentrating its investments in the same industry. There are, however, numerous variations in the way that the investment restriction is described in the Funds' offering documents. In addition, most restrictions define concentration in terms of a percentage of "total assets," rather than in accordance with the new "net assets" standard. The Board of Directors recommends that shareholders approve the standardized fundamental investment restriction set forth below for each Fund. In approving the proposed investment restriction and concluding that it would recommend the investment restriction to Fund shareholders, the Directors considered that the proposed investment restriction will standardize the -7- concentration restriction for the Funds and is intended to provide flexibility for Funds to respond to changes in the SEC staff's position on concentration of investments or to other relevant legal, regulatory or market developments without the delay or expense of a shareholder vote. Adoption of the proposed fundamental restriction will not materially affect the way the Funds are currently managed or operated because the existing concentration restrictions will remain in place as non-fundamental policies unless and until a Fund's Board of Directors modifies them in the future. Proposed Concentration Restriction: The Fund will not make investments that will result in the concentration (as that term may be defined in the 1940 Act, any rule or order thereunder, or SEC staff interpretation thereof) of its investments in the securities of issuers primarily engaged in the same industry, provided that this restriction does not limit the Fund from investing in obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, or in tax-exempt securities or certificates of deposit. The Board of Directors has also approved a related non-fundamental policy, which will be adopted for each Fund if the new fundamental restriction is approved and which provides that, in applying the concentration restriction: (i) utility companies will be divided according to their services, for example, gas, gas transmission, electric and telephone will each be considered a separate industry; (ii) financial service companies will be classified according to the end users of their services, for example, automobile finance, bank finance and diversified finance will each be considered a separate industry; and (iii) asset backed securities will be classified according to the underlying assets securing such securities. This non-fundamental policy is intended to keep the concentration restriction from unnecessarily limiting a Fund's investments. Sub-Proposal 4B: To adopt a new fundamental investment restriction concerning borrowing money and issuing senior securities. Introduction to Sub-Proposal. The 1940 Act imposes certain limits on investment companies with respect to borrowing money and issuing senior securities. A "senior security" is defined as an obligation of a fund with respect to its earnings or assets that takes precedence over the claims of the fund's shareholders with respect to the same earnings or assets. The 1940 Act generally prohibits funds from issuing senior securities, in order to limit their ability to use leveraging. In general, a fund uses leveraging when it enters into securities transactions with borrowed money or money to which it has only a temporary entitlement. The limitations on borrowing and issuing senior securities are generally designed to protect shareholders and their investments by restricting a fund's ability to subject its assets to any claims of creditors or senior security holders who would be entitled to dividends or rights on liquidation of the fund that take precedence over the rights of shareholders. Borrowing money and issuing senior securities are related activities under the 1940 Act in that, if a fund fails to adhere to the restrictions applicable to borrowing, the fund will be considered to have issued an impermissible senior security. Under the 1940 Act, a fund's investment restrictions relating to borrowing and senior securities must be fundamental. The current investment restrictions concerning borrowing and senior securities vary considerably from Fund to Fund and are set forth in Exhibit E. Shareholders of each Fund are being asked to approve the following new standardized fundamental restriction that covers both borrowing and senior securities and which is designed to reflect all current regulatory requirements. Senior Securities. SEC staff interpretations under the 1940 Act allow open-end funds to engage in a number of types of transactions which might be considered to raise "senior securities" or "leveraging" concerns, so long as the funds meet certain collateral requirements set by the SEC staff. These collateral requirements are designed to protect shareholders. For example, some of the transactions that may raise senior security concerns include short sales, certain options and futures transactions, reverse repurchase agreements and securities transactions that obligate the fund to pay money at a future date (these transactions may be referred to collectively as "Leveraging-Type Transactions"). Funds that engage in Leveraging-Type Transactions must set aside money or securities or engage in certain offsetting securities transactions, to meet the SEC staff's collateralization requirements. Consistent with SEC staff positions, the senior security restrictions for most of the Funds specifically permit the funds to engage in Leveraging-Type transactions. Borrowing. Under the 1940 Act, an open-end fund is permitted to borrow up to 5% of its total assets for temporary purposes from any person so long as the borrowing is privately arranged, and may also borrow from banks, provided that if such bank borrowings exceed 5%, the fund must have assets totaling at least 300% of the borrowing when the amount of the borrowing is added to the fund's other assets. The effect of this latter provision is to allow an open-end fund to borrow from banks amounts up -8- to one-third (33 1/3%) of its total assets (including the amount borrowed). Open-end funds typically borrow money to meet redemptions to avoid being forced to sell portfolio securities before they would have otherwise been sold. This technique allows open-end funds greater flexibility to buy and sell portfolio securities for investment or tax considerations, rather than for cash flow considerations. The borrowing restrictions for Funds limit borrowings to 20%, 10% or 5% of assets, rather than the 33 1/3% allowed by law. Further, a number of older Funds only permit borrowing "as a temporary measure for extraordinary purposes" and most provide that the Fund may not borrow for leveraging purposes or purchase securities while borrowings are outstanding. Effects of the Proposed Investment Restrictions. Since the proposed investment restriction would provide greater flexibility for such Funds to engage in borrowing and to engage in Leveraging-Type Transactions, the Funds may be subject to additional costs and risks. For example, the costs of borrowing can reduce a Fund's total return. Further, upon engaging in Leveraging-Type Transactions, such Funds could experience increased risks due to the effects of leveraging. The SEC staff's collateralization requirements are designed to address such risks. Board Recommendation. The Board of Directors recommends that shareholders approve the proposed fundamental investment restriction for each Fund. The proposed investment restriction will establish a standardized borrowing and senior securities restriction which is written to provide flexibility for Funds to respond to changes in legal, regulatory or market developments. Adoption of the new restriction, however, will not affect the way such Funds are currently managed or operated because the existing restrictions will remain as non-fundamental policies unless and until the Board of Directors modifies them in the future. Proposed Borrowing and Senior Securities Restriction: The Fund may not borrow money or issue senior securities, except as the 1940 Act, any rule or order thereunder, or SEC staff interpretation thereof, may permit. Sub-Proposal 4C: To adopt a new fundamental investment restriction concerning underwriting. Each Fund is currently subject to a fundamental investment restriction prohibiting it from acting as an underwriter of the securities of other issuers. Under the 1940 Act, a fund's policy or restriction relating to underwriting must be fundamental. A person or company is generally considered an underwriter under the federal securities laws if it participates in the public distribution of securities of other issuers, usually by purchasing the securities from the issuer and re-selling the securities to the public. Underwriters are subject to stringent regulatory requirements and often are exposed to substantial liability. Thus, virtually all mutual funds operate in a manner that allows them to avoid acting as underwriters. From time to time, a mutual fund may purchase a security for investment purposes which it later sells or re-distributes to institutional investors or others under circumstances where the fund could possibly be considered to be an underwriter under the technical definition of underwriter contained in the securities laws. The current underwriting restriction for each funds specifically permits such re-sales. Management, consistent with SEC staff interpretations, believes that the Funds legally would not be regulated as underwriters in these circumstances. The Board of Directors recommends that the shareholders of each Fund approve the standardized fundamental investment restriction regarding underwriting set forth below. The proposed restriction is substantially similar to the current restriction for most Funds. The new restriction is proposed for each Fund because it will help to achieve the goal of standardization of the language of the investment restrictions among all Funds. Adoption of the proposed restriction will not affect the way the Funds are currently managed or operated. Proposed Underwriting Restriction: The Fund may not underwrite the securities of other issuers, except that the Fund may engage in transactions involving the acquisition, disposition or resale of its portfolio securities, under circumstances where it may be considered to be an underwriter under the Securities Act of 1933. Sub-Proposal 4D: To adopt a new fundamental investment restriction concerning investments in real estate. Each Fund currently has a fundamental investment restriction prohibiting the purchase or sale of real estate. All of the Funds' restrictions allow the Funds to invest in companies that deal in real estate, or to invest in securities that are secured by real estate. Under the 1940 Act, a fund's policy or restrictions regarding investment in real estate must be fundamental. The Board of Directors recommends that shareholders of each Fund approve the fundamental investment restriction concerning real estate set forth below. The proposed investment restriction is designed to standardize the language of the real estate restriction among the various Funds. The proposed investment restriction will permit Funds to purchase securities whose payments of interest or principal are secured by mortgages or other rights to real estate in the event of default. The investment restriction will also enable the Funds to invest in companies within the real estate industry, provided such investments are consistent with the Fund's investment objectives and policies. Adoption of the proposed restriction will not affect the way the -9- Funds are managed or operated because the current restrictions will remain as non-fundamental policies unless and until the Board of Directors modifies them in the future. Proposed Real Estate Restriction: The Fund may not purchase or sell real estate unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from investing in issuers which invest, deal, or otherwise engage in transactions in real estate or interests therein, or investing in securities that are secured by real estate or interests therein. Sub-Proposal 4E: To adopt a new fundamental investment restriction concerning investments in commodities. All of the Funds currently are subject to fundamental restrictions prohibiting the purchase or sale of commodities or commodity contracts. Under the 1940 Act, policies and restrictions regarding commodities must be fundamental. The most common types of commodities are physical commodities such as wheat, cotton, rice and corn. However, under federal law, futures contracts are considered to be commodities and, therefore, financial futures contracts, such as futures contracts related to currencies, stock indices or interest rates are considered to be commodities. If a Fund buys a financial futures contract, it obtains the right to receive (or, if the Fund sells the contract, the Fund is obligated to pay) the cash difference between the contract price for an underlying asset or index and the future market price, if the market price is higher. If the future price is lower, the Fund is obligated to pay (or, if the Fund sold the contract, the Fund is entitled to receive) the amount of the decrease. Funds often desire to invest in financial futures contracts and options related to such contracts for hedging or other investment reasons. The Board of Directors recommends that shareholders of each Fund approve the fundamental investment restriction concerning commodities set forth below for each Fund. The proposed restriction would standardize the language of the restriction among the various Funds and provide appropriate flexibility for the Funds to invest in financial futures contracts and related options. As proposed, the restriction is broad enough to permit investment in financial futures instruments for either investment or hedging purposes, and, thus is broader than many Funds' current restrictions. Using financial futures instruments can involve substantial risks, and will be utilized only if the investment manager determines that such investments are advisable and such practices are later affirmatively authorized by the Board of Directors. Adoption of the restriction will not affect the way the Funds are currently managed or operated because the existing commodities restrictions will remain as non-fundamental policies unless and until the Board of Directors modifies them in the future. Proposed Commodities Restriction: The Fund may not purchase or sell physical commodities, unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities. Sub-Proposal 4F: To adopt a new fundamental investment restriction concerning lending by the Fund. Each of the Funds is currently subject to a fundamental investment restriction limiting its ability to make loans. In order to ensure that the Funds may invest in certain debt securities or repurchase agreements, which could be characterized as the making of loans, the Funds current fundamental restrictions specifically permit such investments. Securities lending is a practice that has become common in the mutual fund industry and involves the temporary loan of portfolio securities to parties who use the securities for the settlement of securities transactions. The collateral delivered to a Fund in connection with such a transaction is then invested to provide the Fund with additional income. The Board of Directors recommends that shareholders approve the standardized fundamental investment restriction concerning lending described below for each Fund. The proposed restriction prohibits loans by the Funds except in the circumstances described above and, in some cases, would provide more flexibility than the current lending restriction because of the authority to engage in securities lending. Although securities lending involves certain risks if the borrower fails to return the securities, management believes that increased flexibility to engage in securities lending does not materially increase the risk to which the Funds are currently subject. Also, the adoption of the restriction will not affect the way the Funds are currently managed or operated, because the existing lending restrictions will remain in place as non-fundamental policies unless and until the Board of Directors modifies them in the future. Proposed Lending Restriction: The Fund may not make loans, provided that this restriction does not prevent the Fund from purchasing debt obligations, entering into repurchase agreements, loaning its assets to broker/dealers or institutional investors and investing in loans, including assignments and participation interests. Sub-Proposal 4G: To redesignate all current fundamental investment restrictions as non-fundamental. -10- Each Fund currently is subject to its own list of fundamental investment restrictions, which are set forth in Exhibit E. Certain Funds are also subject to their own list of non-fundamental investment restrictions. As described in the previous Sub-Proposals, all Funds have a fundamental investment restriction governing concentration, borrowing, underwriting, real estate, commodities and lending and most Funds have a fundamental investment restriction governing senior securities. Many of the Funds, especially the older Funds, have additional fundamental investment restrictions governing activities that are no longer required to be subject to fundamental investment restrictions. The Directors and Fund management recognize that many of the current fundamental investment restrictions cover the same activities as the proposed, standardized fundamental investment restrictions so that there will be overlapping restrictions. However, rather than asking shareholders for approval to eliminate the current restrictions at this time in favor of the new standardized restrictions, the Board of Directors for each Fund is recommending that all current fundamental restrictions be reclassified as non-fundamental. After the current investment restrictions are made non-fundamental, Fund management and the Directors will analyze and evaluate each Fund's investment restrictions on an individual basis while considering the particular investment objective and policies of the Fund. Over time, the Funds' investment restrictions can be standardized, if appropriate. With the exception of a Fund's classification as a diversified fund for purposes of the 1940 Act, the proposed reclassification of the current investment restrictions as non-fundamental will provide the Directors with the authority and ability to make such changes without being required to seek an additional shareholder vote. The conversion of investment restrictions to non-fundamental will provide management of the Funds with the flexibility to respond to industry changes and also to take advantage of unique pricing and distribution structures that have developed over the past ten years. For example, eliminating certain fundamental restrictions and converting them to non-fundamental would permit the Funds to operate in a "master-feeder" structure at some point in the future should management determine that such a structure were appropriate. In a "master-feeder" structure, investors purchase shares of one or more feeder funds which, in turn, invest all of their assets in corresponding master funds which have identical investment objectives, policies and restrictions as the feeder funds. The assets are collectively managed at the master fund level and the different feeder funds can have varying distribution and expense structures. The principal advantage of the master-feeder structure is the consolidation of investment management of multiple identical investment pools into one investment pool. The structure is also sufficiently flexible to permit offshore feeder funds' assets to be managed at the master fund level. By making the investment restrictions non-fundamental, management will have the flexibility to ensure that the investment restrictions of a Fund will not limit the Fund's ability to operate in a master-feeder structure. Before any existing Fund would convert to a master-feeder structure, shareholders would be notified of such a change and the prospectus of the particular Fund would be amended to disclose the ability to operate in a master-feeder structure. Proposal Five: To Approve a New Investment Management Agreement for the Fund This Proposal applies to all Funds. Proposal Overview Shareholders of the Funds are being asked to approve a new Investment Management Agreement with Delaware Management Company (previously defined as "DMC"), the current investment manager for each Fund. The New Investment Management Agreements with VFM: Arizona Fund Minnesota Insured Fund Arizona Insured Fund Minnesota Limited Term Fund California Fund Missouri Insured Fund California Insured Fund New Mexico Fund Colorado Fund North Dakota Fund Idaho Fund Oregon Insured Fund Kansas Fund Utah Tax Free Fund Minnesota Fund Washington Insured Fund Minnesota High Yield Fund For each such Fund, the principal portfolio manager, either Andrew M. McCullagh, Jr.will reflect one or Elizabeth H. Howell, will remain unchanged. Biographical information on Mr. McCullagh and Ms. Howell can be found below under "Executive Officers of Voyageur Funds." Shareholdersmore of the following changes, all of which are explained in further detail below. o Management fee increase or management fee decrease, together with the addition of fee "breakpoints," which reduce fee rates as Fund assets grow. o Potential management fee decrease due to the addition of breakpoints which would result in lower fees as Fund assets grow. o Elimination of a provision concerning shareholder approval of amendments. To determine which proposed changes apply to your Fund, please check the table at the end of this Proposal. Required Vote. Approval of this Proposal for a Fund requires the vote of a "majority of the outstanding voting securities" of the fund, which means the vote: (i) more than 50% of the outstanding voting securities of the fund; or (ii) 67% or more of the voting -11- securities of the Fund present at a meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy, whichever is less. If shareholders approve the new Agreements, any modified management fees will take effect on [(Delaware to advise:) ____________], or at a later date if the Meeting is postponed or adjourned. If a new Agreement is not approved for a particular Fund, the current Agreement will continue in effect. The Board of Directors for each Fund has unanimously approved the proposed Agreements and recommends that you vote FOR the new Investment Management Agreement for your Fund. Proposed Changes in Management Fees Purpose of Management Fees. Each Fund has hired DMC to serve as its investment manager. Under the current Investment Management Agreements, the portfolio management team for each Fund regularly decides which securities or instruments to buy or sell for the Fund and the investment manager directly or indirectly arranges for the placement and execution of orders for the purchase or sale of such securities and instruments. The investment manager is also responsible for each Fund's regulatory compliance and general administrative operations and provides regular reports to the Fund's Board of Directors. The management fees paid by a Fund are used by its investment manager to pay for the personnel, equipment, office space and facilities that are needed to manage the assets of the Fund and to administer its affairs. Reasons for Proposed Changes in Management Fees. At the request of the Boards, management recently undertook a complete review of the level and structure of the management fees for each Fund within the Delaware Investments family. The extensive review process was performed with the guidance of an outside consultant to help ensure the accuracy of the results and conclusions. The process involved the comparison of each Fund with its own universe of "competing" funds, which were identified based on investment objective, asset type and distribution channel. Once competing funds were identified, management compared fee rates at various asset sizes to evaluate both fee rates and breakpoint structures. Management's goal was to establish a consistent fee structure for the various Delaware Investments Funds that would be competitive with funds with a similar investment objective and size in the current marketplace. Management believes that a competitive management fee structure is needed to ensure that Delaware Investments will continue to be able to deliver Funds with competitive expense ratios and provide the increased investment opportunities and service options that are now available to shareholders. Also, in recent years, management has noticed increased competition for talented investment and service professionals along with growing expenses in order to recruit and retain such personnel. By establishing fee levels at competitive market rates, management believes it can continue to attract talented professionals and support high-quality, long-term investment management and shareholder services to help maintain solid investment performance. Description of Proposed Changes in Management Fees. As a result of its analysis, Fund management has identified a number of different management fee pricing levels to be established for the Funds in the Delaware Investments family, each reflecting the dynamics and complexity of managing the assets of particular categories of Funds based on asset type (such as equity or fixed-income), sub-divisions within asset type (such as "insured" or "non-insured" fixed-income securities) and geography (such as domestic or international). In addition, Fund management identified a standardized schedule of breakpoints for Funds at each of the management fee level categories, so that management fees will be reduced if a Fund's assets grow to certain levels, in order to allow the Funds to benefit from economies of scale. The meetings described in this Proxy Statement are part of a series of shareholder meetings to be held at which the standardized management fee pricing levels and schedules of breakpoints will be put into place for many of the Delaware Investments Funds. The chart included in Exhibit F shows the current and proposed management fee rates for each Fund and the dollar amounts paid to the investment manager and its affiliates during the last fiscal year. If a management fee increase is proposed, the chart shows the dollar amount that the Fund would have paid to DMC if the proposed management fees had been in effect. The chart also shows whether DMC has waived any management fees and the effect that such waivers would have had on the amounts paid under the proposed Agreement. In addition, in order to demonstrate the effect that the proposed management fee changes are expected to have on the overall expenses of the Funds, Exhibit G contains a Fee Table for each Fund for which a management fee increase is proposed, showing the actual expense levels under the current management fees and the projected expense levels following implementation of the proposed management fees. Board Consideration of Proposed Management Agreement Changes. In considering the proposed management fee changes, the Directors reviewed extensive materials concerning the methodology used by management to identify competitive peer groups for comparison and to develop proposed management fee pricing and breakpoint levels for the various categories of Funds. The Directors reviewed separate reports for each Fund containing detailed comparative management fee and expense information of each Fund and other funds in the relevant peer group, as well as expense ratio comparisons with relevant mutual fund indices. The Directors assessed how the management fee changes would position each Fund within its peer group. The Directors also reviewed -12- and considered performance and ranking data for each Fund along with other comparative funds within the investment objective category, as well as a performance comparison to a relevant securities index for each Fund. In addition to the expense and performance information, the Directors reviewed the investment manager's historical profitability with respect to each Fund and the anticipated effects of any management fee changes. The Directors also considered the reasons presented by management with respect to each proposed management fee change, including the anticipated impact of management fee increases or decreases on shareholders of the Funds. In support of fee increases for particular Funds, the Directors considered various factors including the enhanced service options and investment opportunities that are made available to shareholders, the growing expense associated with recruiting and retaining qualified investment and service professionals in an increasingly competitive industry and the importance of supporting quality, long-term service by investment managers to help achieve solid investment performance. Following consideration of all of the information and factors discussed above, the Directors for each Fund, including all of the independent Directors, unanimously approved the proposed management fee changes. Other Proposed Changes to Investment Management Agreements In addition to modifications to the management fee structure, certain other changes to the Investment Management Agreements are proposed, one or more of which may apply to a particular Fund. The proposed changes are designed to eliminate provisions that appear in certain older Funds' Agreements and to standardize the form of Agreement among all Funds within the Delaware Investments family. Please refer to the table below to determine whether the changes are proposed for your Fund's Agreement. Shareholder Approval of Amendments to Investment Management Agreements. Under the 1940 Act, shareholder approval is normally required before any fund investment management agreement can be materially amended. The purpose of this requirement is to allow shareholders to make decisions concerning provisions of an investment management agreement that could affect their investment. Funds are, being askedhowever, permitted to approve Newamend such agreements without shareholder approval if the change involves a decrease in management fee rates or a potential decrease due to the introduction or restructuring of breakpoints. In such cases, the SEC staff believes that mutual funds should not be required to experience the delay and costs of seeking shareholder approval, since shareholders are generally assumed to be in favor of management fee decreases. Each Fund's current Investment Management Agreements with DMC: Aggressive Growthrequires shareholder approval of any amendment to the Agreement, regardless of whether shareholder approval would be required under federal law. Management proposes to change the Agreements to permit amendments without shareholder approval in appropriate circumstances like those described above. Miscellaneous Changes. In addition to the changes discussed above, there are certain miscellaneous changes designed to standardize the form of Agreement among all Delaware Investments Funds. First, the Agreements for the Funds will reflect non-material language and structural changes to conform the Agreements to the standard Delaware Investments model Agreement. Second, each new Agreement will contain a provision permitting the names "Delaware," "Delaware Investments" or "Delaware Group" to be used by other Funds, series or classes, whether already existing or to be created in the future, which are, or may be, sponsored or advised by DMC. The first Delaware Investments Fund Iowato use the word "Delaware" in its name was the Delaware Balanced Fund Florida(formerly Delaware Fund) series of Delaware Group Equity Funds I, Inc., which was originally established in 1938. DMC understands that the Delaware Balanced Fund National High Yield Fund Florida Insured Fund New York Fund Florida Limited Term may have a claim to the use of the name "Delaware." Without reaching any conclusion as to such claim, each Agreement will recognize the ability of multiple Funds to use the words described above in their names. Summary of Changes to Investment Management Agreements The following table lists all of the Funds for which new Investment Management Agreements are proposed, as well as the types of changes that are proposed for each Agreement.
Elimination of Shareholder Company/Fund Name Management Fee Change Approval for Amendments ----------------- --------------------- ----------------------- Voyageur Funds, Inc. Delaware Voyageur US Government Securities Fund 0.05% increase/add breakpoints X Voyageur Insured Funds, Inc. Delaware-Voyageur Tax-Free Arizona Insured Fund Potential decrease due to addition of breakpoints X
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Elimination of Shareholder Company/Fund Name Management Fee Change Approval for Amendments ----------------- --------------------- ----------------------- Delaware-Voyageur Tax-Free Minnesota Insured Fund Potential decrease due to addition of breakpoints X Voyageur Intermediate Tax Free Funds, Inc. Delaware-Voyageur Minnesota Intermediate Fund 0.10% increase/add breakpoints X Voyageur Mutual Funds, Inc. Delaware-Voyageur Tax-Free Arizona Fund 0.05% increase/add breakpoints X Delaware-Voyageur Tax-Free California Fund 0.05% increase/add breakpoints X Delaware-Voyageur Tax-Free Idaho Fund 0.05% increase/add breakpoints X Delaware-Voyageur Tax-Free Iowa Fund 0.05% increase/add breakpoints X Delaware-Voyageur Minnesota High Yield Municipal 0.10% decrease/add breakpoints X Bond Fund National High-Yield Municipal Bond Fund 0.10% decrease/add breakpoints X Delaware-Voyageur Tax-Free New York Fund 0.05% increase/add breakpoints X Delaware-Voyageur Tax-Free Wisconsin Fund 0.05% increase/add breakpoints X Voyageur Mutual Funds II, Inc. Delaware-Voyageur Tax-Free Colorado Fund 0.05% increase/add breakpoints X Voyageur Mutual Funds III, Inc. Aggressive Growth Fund 0.25% decrease/add breakpoints X Growth Stock Fund 0.35% decrease/add breakpoints X Tax-Efficient Equity Fund Potential decrease due to change in breakpoints X Voyageur Tax Free Funds, Inc. Delaware-Voyageur Tax-Free Minnesota Fund 0.05% increase/add breakpoints X Delaware-Voyageur Tax-Free North Dakota Fund 0.05% increase/add breakpoints X
Information About the Investment Manager DMC serves as investment manager for each of the Funds. DMC is registered as an investment adviser under the Investment Advisers Act of 1940 (the "Advisers Act") and, together with its predecessors, has been managing funds within the Delaware Investments family since 1938. DMC is located at One Commerce Square, Philadelphia, Pennsylvania 19103. On November 1, 1998, DMC was managing approximately $15.8 billion in assets in various open-end and closed-end mutual fund accounts. Other affiliates of DMC were managing additional institutional and separate account assets in the amount of $17.3 billion on that date. DMC is an indirect, wholly owned subsidiary of LNC. Portfolio managersLincoln National Corporation, also known as Lincoln Financial Group. Lincoln National Corporation, with headquarters in Fort Wayne, Indiana, is a diversified organization involved in many aspects of the financial services industry, including insurance and investment management. DMC also provides investment management or sub-advisory services to other Funds within the Delaware Investments family which have investment objectives that are similar to those of the Funds managed by DMC will be individuals currently employed by DMC. Thus, these Funds will experience a change in portfolio management. However, it is intended that Growth Stock Fund will continue to be managed by James C. King pursuant to a sub-advisory agreement. See "Proposal Three--Proposal to Approve a Sub-Advisory Agreement Pursuant to which Voyageur Asset Management LLC Would Manage the Assets of Growth Stock Fund." Aggressive Growth Fund will be managed by Edward N. Antoian and Gerald S. Frey. Florida Insured Fund, Florida Limited Term Fund, Florida Fund, National High Yield Fund and New York Fund will be managed by Patrick P. Coyne and Mitchell. L. Conery. Biographical information for Messrs. Antoian, Frey, King, Coyne and Conery can be found below under "Executive Officers of Voyageur Funds." Iowa Fund and Wisconsin Fund will be managed by Ms. Howell. BOARD OF DIRECTORS RECOMMENDATION The Boards of Directors of each Company, including the disinterested directors, voted to approve the New Agreements. For information about each Board's deliberations and the reasons for its recommendation, please see "Evaluation of the Merger by the Boards of Directors" near the end of this Proposal Two. The Boards of Directors recommend that shareholders of each Fund vote FOR approval of such Fund's New Agreement. COMPARISON OF NEW AGREEMENTS AND CURRENT AGREEMENTS Except as described below, each Fund's New Agreement will contain the same terms and conditions as are contained in such Fund's Current Agreement, including the investment advisory fees payable by the Fund. A form of New Agreement is attached to this Proxy Statement applies. For the names of such other funds, together with the current (and proposed, in some cases) management or sub-advisory fee rates for such funds, see Exhibit H. DMC is a series of Delaware Management Business Trust. The Trustees who operate the business and their principal occupations (which are positions with DMC) are as follows: Wayne A. Stork, Chairman, President, Chief Executive Officer and Chief Investment Officer; Richard G. Unruh, Jr., Executive Vice President; David K. Downes, Executive Vice President, Chief Operating Officer and Chief Financial Officer; and George M. Chamberlain, Jr., Senior Vice President and Secretary; and John B. Fields, Vice President/Senior Portfolio Manager. Other Information Relevant to Approval of Investment Management Agreements The form of proposed Investment Management Agreement for the Funds is attached as Exhibit A. The following discussionI. Each Current and Proposed Agreement has an initial term of two years and provides that it will thereafter continue in effect from year to year only if such continuation is qualified in its entiretyspecifically approved at least annually with respect to each Fund by reference to the text(i) a vote of such New Agreement. If approved by shareholders, the New Agreements will take effect upon consummationa majority of the Merger. ADVISORY SERVICES. Pursuant to both the Current Agreements and the New Agreements, either VFMBoard of -14- Directors, or DMC, as the case may be (sometimes referred to hereinafter as the "Adviser"), has the sole and exclusive responsibility for the management(ii) a vote of a majority of the respective Fund's portfolio and the making and execution of all investment decisions for the Fund subject to the objectives and investment policies and restrictionsoutstanding voting securities of the Fund, and subject to the supervision(iii) in either case, separately by a majority of the Company's Board of Directors; provided that under the New Agreements the Adviser may retain one or more sub-advisers. See "Ability to Retain a Sub-Adviser" below. Under the Current Agreements and the New Agreements the Adviser is required to furnish, at its own expense, office facilities, equipment and personnel for servicing the investments of each Fund. In addition, the Adviser is required, if a Company so requests, to arrange for its officers and employees to serve without compensation from the Funds as directors, officers or employees of the Companies if duly elected to such positions by the shareholders or directors of the Companies. COMPENSATION. Investment advisory fees payable by each Fund under its Current AgreementDirectors who are identical to fees which will be payable under its New Agreement except that, as describednot "interested persons" (as defined in the following paragraph, under certain Current Agreements, VFM is contractually obligated to waive its advisory fee if total1940 Act). Each current and proposed Agreement may be terminated without penalty by (i) the Fund, operating expenses exceedby a certain level. As compensation for the Adviser's services, each Fund is obligated to pay to the Adviser a monthly investment advisory fee in the amount set forth in the table on page 12, below. The fee is based on the average daily value of each Fund's net assets at the close of business of each business day. FEE AND EXPENSE LIMITATIONS. Under each Fund's Current Agreement (other than the Current Agreements of Growth Fund, Aggressive Growth Fund and Growth and Income Fund), VFM is contractually obligated to waive its advisory fee if and to the extent that aggregate Fund operating expenses exceed 1% of the Fund's average daily net assets. Fund operating expenses are defined to include, among other expenses, the advisory fee paid to VFM under the Current Agreement, the administrative services fee paid to VFM under the Fund's Administrative Services Agreement and deferred organizational costs, but to exclude interest, taxes, brokerage fees and commissions, insurance premiums on portfolio securities (with respect to those Funds that invest in insured municipal bonds) and Rule 12b-1 plan fees. The Current Agreements of Growth Fund, Aggressive Growth Fund and Growth and Income Fund do not include contractual expense limitation provisions. The New Agreements will not include any contractual expense limitation provisions. However, DMC has committed, for a period of two years following the date of Closing, to voluntarily waive fees and/or pay Fund expenses to the same extent, if any, as would have been necessary to comply with such contractual provisions. Under both the Current Agreements and the New Agreements, all costs and expenses incurred in the operation of the Funds, to the extent not specifically assumed by the Adviser or the Funds' distributor, are the responsibility of the Funds. ABILITY TO RETAIN A SUB-ADVISER. The Current Agreements provide that VFM shall have the sole and exclusive responsibility for the management of each Fund's investment portfolio and for making and executing all investment decisions for each Fund. Each New Agreement authorizes the Adviser, at its expense, to retain a sub-adviser or sub-advisers to perform some or all of the services for which the Adviser is responsible under the New Agreement. Any retentionvote of a sub-adviser is subject to approval bymajority of the Board of Directors, and the shareholdersor (ii) by a vote of a majority of the respective Fund. STANDARD OF CARE. The Current Agreements do not contain an explicit standardoutstanding voting securities of care. The New Agreements providea Fund, or (iii) by DMC or DIAL, as relevant, at any time on 60 days' written notice. Each Agreement will also terminate automatically upon its "assignment," as that term is defined in the absence1940 Act. Under each of willful misfeasance, bad faith, gross negligence or a reckless disregard of its duties, the Adviser shall not be liablecurrent and proposed Agreements, best efforts are used to the Funds or their shareholders for any action or omission in the course of, or connected with, rendering services under the New Agreements or for any losses that may be sustained in the purchase, holding or sale of any security, or otherwise. PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE. The New Agreements each provide that, subject to the primary objective of obtainingobtain the best available pricesprice and most favorable execution the Adviserfor portfolio transactions. Orders may place ordersbe placed with brokers or dealers who provide brokerage and research services to the Adviserinvestment manager or itstheir advisory clients. The New Agreements also provide that, toTo the extent consistent with the Rulesrequirements of the Securities and Exchange Commissionrules of the SEC and the National Association of Securities Dealers, Inc., these orders may be placed with brokers who sell shares of the Funds to which the Adviser provides advisory services.Funds. The services whichprovided may be provided to the Adviser include advice, either directly or through publications or writings, as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; furnishing of analyses and reports concerning issuers, securities or industries; providing information on economic factors and trends; assisting in determining portfolio strategy; providing computer software and hardware used in security analyses; and providing portfolio performance evaluation and technical market analyses. Such services will beare used by the Adviserinvestment manager in connection with itstheir investment decision-making process with respect to one or more Funds andor accounts that it manages,they manage, and need not be used, or used exclusively with respect to the Fund or account generating the brokerage. The NewAs provided in the Securities Exchange Act of 1934 and the current and proposed Agreements, also provide that higher commissions are permitted to be paid to broker/dealers who provide brokerage and research services than to broker/dealers who do not provide such services, if such higher commissions are deemed reasonable in relation to the value of the brokerage and research services provided. In some instances, services provided constitute in some part brokerage and research services used in connection with the investment decision-making process and constitute in some part services used in connection with administrative or other functions not related to the investment decision-making process. In such cases, the investment manager will make a good faith allocation of brokerage and research services and will pay out of their own resources for services used by them in connection with administrative or other functions not related to the investment decision-making process. The current and proposed Agreements provide that, in the absence of willful misfeasance, bad faith, gross negligence or a reckless disregard to the performance of its duties to a Fund, the investment manager or sub-adviser shall not be liable to the Fund or any shareholder of the Fund for any action or omission in the course of, or in connection with, rendering services under a current or proposed Agreement, or for any losses that may be sustained in the purchase, holding or sale of any security or otherwise. Other Agreements with the Funds Each Company is currently party to a Distribution Agreement relating to the Funds with Delaware Distributors, L.P. (the "Distributor"), an affiliate of DMC. The Distributor's principal address is 1818 Market Street, Philadelphia, PA 19103. Pursuant to the Distribution Agreement, the Distributor provides underwriting, distribution and marketing services to the Funds. The Agreement includes references to distribution plans adopted pursuant to Rule 12b-1 under the 1940 Act. The Companies are also parties to a Shareholders Services Agreement and a Fund Accounting Agreement with Delaware Service Company, Inc. ("DSC"), an affiliate of DMC, pursuant to which DSC provides fund accounting, shareholder servicing, dividend disbursing and transfer agency services. Exhibit F to this Proxy Statement lists the amount of any payments made to the Distributor pursuant to Rule 12b-1 Plans and to DSC pursuant to service agreements, for each Fund's most recently completed fiscal year. Proposal Six: To Approve a New Sub-Advisory Agreement for the Fund This Proposal only applies to the following Funds:
Voyageur Funds, Inc. Voyageur Mutual Funds III, Inc. Delaware-Voyageur US Government Securities Fund Growth Stock Fund
Shareholders of the two Funds listed above are being asked to approve a new Sub-Advisory Agreement with their Fund's existing sub-adviser. Exhibit F to this Proxy Statement lists the current sub-adviser for each Fund, along with the sub-advisory fee rates and other information about the current sub-advisory agreements. New Agreements are required at this time because the existing Agreements will terminate if new Investment Management Agreements are approved as described in Proposal Five. The proposed Sub-Advisory Agreements do not contain any changes in sub-advisory fee rates and are largely identical to the current Sub-Advisory Agreements. There are no provisionsa number of minor changes in language in the Current Agreements addressingform of the Agreement, which are designed to result in a single, standardized Agreement among all Delaware Investments Funds that utilize sub-advisers. -15- One new provision requires the sub-adviser for the two Funds listed above to share in any fee waiver or expense limitation arrangement entered into by the investment manager for those Funds. This provision does not affect the amounts to be paid by the Fund, but the sub-adviser may receive less, depending on management fee waivers or expense limitations. Required Vote. Approval of this Proposal for a Fund requires the vote of a "majority of the outstanding voting securities" of the Fund, which means the vote of: (i) more than 50% of the outstanding voting securities of the Fund; or (ii) 67% or more of the voting securities of the Fund present at a meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy, whichever is less. The proposed Sub-Advisory Agreement for these issues. Disclosure inFunds will not take effect until shareholders approve a new Investment Management Agreement for each Fund's current Prospectus and StatementFund. [(Delaware to confirm:)] If a proposed Sub-Advisory Agreement is not approved for a Fund, the investment manager will take responsibility for all aspects of Additional Information provides, however, that the Adviser may engage ininvestment management until such practices. TERM. Iftime as a new sub-advisory arrangement is approved by shareholders, the NewBoard of Directors and by shareholders. The Board of Directors for each Fund has unanimously approved the proposed Sub-Advisory Agreements will become effective upon consummationand recommends that you vote FOR the new Sub-Advisory Agreement for your Fund. Information About the Sub-Adviser Voyageur Asset Management LLC ("VAM") is the sub-adviser for the Delaware-Voyageur US Government Securities Fund of Voyageur Funds, Inc. and the Growth Stock Fund of Voyageur Mutual Funds III, Inc. VAM is registered as an investment adviser under the Advisers Act and has been providing advisory services to the US Government Securities Fund since [_______________] and to the Growth Stock Fund since [____________________]. VAM is located at 90 South Seventh Street, Suite 4400, Minneapolis, MN 55402. On [November 30, 1998], VAM was managing approximately [$___________] in assets for _________________[SRSY is in the process of compiling more complete information from VAM]. VAM is a [provide Parent info]. [Name and principal occupation of the Mergerprincipal executive officer and will haveeach director of the firm to be described here; along with information about any firm officers or directors who serve as officers or directors of the Fund - SRSY is in the process of compiling this information from VAM.] Other Information Relevant to Approval of Sub-Advisory Agreements The form of proposed Sub-Advisory Agreement for the Funds is attached as Exhibit J. Each Current and Proposed Agreement has an initial termsterm of two years. Thereafter, as is also the case with the Current Agreements, each Fund's New Agreementyears and provides that it will thereafter continue in effect from year to year only if such continuation is specifically approved at least annually (a)with respect to each Fund by (i) a vote of a majority of the Fund's Board of Directors, or by the(ii) a vote of a majority of the outstanding voting securities of the Fund, and (b)(iii) in either case, separately by the vote of a majority of the directors of the FundDirectors who are not parties to the Agreement or interested persons"interested persons" (as defined in the 1940 Act) of any such party, cast in person at a meeting of the Board of Directors of the Fund called for the purpose of voting on such approval. In the case of both the New Agreements. Each current and the Current Agreements, eachproposed Agreement may be terminated by the Fund or by the Adviser on 60 days' notice to the other party, and terminates automatically upon its assignment. OTHER INFORMATION RELATED TO ADVISORY AGREEMENTS The first table below sets forth for each Fund the date of such Fund's Current Agreement, the date on which such Agreement was last submitted to a vote of the shareholders of the Fund, the purpose of such submission, the rate of compensation payable under such Agreement, advisory fees paid to and waived by VFM for the Fund's last fiscal year and the Fund's net assets at December 31, 1996. The second table sets forth for each Fund's last fiscal year administrative services fees paid to VFM under the Fund's Administrative Services Agreement, commissions paid to VFD under the Fund's Distribution Agreement, and Rule 12b-1 fees paid to VFD under the Fund's Plan of Distribution.
Date Last Net Assets Date of Submitted to Purpose of Rate of Advisory Advisory of Fund Agmt Shareholders Submission Compensation* Fees Paid Fees Waived at 12/31/96 ---- ------------ ---------- ------------- --------- ----------- ------------ AZ Insured 11/1/93 10/13/93 (3) 0.50% $1,119,609 $ 0 $212,922,363 AZ Tax Free 3/1/95 (4) (4) 0.50% $ 0 $ 0 $ 0 CA Insured 11/1/93 10/13/93 (3) 0.50% $ 192,101 $ 75,000 $ 37,323,194 CA Tax Free 3/1/95 (4) (4) 0.50% $ 7,369 $ 7,369 $ 1,972,477 CO Tax Free 11/1/93 9/28/94 (2) 0.50% $1,865,515 $ 0 $364,022,636 FL Ltd Term 5/2/94 (4) (4) 0.40% $ 11,429 $ 11,429 $ 4,255,243 FL Insured 11/1/93 10/13/93 (3) 0.50% $1,074,026 $ 25,000 $195,392,923 FL Tax Free 3/1/95 (4) (4) 0.50% $ 29,915 $ 29,915 $ 7,411,424 MN Ltd Term 11/1/93 10/13/93 (3) 0.40% $ 281,038 $ 0 $ 67,569,891 MN Insured 11/1/93 10/13/93 (3) 0.50% $1,518,301 $ 0 $314,820,291 MN Tax Free 11/1/93 10/13/93 (3) 0.50% $2,222,690 $ 0 $437,696,176 MN High Yield 6/3/96 (4) (4) 0.65% $ 17,203 $ 17,203 $ 9,705,551 ID Tax Free 12/1/94 (4) (4) 0.50% $ 131,410 $130,000 $ 33,451,212 IA Tax Free 11/1/93 (4) (4) 0.50% $ 217,160 $ 5,000 $ 42,352,589 KS Tax Free 11/1/93 10/13/93 (3) 0.50% $ 60,154 $ 30,000 $ 12,668,250 MO Insured 11/1/93 10/13/93 (3) 0.50% $ 290,247 $ 95,000 $ 59,885,472 NTL High Yield 11/13/96 (4) (4) 0.65% $ 140,548 $ 35,572 $ 59,192,976 NY Tax Free 11/20/96 (4) (4) 0.50% $ 17,615 $ 17,615 $ 10,351,401 NM Tax Free 11/1/93 10/13/93 (3) 0.50% $ 107,784 $ 0 $ 21,268,754 ND Tax Free 11/1/93 10/13/93 (3) 0.50% $ 175,239 $ 0 $ 34,454,124 OR Insured 11/1/93 10/13/93 (3) 0.50% $ 124,769 $ 65,000 $ 26,031,139 UT Tax Free 11/1/93 10/13/93 (3) 0.50% $ 21,935 $ 21,935 $ 4,258,007 WA Insured 11/1/93 10/13/93 (3) 0.50% $ 12,662 $ 12,662 $ 2,917,416 WI Tax Free 11/1/93 (4) (4) 0.50% $ 141,262 $ 10,000 $ 30,186,630 Agg Growth 5/16/94 (4) (4) 1.00% $ 34,256 $ 25,000 $ 5,442,223 Growth 9/1/95 8/21/95 (1) 1.00% $ 222,957 $ 25,000 $ 32,079,713
- ------------------------ * As a percentage of average daily net assets. (1) To approve an increase in advisory fees. (2) To ratify the Advisory Agreement. (3) To approve a new Advisory Agreement (same terms and fees) with VFM as a result of a change in control in the Adviser. (4) Not submitted to public shareholders.
Commissions Retained by Administrative VFD under Rule 12b-1 Fees Paid Administrative Distribution Fees Paid Rule 12b-1 to VFM Fees Waived Agreement to VFD Fees Waived ------ ----------- --------- ------ ----------- AZ Insured $307,939 $ 0 $ 40,338 $ 140,267 $ 293,789 AZ Tax Free $ 35,594 $ 34,536 $ 13,217 $ 21,757 $ 2,854 CA Insured $ 85,853 $ 0 $ 14,226 $ 38,694 $ 22,641 CA Tax Free $ 20,859 $ 21,559 $ 1,641 $ 1,892 $ 811 CO Tax Free $438,237 $ 0 $ 68,666 $ 320,190 $ 500,871 FL Ltd Term $ 23,812 $ 21,512 $ 1,233 $ 4,623 $ 5,417 FL Insured $324,664 $ 0 $ 20,261 $ 14,422 $ 483,322 FL Tax Free $ 28,312 $ 30,812 $ 5,271 $ 6,210 $ 3,755 MN Ltd Term $115,484 $ 0 $ 5,306 $ 80,724 $ 124 MN Insured $353,378 $ 0 $ 33,673 $ 55,021 $ 6,996 MN Tax Free $504,689 $ 0 $ 69,682 $ 264,477 $ 8,024 MN High Yield $ 12,121 $ 13,721 $ 20 $ 7,608 $ 0 ID Tax Free $ 64,457 $ 0 $ 32,689 $ 28,358 $ 9,559 IA Tax Free $103,079 $ 0 $ 26,641 $ 9,593 $ 58,179 KS Tax Free $ 42,148 $ 0 $ 7,686 $ 11,977 $ 16,119 MO Insured $130,186 $ 0 $ 29,607 $ 50,306 $ 103,956 NTL High Yield $ 8,025 $ 0 $ 0 $ 27 $ 17,451 NY Tax Free $ 3,400 $ 5,447 $ 1 $ 288 $ 0 NM Tax Free $ 57,384 $ 0 $ 6,724 $ 4,600 $ 41,408 ND Tax Free $ 88,034 $ 0 $ 5,425 $ 2,849 $ 72,351 OR Insured $ 66,238 $ 0 $ 20,166 $ 24,373 $ 33,580 UT Tax Free $ 26,694 $ 8,065 $ 800 $ 2,499 $ 9,557 WA Insured $ 23,166 $ 21,966 $ 2,196 $ 1,938 $ 4,501 WI Tax Free $ 71,833 $ 0 $ 11,170 $ 7,264 $ 21,850 Agg Growth $ 26,121 $ 0 $ 608 $ 227 $ 0 Growth $ 80,534 $ 0 $ 6,662 $ 47,797 $ 0 Growth & Income $ 14,750 $ 10,744 $ 0 $ 30 $ 0
FEES AND EXPENSES As discussed above, certain Current Agreements contain contractual expense limitations. The New Agreements will not contain any such limitations. However, DMC has committed for a period of two years following the date of the Closing of the Merger to waive fees and/or pay Fund expenses to the same extent, if any, as would have been necessary had such contractual expense limitations remained in place. VFM has also undertaken in the current Prospectuses of certain Funds to voluntarily waive fees or reimburse expenses in addition to those that it is contractually required to waive or reimburse under the Current Agreements. DMC has agreed that it will waive fees and/or pay Fund expenses consistent with such Prospectus disclosed expense limitations at least through December 31, 1997. In addition to the contractual and prospectus imposed expense limitations described above, VFM and VFD have, on a voluntary basis, waived additional fees and reimbursed additional Fund expenses for certain Funds. The amount of such voluntary fee waivers and expense reimbursements has varied from year to year depending on VFM's and VFD's assessment of market conditions. Senior management of VFM and VFD have reviewed with senior management of DMC, Delaware Distributors and Delaware Service the amount of fees and expenses that VFM and VFD expected to waive or reimburse during 1997 and the expected total expense ratios for each Fund for 1997, and the expected total expense ratios for each Fund for 1997, after taking into account such fee waivers and expense reimbursements. DMC currently expects to voluntarily waive fees and/or pay Fund expenses following the Closing and through December 31, 1997 to the extent necessary to cause the total expense ratio for Class A of each Fund to be the same as the total expense ratio that senior management of VFM and VFD projected for such class of each such Fund during 1997. Expense ratios for Class B and Class C of each Fund are expected to vary from the expense ratio for Class A by the amount of the difference in the Rule 12b-1 plan fees payable for each class. In accordance with DMC's standard process, it is expected that, commencing in 1998, the voluntary fee waivers and expense limitations described in this paragraph will be reviewed on a semi-annual basis and may be adjusted or eliminated from time to time based on factors determined by DMC, Delaware Distributors and Delaware Service to be relevant. Notwithstanding any possible adjustment or elimination of voluntary fee waivers or expense limitations, fees paid to VFM or DMC for investment management services after the Closing will not exceed those set forth in the New Agreements being considered for approval at the Meeting unless shareholder approval is obtained. Nor will Rule 12b-1 Plan payments for each class of the Fund exceed the levels set forth in the Funds' existing Rule 12b-1 Plans, without shareholder approval. EVALUATION OF THE MERGER BY THE BOARDS OF DIRECTORS On January 15, 1997, the Boards of Directors of the Companies were informed by VFM that DFG had entered into the Merger Agreement. After such notification, the Boards were advised by counsel to the Funds regarding their fiduciary obligations and the nature and extent of the information that they should consider requesting in order to evaluate the New Agreements and the potential impact of the Merger on the Funds and their shareholders. A special meeting of the Boards was held on January 28, 1997, at which meeting the Boards met with various executive officers of LNC, DMC, Delaware Distributors and Delaware Services ("DMH representatives"). These individuals presented to Board members background information on LNC, information on DMC, including its experience in municipal bond fund, fixed income fund and equity fund management, and the structure of and rationale behind the proposed Merger. They also discussed with Board members the organizational continuity that would follow the Merger, noting in particular that the majority of the Funds would continue to be managed by their current portfolio managers. They also discussed the capabilities of Delaware Distributors and Delaware Service and described the Transition Services Agreement referred to above that was designed to help provide continuity with respect to shareholder servicing, fund accounting and dividend disbursing and transfer agency services. DMH representatives summarized other benefits that the Merger, in their opinion, could bring to Fund shareholders, including benefits in the areas of customer service and fund accounting, improved distribution as a result of the strength of Delaware Distributors, and access through a net asset value exchange privilege to all open-end mutual funds in the Delaware Group. At the meeting, the Boards appointed a special committee made up of disinterested directors (the "Special Committee") to further consider and make recommendations to the Boards as to the appropriateness of the proposed transactions. Those directors who are members of the Special Committee are James W. Nelson and Thomas F. Madison. On February 5, 1997, the Special Committee travelled to DMH's headquarters and met with senior management representatives of DMC, Delaware Distributors and Delaware Service to review various aspects of the proposed Merger, the background of DMC and its affiliates, DMC's operational capabilities and compliance functions and future plans for the Funds. The Special Committee also met with outside counsel to the funds in the Delaware Group, a representative of Ernst & Young LLP, the independent public accountants to the funds in the Delaware Group, proposed portfolio managers for some of the Funds and with certain nominees to the Funds' Boards. At a meeting on February 7, 1997, the Boards of Directors of the Funds met to review with the Special Committee the findings of such committee. The Boards also met with senior management representatives of DMC, Delaware Distributors and Delaware Service and reviewed substantial additional information, including information regarding the following points: (a) the structure of the Merger; (b) the performance and abilities of DMC, including performance information for funds in the Delaware Group; (c) benefits of the Merger to Fund shareholders; (d) Fund expenses following the transaction; (e) proposed staffing and personnel relative to the Funds; (f) organizational style; (g) the financial condition of LNC and its affiliates; (h) the fact that consolidations of the Funds currently are not being considered; (i) anticipated changes in Fund officers and counsel; (j) the compliance philosophy and record of DMC and its affiliates; (k) distribution, shareholder servicing and fund accounting; and (l) pro forma profitability information (in connection with providing advisory, distribution and other services to the Funds) for DMC, Delaware Distributors and Delaware Service, assuming consummation of the Merger. A final meeting of the Boards was held on February 14, 1997 for the purpose of approving the Funds' New Agreements. At such meeting, each Company's Board recommended that the shareholders of each Fund that is a series of such Company approve the Fund's New Agreement, to become effective as of the closing of the Merger. During its deliberations the Board noted, in particular, the following: * Each Fund's New Agreement contains substantially the same material terms and conditions as are contained in the Fund's Current Agreement except that, as discussed above, the New Agreements do not contain contractual expense limitation provisions and they allow the Adviser to retain one or more sub-advisers. * DMC has committed, for a period of two years following the date of Closing, to voluntarily waive fees and/or pay Fund expenses to the same extent, if any, as would have been necessary to comply with the contractual expense limitations in the Current Agreements. * The Funds will not bear any costs or expenses in connection with the Merger, including the costs of this proxy solicitation. * No change in any Fund's investment objectives or fundamental policies are contemplated in connection with the Merger. * The Merger is expected to result in a number of benefits to shareholders, including access through a net asset value exchange privilege to all of the open-end mutual funds in the Delaware Group. * The Merger is not expected to cause any change in the investment personnel managing the majority of the Funds. The Board also considered Section 15(f) of the 1940 Act during its deliberations. Section 15(f) provides a "safe harbor" from the 1971 case of ROSENFELD V. BLACK, in which the U.S. Court of Appeals for the Second Circuit held that an investment adviser is prohibited from benefitting financially in connection with the sale or assignment of its advisory office to another investment adviser. Under the ROSENFELD analysis, any compensation received by an investment adviser or an affiliate thereof in connection with the transfer or assignment of an investment advisory agreement arguably would be prohibited if all or any portion of such compensation constitutes consideration for the assistance by such investment adviser or affiliate thereof in facilitating the transfer of the investment advisory office to the successor adviser. The Section 15(f) safe harbor is available if two conditions are met. First, for a period of three years after the transaction at least 75% of the board members of the investment company must not be "interested persons" (within the meaning of the 1940 Act) of the new or predecessor investment adviser. The Board of Directors which shareholders are being asked to elect in Proposal One, above, consists of eight directors, two of whom, Jeffrey J. Nick and Wayne A. Stork, are interested persons of LNC, and none of whom are interested persons of VFM. Accordingly, the composition of the proposed Board of Directors would be in compliance with this provision of Section 15(f). Second, an "unfair burden" must not be imposed upon the investment company as a result of such transaction or any express or implied terms, conditions or understandings applicable thereto. The term "unfair burden" is defined in Section 15(f) to include any arrangement during a two-year period after the transaction whereby the investment adviser, or any interested person of any such adviser, receives or is entitled to receive any compensation, directly or indirectly, from the investment company or its shareholders (other than fees for bona fide investment advisory or other services) or from any person in connection with the purchase or sale of securities or other property to, from or on behalf of the investment company (other than bona fide ordinary compensation as principal underwriter for such investment company). In connection therewith, LNC represented to the Board that it will use its best efforts to assure that the Funds do not execute any portfolio transactions through an affiliate of LNC for a period of at least two years following consummation of the Merger. LNC has represented in the Merger Agreement that neither LNC nor any of its affiliates has any express or implied understanding or arrangement which would impose an unfair burden on any of the Funds or would in any way violate Section 15(f) of the 1940 Act as a result of the transactions contemplated by the Merger Agreement. VOTE REQUIRED THE BOARDS OF DIRECTORS RECOMMEND THAT SHAREHOLDERS OF EACH FUND VOTE IN FAVOR OF APPROVAL OF SUCH FUND'S NEW AGREEMENT. Approval of the proposal for a Fund requires the favorable vote of a majority of the outstanding shares of such Fund, as defined in the 1940 Act, which means the lesser of the vote of (a) 67% of the shares of the Fund present at a meeting where more than 50% of the outstanding shares are present in person or by proxy, or (b) more than 50% of the outstanding shares of the Fund. Unless otherwise instructed, the proxies will vote to approve the New Agreements. PROPOSAL THREE PROPOSAL TO APPROVE A SUB-ADVISORY AGREEMENT PURSUANT TO WHICH VOYAGEUR ASSET MANAGEMENT LLC WOULD MANAGE THE ASSETS OF GROWTH STOCK FUND THE PROPOSED SUB-ADVISORY AGREEMENT As set forth in Proposal Two, shareholders of Growth Stock Fund are being asked to approve a new investment advisory agreement with DMC. DMC believes that Growth Stock Fund is an appropriate addition to the Delaware Group, since it is not duplicative of any of the Delaware Group's current funds. However, DMC does not believe that it currently has adequate resources to manage this type of Fund. Therefore, DMC proposed that the Board of Directors approve a sub-advisory agreement (the "Sub-Advisory Agreement") between DMC and Voyageur Asset Management LLC ("VAM LLC"). It is expected that VAM LLC will be a wholly owned subsidiary of DFG LLC formed as a part of the Reorganization. See "Background." After the Merger, VAM LLC is expected to conduct the private account investment advisory business formerly conducted by VFM. The current portfolio manager for Growth Stock Fund, James C. King, will be an employee of VAM LLC following the Merger and, if the proposed Sub-Advisory Agreement is approved, will continue to act as Growth Stock Fund's portfolio manager after the Merger. Mr. King was a director of VFM and VFD from 1993 through 1995 and has been a Senior Equity Portfolio Manager of VFD since 1990. He has over 30 years of investment experience. The Board of Directors of Growth Stock Fund has approved, and recommends that Growth Stock Fund shareholders approve, the Sub-Advisory Agreement. If approved by shareholders, the Sub-Advisory Agreement would be effective upon closing of the Merger. The form of Sub-Advisory Agreement is attached as Exhibit B to this Proxy Statement. The following discussion is qualified in its entirety by reference to the text of the Sub-Advisory Agreement. Under the terms of the Sub-Advisory Agreement, and subject to the supervision of DMC, VAM LLC will direct the investment of Growth Stock Fund's assets and will be responsible for the formulation and implementation of a continuing program for the management of the Fund's assets and resources. VAM LLC will make all determinations with respect to the investment of the assets of Growth Stock Fund and will take such steps as may be necessary to implement the determinations, including the placement of purchase and sale orders on behalf of the Fund. The Sub-Advisory Agreement provides that DMC shall pay VAM LLC a monthly management fee at an annual rate of [0.__%] of Growth Stock Fund's average daily net assets during each month. VAM LLC's sub-advisory fee will be paid by DMC, not by Growth Stock Fund. The Sub-Advisory Agreement will terminate automatically in the event of its assignment. In addition, the Sub-Advisory Agreement is terminable at any time, without penalty by (i) the Board of Directors of Growth Stock Fund, or by a vote of a majority of the Fund's outstanding voting securities on 60 days' written notice to DMC and VAM LLC, by DMC on 60 days' written notice to VAM LLC, or by VAM LLC on 60 days' written notice to the DMC. The Sub-Advisory Agreement shall have an initial term of two years and thereafter shall continue in effect only so long as such continuance is specifically approved at least annually by either the Board of Directors, of Growth Stock Fund, or by a vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund, provided that, in either event, such continuance is also approved(ii) by a vote of a majority of the outstanding voting securities of a Fund, or (iii) by the sub-adviser at any time on 60 days' written notice. Each Agreement will also terminate automatically upon its "assignment," as that term is defined in the 1940 Act. Under each of the current and proposed sub-advisory agreements, best efforts are used to obtain the best available price and most favorable execution for portfolio transactions. Orders may be placed with brokers or dealers who provide brokerage and research services to the investment manager, sub-adviser or their advisory clients. To the extent consistent with the requirements of the rules of the SEC and the National Association of Securities Dealers, Inc., these orders may be placed with brokers who sell shares of the Funds. The services provided may include advice, either directly or through publications or writings, as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; furnishing of analyses and reports concerning issuers, securities or industries; providing information on economic factors and trends; assisting in determining portfolio strategy; providing computer software and hardware used in security analyses; and providing portfolio performance evaluation and technical market analyses. Such services are used by the investment manager or sub-adviser in connection with their investment decision-making process with respect to one or more Funds or accounts that they manage, and need not be used exclusively with respect to the Fund or account generating the brokerage. As provided in the Securities Exchange Act of 1934 and the current and proposed Agreements, higher commissions are permitted to be paid to broker/dealers who provide brokerage and research services than to broker/dealers who do not provide such services, if such higher commissions are deemed reasonable in relation to the value of the brokerage and research services provided. In -16- some instances, services provided constitute in some part brokerage and research services used in connection with the investment decision-making process and constitute in some part services used in connection with administrative or other functions not related to the investment decision-making process. In such cases, the sub-adviser will make a good faith allocation of brokerage and research services and will pay out of their own resources for services used by them in connection with administrative or other functions not related to the investment decision-making process. The current and proposed Agreements provide that, in the absence of willful misfeasance, bad faith, gross negligence or a reckless disregard to the performance of its duties to a Fund, the sub-adviser shall not be liable to the Fund or any shareholder of the Fund for any action or omission in the course of, or in connection with, rendering services under a current or proposed Agreement, or for any losses that may be sustained in the purchase, holding or sale of any security or otherwise. Proposal Seven: To Ratify the Selection of Ernst & Young LLP as Independent Auditors for the Company This Proposal applies to all Companies. The Boards of Directors have selected Ernst & Young LLP as independent auditors of each Company for the current fiscal year and shareholders are asked to ratify this selection. Ernst & Young LLP's principal address is Two Commerce Square, Philadelphia, PA 19103. A representative from Ernst & Young LLP is expected to be present at the meeting. The representative of Ernst & Young LLP will have an opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions. Each Companies' Audit Committee meets periodically with the representatives of Ernst & Young LLP to receive reports from Ernst & Young LLP and plan for the Companies' audits. Required Vote. A simple majority (more than 50%) of the outstanding voting securities of each Company, regardless of individual Funds within a Company, is required to ratify the selection of Ernst & Young LLP as independent auditor for each such Company. The Board of Directors of each Company unanimously recommends that you ratify the selection of Ernst & Young LLP as independent auditors for such Company for the current fiscal year. -17- Proposal Eight: To Approve the Reorganization of the Company from a Minnesota Corporation into a Delaware Business Trust and the Dissolution of the Minnesota Corporation This Proposal applies to all Companies. The Board of Directors of each Company (the "Current Boards") has approved separate Agreements and Plans of Reorganization (a "Plan" or the "Plans") substantially in the form attached to this Proxy Statement as Exhibit K. Each Plan provides for a reorganization (a "Reorganization") pursuant to which each Company will change its state and form of organization from a Minnesota corporation into a Delaware business trust. Each Company may be referred to in this Proposal as a "Current Fund" or the "Current Funds" and each Series of a Company is referred to in this Proposal as the "Current Series." For each Current Fund, the Reorganization involves the continuation of the Current Fund in the form of a newly created Delaware business trust. The newly created Delaware business trusts are referred to in this Proposal as the "New Funds." Separate classes and series of shares of each Delaware business trust that correspond to the classes and series of each Current Fund will carry on the business of the Current Fund. The series of shares of the New Funds that correspond to the Current Series are referred to in this Proposal as the "New Series." Each New Fund and New Series will have substantially the same name as its corresponding Current Fund and Current Series. Under the Reorganization, the investment objectives of each New Series will be the same as those of its corresponding Current Series; the portfolio securities of each Current Series will be transferred to its corresponding New Series; and shareholders will own interests in each New Fund that are equivalent to their interests in the Current Fund on the closing date of the Reorganization. The directors, whoand the officers and employees of each Current Fund on the effective date of the Reorganization will become the trustees, officers and employees, respectively, of the corresponding New Fund and will operate the New Fund in the same manner as they previously operated the Current Fund. The investment manager responsible for the investment management of each New Series will be the same as the investment manager to the Current Series. For those Current Series with sub-advisory arrangements, the sub-adviser for each New Series will be the same as the sub-adviser to the Current Series. In essence, a shareholder's investment in a Current Fund will not change for all practical purposes. The investment manager of each Current Series is referred to as the "Current Adviser" and, for those Current Series with sub-advisory arrangements, the sub-adviser to each Current Series is referred to as the "Current Sub-Adviser." Background and Reasons for the Reorganizations. The Current Boards unanimously recommend conversion of the Current Funds into Delaware business trusts because they have determined that the Delaware business trust form of organization is an inherently flexible form of organization and provides certain administrative advantages to the Companies. Delaware trust law contains provisions specifically designed for mutual funds. Those provisions take into account the unique structure and operation of mutual funds, and allow mutual funds to simplify their operations by reducing administrative burdens so that, in general, they may operate more efficiently. For example, mutual funds organized as Delaware business trusts are not partiesrequired to such Agreement,hold annual shareholders' meetings and may create new series or interested personsclasses of such parties, cast in personshares without obtaining the approval of shareholders at a meeting calledmeeting. Under Delaware business trust law, the New Funds will have the flexibility to respond to future business contingencies. For example, a New Fund will have the power to consolidate with another entity, to cause each New Series to become a separate trust and to change the New Fund's domicile all without a shareholder vote, unless such vote is required under the1940 Act or other applicable law. This flexibility could help to assure that the New Fund operates under the most advanced form of organization and could help reduce the expense and frequency of future shareholders' meetings for non-investment related issues. The Reorganizations also will increase uniformity among the mutual funds within the Delaware Investments family. Increased uniformity among the mutual funds, many of which share common directors, trustees, officers and service providers, is expected to reduce the costs and resources devoted to compliance with varying state corporate or trust laws and also reduce administrative burdens. Another advantage that is afforded to a mutual fund organized as a Delaware business trust is that there is a well established body of corporate precedent that may be relevant in deciding issues pertaining to the trust. For these reasons, the Current Boards believe it is in the interests of the shareholders of the Current Funds to reorganize the Current Funds into Delaware business trusts. At present, it appears that the most advantageous time to consummate the Reorganizations is on or before ________________, 1999. This date, however, may be modified by the Current Fund and the New Fund. The Current Boards reserve the right to abandon the Reorganizations if they determine that such action is in the best interests of the Current Funds. The following discussion applies to the Reorganization of each Current Fund, except where otherwise specifically noted. Consequences and Procedures of the Reorganization. Upon consummation of the Reorganization, the New Fund will continue the Current Fund's business with the same investment objectives, policies and restrictions that are in effect for the Current Series at the time of the consummation of the Reorganization (see the discussion under "Investment Policies and Restrictions" below). The net asset value of the shares of each class of each Current Series will not be affected by the Reorganization. The New Fund has been organized specifically for the purpose of voting on such approval. THE BOARD'S CONSIDERATIONS The Sub-Advisory Agreement was approved byeffecting the Growth Stock Fund's Board of Directors, subjectReorganization. Immediately prior to shareholder approval, at a meeting called for the purpose of voting on the Sub-Advisory Agreement held February 14, 1997. Prior to approving the Sub-Advisory Agreement, the Board considered a variety of factors, including: (a) the historical performance of Growth Stock Fund under current management; (b) the nature, quality and extenteffective date of the services proposed to be provided by VAM LLC pursuant to the Sub-Advisory Agreement; (c) DMC's role in supervising VAM LLC in its capacity as sub-adviser to DMC; and (d) the reasonableness of the proposed fee allocation between DMC and VAM LLC in light of the reduced investment role but continued overall responsibility of DMC. VOTE REQUIRED THE BOARD OF DIRECTORS OF GROWTH STOCK FUND RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE TO APPROVE THE PROPOSED SUB-ADVISORY AGREEMENT. Adoption of the proposal requires the favorable vote of a majority of the outstanding shares of the Fund, asReorganization (as defined in the 1940 Act, which meansPlan), each New Fund will have outstanding only one share of each class of beneficial interest of each New Series corresponding to the lessershares of each class of each Current Series. The Current Fund will be the vote of (a) 67%sole holder of the shares of beneficial interest. The Plan contemplates that the Fund present at a meeting where more than 50% of the outstanding shares are present in person or by proxy, or (b) more than 50% of the outstanding shares of the Fund. Unless otherwise instructed, the proxies will vote for the approval of the proposed Sub-Advisory Agreement. PROPOSAL FOUR PROPOSAL TO APPROVE THE LIQUIDATION OF INTERNATIONAL EQUITY FUND, NATIONAL INSURED TAX FREE FUND, NATIONAL LIMITED TERM TAX FREE FUND AND NATIONAL TAX FREE FUND INTRODUCTION On February 7, 1997, the Boards of Directors of International Equity Fund, National Insured Tax Free Fund, National Limited Term Tax Free Fund and National Tax Free Fund (individually a "Liquidating Fund" and collectively the "Liquidating Funds") considered the recommendation of VFM that such Funds be liquidated and terminated. A Plan of Liquidation and Termination for each such Fund (individually a "Plan" and collectively the "Plans") was subsequently adopted by the Boards on February 14, 1997, subject to shareholder approval. A copy of the form of Plan is attached as Exhibit C to this Proxy Statement. If the Plan is approved by a Liquidating Fund's shareholders, the portfolio securities and other assets of such Fund will be sold, creditors will be paid or reserves for such payments established, and the net proceeds of such sales will be distributed to shareholders in cash, pro rata in accordance with their shareholdings. With respect to each Fund, approval of the Plan will be considered approval of an amendment to the articles of incorporation of such Fund's Company required to effect the Plan. BACKGROUND In connection with the Merger described at the beginning of this Proxy Statement under "Background," LNC and VFM determined that neither VFM nor DMC would act as investment adviser to the Liquidating Funds after consummation of the Merger. LNC's and VFM's determination was based primarily upon the small size of each of the Liquidating Funds, the fact that each of the Liquidating Funds is duplicative of a fund offered within the Delaware Group, and the cost of and amount of time available to complete a merger of each Liquidating Fund into its corresponding Delaware Group fund prior to ordirectors serving at the time of Closing. The Liquidating Funds had the following net asset valuesReorganization will serve as of December 31, 1996: Fund Net Assets ---- ---------- International Equity Fund $ 2,560,777 National Insured Tax Free Fund $ 32,030,258 National Limited Term Tax Free Fund $ 1,184,425 National Tax Free Fund $ 3,737,821 Shareholdersthe trustees of the Liquidating FundsNew Fund, with comparable responsibilities. The officers of the Current Fund will be givenbecome officers of the opportunityNew Fund with comparable responsibilities. The Reorganization will not result in the recognition of income, gain or loss for Federal income tax purposes to invest their redemptionthe Current Fund, the New Fund or liquidation proceeds in Class Athe holders of shares of any open-end mutual fundthe Current Fund. (See "Certain Tax Consequences of the Plan.") To accomplish the Reorganization, the Plan provides that the Current Fund will transfer all of the assets of the Current Series, subject to its related liabilities, to the corresponding New Fund and to each of its corresponding New Series. The New Fund will establish an account for each shareholder and will credit to that account the exact number of full and fractional shares of the class of the New Series that such shareholder previously held in the Delaware Group (including the Voyageur Funds that become memberssame class of the Delaware Group as a resultcorresponding Current Series on the effective date of the Merger) atReorganization. Each shareholder will retain the right to any declared but undistributed dividends or other distributions payable on the shares of the Current Series that he or she owned. On the date of the Reorganization, the net asset value without the impositionper share of any front-end sales charge, for a periodeach class of one year following the liquidationshares of the shareholder's Fund. THE BOARDS' CONSIDERATIONS At the meeting of the Boards of Directors held on February 7, 1997, VFM reviewed LNC's conclusion with the Boards. VFM noted that VAM LLC also would not be in a position to manage the Liquidating Funds after the Merger, since VAM LLCeach Current Series will be retaining generally only those assets related to the management of private accounts and certain non-retail mutual funds. VFM also expressed its opinion that, givensame as the small size of each of the Liquidating Funds, it would be difficult to find an investment adviser interested in managing such Funds. VFM then reviewed the tax consequences of a liquidation with the Boards, explaining that the payment of liquidation distributions will be a taxable event to shareholders. Finally, VFM informed the Boards that shareholders of the Liquidating Funds would be given the opportunity to invest their redemption or liquidation proceeds in Class A shares of any open-end mutual fund in the Delaware Group (including the Voyageur Funds that become members of the Delaware Group) at net asset value without the imposition of any front-end sales charge. On February 14, 1997, the Boards of Directors, including allper share of the independent directors, unanimously approved for each Liquidating Fund the Plan and determined to recommend that shareholderscorresponding class of each Liquidating Fund approve its respective Plan. If shareholders of a Fund do not approve liquidation, the Board of Directors will meet to determine an alternative course of action. Liquidationshares of the Funds is contingent upon consummationNew Series. The New Fund will assume all liabilities and obligations of the Merger. SUMMARY OF THE PLANS AND RELATED TRANSACTIONS For each Liquidating Fund, such Fund's Plan will become effective upon consummation of the Merger (the "Effective Date"). From the Effective Date through the completion of liquidation, VAM LLC will act as the investment adviser for each Liquidatingits corresponding Current Fund. As soon as practicable after the Effective Dateeffective date of the Reorganization, the Current Fund will be dissolved and its existence terminated. On the effective date of the Reorganization, each certificate representing shares of a Liquidating Fund'sclass of a Current Series will represent an identical number of shares of the same class of the corresponding New Series. Shareholders will have the right to exchange their certificates of the Current Fund for certificates of the New Fund. A shareholder, however, is not required to make this exchange of certificates. The Plan provides that the effective date of the Reorganization will be (i) the next business day after the later of the receipt of all necessary regulatory approvals and the final adjournment of the meeting of shareholders of the Current Fund at which the Plan will be considered, or (ii) such later date as the Current Fund and the New Fund may mutually agree. It is expected that this will be on ________________, 1999, or such earlier time as the Current Board deems advisable and in the best interests of the Current Fund and its shareholders. The Plan may be terminated and the Reorganization abandoned at any time prior to the effective date of the Reorganization by the Current Board. If the Reorganization is not so approved or if the Current Board determines to terminate or abandon the Reorganization, the Current Fund will completecontinue to operate as a Minnesota corporation. Capitalization and Structure. Each New Fund was established pursuant to a substantially identical Agreement and Declaration of Trust ("Trust Document") under the salelaws of the State of Delaware. Each New Fund is organized as a series company. The Trust Document permits the Trustees to issue an unlimited number of shares of beneficial interest, with no par value. The Board of Trustees of the New Fund has the power to divide such shares into an unlimited number of series or classes of beneficial interest without shareholder approval. Each of the other New Funds has designated the same number of series and classes as its portfolio securitiescorresponding Current Fund. Each share of a New Series represents an equal proportionate interest in orderthe assets and liabilities belonging to convert its assetsthat series (or class) as declared by the Board of Trustees. Shares of the respective classes of the New Series have substantially the same dividend, redemption, voting, exchange and liquidation rights, and terms of conversion as the shares of the corresponding Current Series. Please see Exhibit L, "Comparison And Significant Differences For Delaware Business Trusts And Minnesota Corporations." Shares of the respective classes of the Current Series and the corresponding New Series are fully paid, non-assessable, and freely transferable and have no preemptive or subscription rights. Prior to cash. After the Effective Date, suchReorganization, the New Fund will have nominal assets and no liabilities. The sole shareholder of the New Fund will be the corresponding Current Fund. Each New Series will have the same investment objectives and policies as its corresponding Current Series at the time of the Reorganization. (See the discussion under "Investment Policies and Restrictions" below.) The Current Adviser will provide investment management services to the New Series as it does to the Current Series. For the Current Series that have sub-advisory arrangements, the Current Sub-Adviser will provide sub-advisory services to the corresponding New Series as it does to the Current Series. The New Fund will have the same fiscal year as the Current Fund. Subsequent to the closing of the Reorganization, shares of the respective classes of the Current Series will be exchanged for an identical number of shares of the same class of the corresponding New Series. Thereafter, shares of each class of the New Series will be available for issuance at their net asset value applicable at the time of sale. The New Fund will adopt the Current Fund's existing registration statement under the Securities Act of 1933 and the 1940 Act. Effects of Shareholder Approval of the Reorganization. An investment company registered under the 1940 Act is required to: (1) submit the selection of the company's independent auditors to all shareholders for their ratification; (2) call a special meeting to elect directors (trustees) within 60 days if, at any time, less than one half of the directors (trustees) holding office have been elected by all shareholders; and (3) submit any proposed investment management agreement and sub-advisory agreement relating to a particular series of the investment company to the shareholders of that series for approval. The Current Board believes that it is in the best interest of the shareholders of the Current Fund (who will become the shareholders of the corresponding New Fund if the Reorganization is approved) to avoid the considerable expense of another shareholders' meeting to obtain the shareholder approvals described above shortly after the closing of the Reorganization. The Current Board also believes that it is not engage in any business activity exceptthe best interest of the shareholders to carry out the Reorganization if the surviving New Fund would not have a Board of Trustees, independent auditors, and investment management agreements or sub-advisory agreements complying with the 1940 Act. The Current Board will, therefore, consider approval of the Reorganization by the requisite vote of the shareholders of the Current Fund to constitute the approval of the Plan contained in Exhibit K, and also to constitute, for the purposepurposes of winding up its business and affairs, preserving the value1940 Act: (1) ratification of its assets and distributing such assets to shareholdersthe independent auditors for each Current Fund at the time of the Reorganization as the New Fund's independent auditors (please see Proposal Seven); (2) election of the Directors of the Current Fund who are in office at the time of the Reorganization as the trustees of the New Fund after the payment to (or reservation of assets for payment to) all creditorsclosing of the Fund. All contracts entered intoReorganization (please see Proposal One); (3) approval by orthe shareholders of each Current Series of the investment management agreement between the New Fund on behalf of the New Series and the Current Adviser, which will be substantially identical to the agreement that is in place between the Current Fund and the Current Adviser for the corresponding Current Series on the effective date of the Reorganization (please see Proposal Five); and (4) for those Current Series subject to a Liquidatingsub-advisory agreement, approval by the shareholders of the Current Series of the sub-advisory agreement between the Current Adviser and the Current Sub-Adviser, which will be substantially identical to the agreement that is in place between the Current Adviser and the Current Sub-Adviser on the effective date of the Reorganization (please see Proposal Six). The New Fund will terminate upon consummationissue a single share of each class of each New Series to the Current Fund, and, assuming approval of the Reorganization by shareholders of the Current Fund, the officers of the Current Fund, prior to the Reorganization, will cause the Current Fund, as the sole shareholder of the New Fund, to vote such shares "FOR" the matters specified in the above paragraph. The Current Fund will then consider the requirements of the 1940 Act referred to above to have been satisfied. The mailing address and telephone number of the principal executive offices of both the Current Fund and the New Fund are 1818 Market Street, Philadelphia, PA 19103, and 1-800-523-1918, respectively. Investment Policies and Restrictions. If the investment policies and restrictions for the Current Series as proposed and set forth in Proposals Two, Three and Four are approved by the shareholders, the investment policies and restrictions of the corresponding New Series will be the policies and restrictions of the Current Series as amended by the provisions set forth in such Proposals. For each Current Series for which the investment policies and restrictions set forth in Proposals Two, Three and Four are not approved, the investment policies and restrictions of the corresponding New Series after the Reorganization will be the investment policies and restrictions of that Current Series immediately prior to the Reorganization. Investment Management Agreements. If the proposed new investment management agreement relating to the Current Series, and as proposed and described in Proposal Five (a "New Agreement"), is approved by the shareholders of the Current Series, the terms of the investment management agreement for the corresponding New Series will be substantially identical to the New Agreement for the Current Series. For each Current Series for which the New Agreement described in Proposal Five is not approved, if any, the investment management agreement for the corresponding New Series will be substantially identical to the existing investment management agreement currently in place for that Current Series. Sub-Advisory Agreements. For the Current Series with sub-advisory arrangements, if the proposed new sub-advisory agreement relating to the Current Series, as proposed and described in Proposal Six (a "New Sub-Advisory Agreement"), is approved by the shareholders of the Current Series, the terms of the sub-advisory agreement for the corresponding New Series will be substantially identical to the New Sub-Advisory Agreement for the Current Series. For each Current Series for which the New Sub-Advisory Agreement described in Proposal Six is not approved, if any, the sub-advisory agreement for the corresponding New Series will be substantially identical to the existing sub-advisory agreement currently in place for that Current Series. Certain Tax Consequences of the Plan. It is anticipated that the transactions contemplated by such Fund's Plan. After the Effective DatePlan will be tax-free for federal income tax purposes. Consummation of the Reorganization is subject to receipt of a Liquidating Fund's Plan, and in any event within 60 days thereafter, such Fund will mail to each shareholderlegal opinion from the law firm of record who has not redeemed such shareholder's shares a liquidating distribution equalStradley, Ronon, Stevens & Young, LLP, counsel to the shareholder's proportionate interest in the remaining assets of theCurrent Fund and information concerning the sources of the liquidating distribution. Shareholders of the Liquidating Funds may reinvest their redemption proceeds or the proceeds of their liquidating distributions in Class A shares of any of the mutual funds in the Delaware Group at net asset value without the imposition of any front-end sales charge. After the distribution of assets to shareholders, each LiquidatingNew Fund, will be terminated in accordance with its Plan and applicable provisions under Minnesota law. The Plans provide that, the Boards of Directors may authorize such variations from, or amendments to, the provisions of the Plans as may be necessary or appropriate to effect the complete liquidation and termination of the Liquidating Funds in accordance with the purposes to be accomplished by the Plans. The adoption of the Plan by a Liquidating Fund will not affect the right of shareholders of such Fund to redeem shares of such Fund at their then current net asset value per share any day prior to the day the liquidating distribution is made. FEDERAL INCOME TAX CONSEQUENCES PAYMENT BY A LIQUIDATING FUND OF LIQUIDATION DISTRIBUTIONS TO SHAREHOLDERS WILL BE A TAXABLE EVENT. BECAUSE THE INCOME TAX CONSEQUENCES FOR A PARTICULAR SHAREHOLDER MAY VARY DEPENDING ON INDIVIDUAL CIRCUMSTANCES, EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISER CONCERNING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF RECEIPT OF A LIQUIDATING DISTRIBUTION. Each Liquidating Fund currently qualifies, and intends to continue to qualify through the end of the liquidation period, for treatment as a regulated investment company under the Internal Revenue Code of 1986, as amended so that it will be relieved(the "Internal Revenue Code"), the exchange of federal income tax on any investment company taxable income or net capital gain (the excess of net long-term capital gain over net short-term capital loss) from the sale of its assets. The payment of liquidation distributions will be a taxable event to shareholders. Each shareholder will be viewed as having sold his or her Fund shares for an amount equal to the liquidation distribution(s) he or she receives. Each shareholder will recognize gain or loss in an amount equal to the difference between (a) the shareholder's adjusted basis in the Fund shares, and (b) such liquidation distribution(s). The gain or loss will be capital gain or loss to the shareholder if the Fund shares were capital assets in the shareholder's hands and generally will be long-term if the Fund shares were held for more than one year before the liquidation distribution is received. Immediately prior to declaring the liquidating distribution, National Insured Tax Free Fund, National Limited Term Tax Free Fund and National Tax Free Fund will declare a dividend of all current but undistributed tax-exempt interest income. Shareholders will be entitled to treat this amount as an exempt-interest dividend, I.E., as tax-exempt interest income in their hands. This tax-exempt dividend will be paid at the same time as the liquidating distribution, and shareholders will be notified of the portion ofCurrent Fund for the total distribution that constitutes the tax-exempt interest dividend. The balance of the liquidating distribution will be treated as an amount realized from the sale of Fund shares, as discussed above. Each Liquidating Fund generally will be required to withhold tax at the rate of 31% with respect to any liquidation distribution paid to individuals and certain other non-corporate shareholders who fail to certify to the Fund that their social security number or taxpayer identification number provided to the Fund is correct and that the shareholder is not subject to backup withholding. The foregoing summary is generally limited to the material federal income tax consequences to shareholders who are individual United States citizens and who hold shares as capital assets. It does not address the federal income tax consequences to shareholders who are corporations, trusts, estates, tax-exempt organizations, pension plans, Individual Retirement Accounts or non-resident aliens. This summary does not address state or local tax consequences. Shareholders are urged to consult their own tax advisers to determine the extent of the federal income tax liability they would incur as a result of receiving a liquidation distribution, as well as any tax consequences under any applicable state, local or foreign laws. VOTE REQUIRED EACH LIQUIDATING FUND'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF APPROVAL OF SUCH FUND'S PLAN. For each Liquidating Fund, the affirmative vote of a majority of the outstanding shares of the corresponding New Fund, is requiredthe transfer of such shares to approve the Plan. PROPOSAL FIVE PROPOSAL FOR GROWTH AND INCOME FUND TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION INTRODUCTION Shareholdersholders of Growth and Income Fund (the "Fund") are being asked to consider and vote upon an Agreement and Plan of Reorganization, dated as of ________, 1997 (the "Plan"), by and between Voyageur Mutual Funds III, Inc. ("Voyageur III"), on behalfshares of the Current Fund, and VAM Institutional Funds, Inc. ("VAM Funds"), on behalf of a newly formed series of VAM which is also called Growththe liquidation and Income Fund (the "New Fund"). Pursuant to the Plan, alldissolution of the assets of the Fund would be acquired by New Fund (which, prior to such time, would have no assets) and shareholders of the Fund would become shareholders of New Fund and would receive shares in New Fund equal to the value of their holdings in the Fund on the date of such transaction (the transactions described above are referred to as the "Fund Reorganization"). The shares to be issued by NewCurrent Fund pursuant to the Fund Reorganization ("New Fund Shares") will be issued at net asset value without a sales charge. A vote in favor of the Plan will be considered a vote in favor of an amendment to the articles of incorporation of Voyageur III required to effect the Fund Reorganization as contemplated by the Plan. The Fund Reorganization is not contingent upon consummation of the Merger. BACKGROUND The Fund is currently a series of Voyageur III. Aggressive Growth Fund, Growth Stock Fund and International Equity Fund are also series of Voyageur III. As described above, in connection with the Merger, shareholders of Aggressive Growth Fund and Growth Stock Fund are being asked to approve new investment advisory agreements with DMC, and shareholders of International Equity Fund are being asked to approve such Fund's liquidation. In addition, shareholders of each series of Voyageur III (including the Fund) are being asked to approve a new Board of Directors for Voyageur III that will consist principally of individuals who currently serve on the Board of Directors of the investment companies in the Delaware Group. Shareholders of the Fund are not being asked to approve a new investment advisory agreement with DMC. After the Merger, the management of the Fund will remain essentially unchanged with the Fund continuing to be sub-advised by Segall Bryant & Hamill ("Segall Bryant"). See "Comparison of Fund and New Fund" below. Unlike Aggressive Growth Fund and Growth Stock Fund, the Fund will not become a part of the Delaware Group. For this reason, shareholders are being asked to approve the Plan. The Plan will in essence cause the Fund to become, as the New Fund, a series of a different corporate entity, VAM Funds. VAM Funds will have the same Board of Director as Voyageur III currently has and will not be affiliated with LNC. The Plan will not result in any other material changes to shareholders. THE PLAN The terms and conditions under which the Fund Reorganization would be consummated are set forth in the Plan and are summarized below. This summary is qualified in its entirety by referencegive rise to the Plan, a copy of which is attached as Exhibit D to this Proxy Statement. The Plan provides that (a) the Fund will transfer all of its assets, including portfolio securities, cash, cash equivalents, securities, commodities, futures and interest receivables, to New Fund on the Closing Date in exchange for the assumption by New Fund of all of the Fund's liabilities, including all expenses, costs, charges and reserves, as reflected on an unaudited statement of assets and liabilities of the Fund prepared by the Treasurer of Voyageur III as of the Valuation Date in accordance with generally accepted accounting principles consistently applied from the prior audited period, and the delivery of New Fund Shares; and (b) such New Fund Shares will be distributed to the shareholders of the Fund on the Closing Date or as soon as practicable thereafter and outstanding Fund shares will be canceled and retired. The distribution of New Fund Shares and the cancellation and retirement of outstanding Fund shares is to be accomplished under the Plan by amending the articles of incorporation of Voyageur III in the manner provided in the amendment set forth in Exhibit 1 to the Plan. For technical reasons, certain of the Fund's existing investment limitations may be deemed to preclude the Fund from consummating the Fund Reorganization to the extent that the Fund Reorganization would involve the Fund holding all of its assets as shares of New Fund until such shares are distributed to the Fund's shareholders. By approving the Plan, the Fund's shareholders will be deemed to have agreed to waive each of these limitations. The number of New Fund Shares to be delivered to the Fund will have an aggregate net asset value equal to the value of the Fund assets acquired by New Fund (net of the liabilities assumed by New Fund); these values will be calculated as of the close of business of the New York Stock Exchange on a business day not later than the fifth business day following the receipt of the requisite approval of the Plan by the shareholders of the Fund or at such other time as the Fund and New Fund may agree (the "Valuation Date"). These New Fund Shares will be distributed to the former Fund shareholders, with each such shareholder receiving New Fund Shares with a value equal to the value of their holdings in the Fund. New Fund will cause its transfer agent to credit and confirm an appropriate number of New Fund Shares to each Fund shareholder. Neither the Fund nor New Fund issues stock certificates. The Closing Date will be 5:00 p.m., Eastern Time, on the Valuation Date, or at such other time as the Fund and New Fund may agree. The consummation of the Fund Reorganization is contingent upon the approval of the Plan by the shareholders of the Fund and the receipt of the other opinions and certificates set forth in Sections 6, 7 and 8 of the Plan and the occurrence of the events described in those Sections, certain of which may be waived by the Fund or New Fund. The Plan may be amended in any mutually agreeable manner, except that no amendment may be made subsequent to the Meeting which would detrimentally affect the value of the New Fund Shares to be distributed. LNC will bear all direct costs associated with preparation, printing, filing and proxy solicitation expenses incurred in connection with obtaining requisite shareholder approval of the Fund Reorganization. In addition, VFM will pay any unamortized organizational expenses on the books of the Fund immediately prior to the Fund Reorganization. The Plan may be terminated and the Fund Reorganization abandoned at any time, before or after approval by the Fund's shareholders, by mutual consent of the Fund and New Fund. In addition, either party may terminate the Plan upon the occurrencerecognition of a material breach of the Plan by the other partygain or if, by December 31, 1997, any condition set forth in the Plan has not been fulfilled or waived by the party entitled to its benefits. Shareholders of the Fund will continue to be able to redeem their shares at net asset value next determined after receipt of the redemption request until the close of business on the business day next preceding the Closing Date. Redemption requests received by the Fund thereafter will be treated as requests for redemption of shares of New Fund. TAX ASPECTS OF THE REORGANIZATION It is intended that the Reorganization will qualifyloss for federal income tax purposes as a tax-free reorganization under Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the "Code"), and that, for federal income tax purposes, no income, gain or loss will be recognized by the Fund's shareholders. The Fund has not asked, nor does it plan to ask, the Internal Revenue Service to rule on the tax consequences of the Reorganization. As a condition to the closing ofCurrent Fund, the Fund Reorganization, the two funds will receive an opinion from Dorsey & Whitney LLP, counsel to the funds, based in part on certain representations to be furnished by each fund, substantially to the effect that the federal income tax consequences of the Fund Reorganization will be as follows: (i) the Fund Reorganization will constitute a reorganization within the meaning of Section 368(a)(1)(F) of the Code, and New Fund, and the Fund each will qualify as a party to the Fund Reorganization under Section 368(b) of the Code; (ii) Fund shareholders will recognize no income, gain or loss upon receipt, pursuant to the Fund Reorganization, of New Fund shares. Fund shareholders subject to taxation will recognize income upon receipt of any net investment income or net capital gains of the Fund which are distributed by the Fund prior to the Fund Reorganization; (iii) the tax basis of New Fund shares received by each Fund shareholder pursuant to the Reorganization will be equal to the tax basis of the Fund shares exchanged therefor; (iv) the holding period of New Fund shares received by each Fund shareholder pursuant to the Reorganization will include the period during which the Fund shareholder held the Fund shares exchanged therefor, provided that the Fund shares were held as a capital asset on the date of the Fund Reorganization; (v) the Fund will recognize no income, gain or loss by reason of the Fund Reorganization; (vi) New Fund will recognize no income, gain or loss by reason of the Fund Reorganization; (vii) the tax basis of the assets received by the Fund pursuant to the Fund Reorganization will be the same as the basis of those assets in the hands of the Fund immediately prior to the Fund Reorganization; (viii) the holding period of the assets received by New Fund pursuant to the Fund Reorganization will include the period during which such assets were held by the Fund; and (ix) New Fund will succeed to and take into account the earnings and profits, or deficit in earnings and profits, of the Fund immediately prior to the Fund Reorganization. The foregoing advice is based in part upon certain representations furnished by the Fund, VFM and certain 5% shareholders of the Current Fund of which two principal ones are: (a) immediately following consummation of the Fund Reorganization, the shareholders of the Fund will own all of the outstanding stock ofor the New Fund and will own such stock solely by reason of their ownership of stock of the Fund immediately prior to the Fund Reorganization; and (b) there is no plan or intention on the part of shareholders of the Fund who own 5% or more of the shares of the Fund and, to the best knowledge of management of the Fund, there is no plan or intention on the part of the remaining shareholders of the Fund to sell, exchange or otherwise dispose of any ofFund. A shareholder's adjusted basis for tax purposes in the shares of the New Fund stock receivedafter the exchange and transfer will be the same as his adjusted basis for tax purposes in the shares of the corresponding Current Fund immediately before the exchange. As a business trust, the New Fund (or, in certain circumstances, its shareholders who are Pennsylvania residents) would be subject to the Pennsylvania county personal property tax. However, at present, Pennsylvania counties generally have stopped assessing personal property taxes. This is due, in part, to ongoing litigation challenging the validity of the tax. However, if the personal property tax were reinstituted, or any similar state or local tax were imposed, the New Fund's options would be reevaluated at that time. Each shareholder should consult his or her own tax adviser with respect to the details of these tax consequences and with respect to state and local tax consequences of the proposed transaction. Distribution Plans and Shareholder Servicing Arrangements. The New Fund will enter into agreements with DSC for transfer agency, dividend disbursing and shareholder servicing and fund accounting services that are substantially identical to the agreements currently in effect for each corresponding Current Fund for such services. Delaware Distributors, L.P. ("DDLP") will serve as the national distributor for the shares of the New Series under a separate distribution agreement between DDLP and the New Fund that is substantially identical to the distribution agreement currently in effect for the Current Series. The Current Fund has adopted distribution plans under Rule 12b-1 of the 1940 Act (each a "Distribution Plan") relating to certain classes of shares of the Current Series. For each class of shares of the Current Series that is subject to a Distribution Plan, the corresponding New Fund also has adopted a distribution plan that is substantially identical to the Distribution Plan currently in place for the same class of shares of the corresponding Current Series. Requests for Redemption of the Current Fund. Any request to redeem shares of the Current Fund that is received and processed prior to the Reorganization will be treated as a redemption of shares of the Current Fund. Any request to redeem shares of the Current Fund received or processed after the Reorganization will be treated as a request for the redemption of shares of the corresponding New Fund. Expenses of the Reorganization. SHAREHOLDERS OF THE FUND SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE EFFECT, IF ANY, OF THE PROPOSED FUND REORGANIZATION IN LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES. SINCE THE FOREGOING DISCUSSION RELATES ONLY TO THE FEDERAL INCOME TAX CONSEQUENCES OF THE FUND REORGANIZATION, SHAREHOLDERS OF THE FUND SHOULD CONSULT THEIR TAX ADVISORS AS TO STATE AND LOCAL TAX CONSEQUENCES, IF ANY, OF THE FUND REORGANIZATION. DISSENTERS' RIGHTS Pursuant to Sections 302A.471Because the Reorganization will benefit solely the Current Fund and 302A.473its shareholders, the Current Board has authorized that the expenses incurred by the Current Fund in the Reorganization or arising out of the Reorganization shall be paid by the Current Fund, whether or not the Reorganization is approved by the shareholders. Comparison of Legal Structures. A comparison of the Delaware Business Trust Act with the Minnesota Business Corporation Act, (the "MBCA Sections"), record holdersincluding a comparison of Fund shares are entitled to assert dissenters' rights in connection with the Fund Reorganization and obtain paymentrelevant provisions of the "fair value" of their shares, provided such shareholders comply with the requirementsgoverning documents of the MBCA Sections. NOTWITHSTANDING THE PROVISIONS OF THE MBCA SECTIONS, THE DIVISION OF INVESTMENT MANAGEMENT OF THE COMMISSION HAS TAKEN THE POSITION THAT ADHERENCE TO STATE APPRAISAL PROCEDURES BY A REGISTERED INVESTMENT COMPANY ISSUING REDEEMABLE SECURITIES WOULD CONSTITUTE A VIOLATION OF RULE 22c-1 UNDER THE 1940 ACT. THIS RULE PROVIDES THAT NO OPEN-END INVESTMENT COMPANY MAY REDEEM ITS SHARES OTHER THAN AT NET ASSET VALUE NEXT COMPUTED AFTER RECEIPT OF A TENDER OF SUCH SECURITY FOR REDEMPTION. IT IS THE VIEW OF THE DIVISION OF INVESTMENT MANAGEMENT THAT RULE 22c-1 PREEMPTS APPRAISAL PROVISIONS IN STATE STATUTES. DESCRIPTION OF SHARES Shares ofCurrent Funds and the New Fund to be issued pursuant toFunds, is included in Exhibit L, which is entitled "Comparison And Significant Differences For Delaware Business Trusts And Minnesota Corporations." Required Vote. The Plans and the Plan will, when issued, be fully paidtransactions contemplated thereby, including the liquidation and nonassessable by New Fund and transferable without restrictions and will have no preemptive or conversion rights. COMPARISON OF FUND AND NEW FUND INVESTMENT ADVISER AND SUB-ADVISER. VAM, on behalf of New Fund, will enter into an investment advisory agreement with VAM LLC. The terms of such advisory agreement will be identical to the termsdissolution of the Fund's current investment advisory agreement with VFM. As described above, prior toCurrent Funds, requires the Merger DFG will complete a reorganization whereby certain assets of DFG and its subsidiaries, including certain assets of VFM, will be sold by DFG to certain newly organized limited liability companies, including VAM LLC. These limited liability companies will not be acquired by LNC in the Merger. VAM LLC will be ultimately controlled by the same individuals who currently control VFM, Michael E. Dougherty, James O. Pohlad, Robert C. Pohlad and William M. Pohlad. It is expected that those individuals who currently serve as the principal executive officer and the directors of VFM will, with the exception of Frank Tonnemaker, serve in such capacities with VAM LLC after the merger. See "Supplemental Information about Voyageur Fund Managers, Inc." VAM LLC in turn will enter into a sub-advisory agreement with Segall Bryant &Hamill ("Segall Bryant"), the Fund's current sub-adviser, containing identical terms to the current sub-advisory agreement between VFM and Segall Bryant. Ralph Segall, Managing Director of Segall Bryant, who is primarily responsible for the day-to-day management of the Fund's portfolio, will continue to act in such capacity for New Fund. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The investment objectives, policies and restrictions of New Fund will be identical to those of the Fund. DIRECTORS AND EXECUTIVE OFFICERS. As mentioned above, the Directors of VAM Funds are the same as the current Directors of Voyageur III. The officers of VAM Funds are the same individuals as listed below under "Executive Officers of Voyageur Funds." However, Mr. McCullagh and Ms. Howell will resign as officers of VAM Funds immediately prior to the Merger. PLAN OF DISTRIBUTION; PRINCIPAL UNDERWRITER. The Plan of Distribution for New Fund will be identical to the Fund's current Plan of Distribution. VFD acts as the principal underwriter of the Fund's shares. _____________, one of the limited liability companies to be formed in the reorganization of DFG, will act as the principal underwriter of New Fund's shares. DIVIDEND DISBURSING, TRANSFER, ADMINISTRATIVE AND ACCOUNT SERVICES AGENT. VFM acts as the Fund's dividend disbursing, transfer, administrative and account services agent pursuant to an administrative services agreement. VAM LLC will act in such capacities for New Fund pursuant to an administrative services agreement that will have identical terms to the current agreement between VFM and the Fund. THE BOARD'S CONSIDERATIONS At a meeting of the Board of Directors of Voyageur III held on February 7, 1997, VFM reviewed the proposed Plan with the Board. In reviewing the Plan the Board considered the various factors discussed above, including the following: (a) The Fund is currently a series of a corporate entity that will become a part of the Delaware Group, whereas the Fund will not be advised by DMC or its affiliates; (b) The Plan will result in no material changes to shareholders other than a change in the corporate entity of which their fund is a series, and will allow their fund to be a series of a corporate entity that will be advised by VAM LLC; (c) The Board of Directors of VAM Funds will not change as a result of the Merger and will continue to consist of the same individuals who currently serve on the Board of Directors of Voyageur III; (d) It is anticipated that the Fund Reorganization will constitute a tax-free reorganization for federal income tax purposes, and no gain or loss will be recognized by the Fund or its shareholders for federal income tax purposes as a result of the Fund Reorganization. Based on the foregoing, at a meeting held on February 14, 1997, the Board determined that the Fund Reorganization is in the best interestsapproval of the shareholders ofas set forth below: [To be inserted.] The Current Board unanimously recommends that you vote FOR the Reorganization. EXHIBIT A OUTSTANDING SHARES AS OF RECORD DATE (January 18, 1999)
Shares Outstanding Shares Owned by Fund Directors on and Executive Officers as a Group Company/Fund Record Date* as of October 31, 1998 ------------ ------------ ---------------------- Voyageur Funds, Inc. Delaware-Voyageur US Government Securities Fund Voyageur Insured Funds, Inc Delaware-Voyageur Tax-Free Arizona Insured Fund Delaware-Voyageur Minnesota Insured Fund Voyageur Intermediate Tax Free Funds, Inc. Delaware-Voyageur Tax-Free Minnesota Intermediate Fund Voyageur Mutual Funds, Inc. Delaware-Voyageur Tax-Free Arizona Fund Delaware-Voyageur Tax-Free California Fund Delaware-Voyageur Tax-Free Idaho Fund Delaware-Voyageur Tax-Free Iowa Fund Delaware-Voyageur Minnesota High Yield Municipal Bond Fund National High-Yield Municipal Bond Fund Delaware-Voyageur Tax-Free New York Fund Delaware-Voyageur Tax-Free Wisconsin Fund Voyageur Mutual Funds II, Inc. Delaware-Voyageur Tax-Free Colorado Fund Voyageur Mutual Funds III, Inc. Aggressive Growth Fund Growth Stock Fund Tax-Efficient Equity Fund Voyageur Tax Free Funds, Inc. Delaware-Voyageur Tax-Free Minnesota Fund Delaware-Voyageur Tax-Free North Dakota Fund and
* The Shares outstanding on the record date included all shares purchased in transactions that the interests of Fund shareholders will not be diluted as a result thereof, and therefore approved the Plan. VOTE REQUIRED THE BOARD OF DIRECTORS OF VOYAGEUR III UNANIMOUSLY RECOMMENDS THAT FUND SHAREHOLDERS VOTE IN FAVOR OF APPROVAL OF THE PLAN. The affirmative vote of a majority of the Fund shares entitled to vote is required to approve the Plan. PROPOSAL SIX RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS The 1940 Act provides that every registered investment company shall be audited at least once each year by independent public accountants selected by a majority of the directors of the investment company who are not interested persons of the investment company or its investment adviser. The 1940 Act requires that the selection be submitted for ratification or rejectionhave settled by the shareholders at their next annual meeting following the selection. KPMG Peat Marwick LLP ("KPMG") has acted as independent public accountants for each Company since its inception. However, _____________________ ______________________________ acts as independent public accountants for the Delaware Group of investment companies. At the request of LNC, in connection with certain Funds becoming a part of the Delaware Group, as described elsewhere herein, the Boards of Directors of the Funds, including a majority who are not interested persons of VFM or DMC, have appointed __________ to become the independent public accountants for the Companies for their current fiscal year. This appointment is contingent upon consummation of the Merger. KPMG has not rendered any adverse or qualified opinions, or any disclaimers of opinions, with respect to the Funds, and the Funds have not had any disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of KPMG, would have caused it to make a reference to the subject matter of the disagreement in connection with its reports. Representatives of __________ are expected to be present at the meeting. Such representatives will be given the opportunity to make a statement to the shareholders if they desire to do so and are expected to be available to respond to any questions that may be raised at the meeting. VOTE REQUIRED THE BOARDSrecord date. A-1 EXHIBIT B SHAREHOLDERS OWNING 5% OR MORE OF DIRECTORS RECOMMEND THAT SHAREHOLDERSA FUND AS OF EACH COMPANY VOTE IN FAVOR OF THE RATIFICATION OF THE SELECTION OF ______________________ AS THE INDEPENDENT PUBLIC ACCOUNTANTS FOR SUCH COMPANY. For each Company, the vote of a majority of the shares of the Company represented at the meeting and entitled to vote, provided at least a quorum (10% of the outstanding shares) is represented in person or by proxy, is sufficient for the ratification of the selection of the independent public accountants. SUPPLEMENTAL INFORMATION ABOUT VOYAGEUR FUND MANAGERS, INC. VFM, a Minnesota corporation, is an indirect wholly owned subsidiary of DFG, which is owned 49.83% by Michael E. Dougherty and 49.83% equally by James O. Pohlad, Robert C. Pohlad and William M. Pohlad. Mr. Dougherty co-founded the predecessor of DFG in 1977 and has served as DFG's Chairman of the Board and Chief Executive Officer since inception. As of JanuaryOCTOBER 31, 1997, VFM and its affiliates served as the investment manager to six closed-end and ten open-end investment companies (comprising 33 separate investment portfolios), administered numerous private accounts and managed approximately $11 billion in assets. The names and principal occupations of the principal executive officer and each director of VFM are set forth below. The address of all individuals is that of the VFM and the Funds. Name Principal Occupation - ---- -------------------- Michael E. Dougherty Chairman of VFM; Chairman of VFD and Dougherty Dawkins, Inc.; Director, Chairman of the Board, President and Chief Executive Officer of DFG. John G. Taft Director and President of VFM; Director and Executive Vice President of VFD. Jane M. Wyatt Director and Chief Investment Officer of VFM; Director and Executive Vice President of VFD. Edward J. Kohler Director and Executive Vice President of VFM; Director of VFD. Frank C. Tonnemaker Director and Executive Vice President of VFM; and Director and President of VFD. All of such individuals will resign their positions immediately prior to Closing. It is expected that, after consummation of the Merger, the individuals who currently serve as the principal executive officer and directors of DMC will also serve as the principal executive officer and directors of VFM. See "Supplemental Information about Delaware Management Company, Inc." below. Information regarding compensation received by VFM pursuant to certain advisory agreements is set forth above under "Proposal Two--Proposal to Approve New Investment Advisory Agreements." Set forth below is information regarding advisory agreements between VFM and certain other open-end and closed-end funds which have investment objectives similar to those of one or more of the Funds being asked to approve new investment advisory agreements under Proposal Two:1998
RateNumber of Advisory Net AssetsPercent of Percent of Company/Fund VFM's Compensation Fees WaivedName and Address Shares Fund at 12/31/96 -Company ------------ ---------------- ------ ---- ------------------ ----------- ----------------------- Voyageur Funds, Inc. Delaware-Voyageur US Government Securities Fund Voyageur Insured Funds, Inc Delaware-Voyageur Tax-Free Arizona Insured Fund Delaware-Voyageur Tax-Free Colorado Insured Fund Delaware-Voyageur Minnesota Insured Fund Voyageur Intermediate Tax Free Funds, Inc. Delaware-Voyageur Tax-Free Minnesota Intermediate Fund Voyageur Mutual Funds, Inc. Delaware-Voyageur Tax-Free Arizona Fund Delaware-Voyageur Tax-Free California Fund Delaware-Voyageur Tax-Free Idaho Fund Delaware-Voyageur Tax-Free Iowa Fund Delaware-Voyageur Minnesota High Yield Municipal IncomeBond Fund Inc. Annual rate of .40% of $ 0 $ 58,315,692 average weekly net assets MinnesotaNational High-Yield Municipal IncomeBond Fund Delaware-Voyageur Tax-Free New York Fund Delaware-Voyageur Tax-Free Wisconsin Fund Voyageur Mutual Funds II, Inc. Annual rate of .40% of $ 0 $161,051,362 average weekly net assets Minnesota Municipal IncomeDelaware-Voyageur Tax-Free Colorado Fund Voyageur Mutual Funds III, Inc. Annual rate of .40% of $ 0 $ 38,910,971 average weekly net assets Arizona Municipal IncomeAggressive Growth Fund Inc. Annual rate of .40% of $ 0 $ 67,367,446 average weekly net assets Florida Insured Municipal IncomeGrowth Stock Fund Annual rate of .40% of $ 0 $ 54,439,214 average weekly net assets Colorado Insured Municipal IncomeTax-Efficient Equity Fund Inc. Annual rate of .40% of $ 0 $107,788,794 average weekly net assets National InsuredVoyageur Tax Free Funds, Inc. Delaware-Voyageur Tax-Free Minnesota Fund Annual rate of .50% of $145,000 $ 32,030,258 average daily net assets National Limited Term Tax FreeDelaware-Voyageur Tax-Free North Dakota Fund Annual rate of .40% of $ 4,731 $ 1,184,425 average daily net assets National Tax Free Fund Annual rate of .50% of $ 12,665 $ 3,737,821 average daily net assets
SUPPLEMENTAL INFORMATION ABOUT DELAWARE MANAGEMENT COMPANY, INC. DMC is an indirect, wholly owned subsidiaryB-1 EXHIBIT C EXECUTIVE OFFICERS OF THE COMPANIES David K. Downes (58) Executive Vice President, Chief Operating Officer, Chief Financial Officer of DMH. In turn, DMH is an indirect, wholly-owned subsidiary, and subject to the ultimate control, of LNC. LNC, an Indiana corporation with headquarters in Fort Wayne, Indiana, is a diversified organization with operations in many aspectseach of the financial services industry, including insurance and investment management. DMC and its predecessors have been managing the funds in the Delaware Group since 1938. On December 31, 1996, DMC and its affiliates within the Delaware Group, including Delaware International Advisers Ltd., were supervising in the aggregate approximately $32 billion in assets in the various institutional or separately managed and investment company accounts. DMC is located at One Commerce Square, Philadelphia, Pennsylvania 19103. The names and principal occupations of the principal executive officer and each director of DMC are set forth below. The address of all individuals is that of DMC. Name Principal Occupation - ---- -------------------- Wayne A. Stork Chairman, President, Chief Executive Officer, Chief Investment Officer and Director of Delaware Management Company, Inc.; Chairman, President, Chief Executive Officer, Director and/or Trustee of 1734 investment companies in the Delaware Group (which excludes Delaware Pooled Trust, Inc.),Investments family, Delaware Management Holdings, Inc., DMH Corp., Delaware International Holdings Ltd. andInc, Founders Holdings, Inc.; Chairman and Director of Delaware Pooled Trust, Inc., Delaware Distributors, Inc. andCBO Corporation, Delaware Capital Management, Inc.; Chairman, Chief Executive Officer and Director of, Delaware International Advisers Ltd.; Director of Delaware ServiceManagement Company Inc. and Delaware Investment & Retirement Services, Inc. Winthrop S. Jessup Executive Vice President and Director(a series of Delaware Management Company, Inc.Business Trust), Delaware Investment Advisers (a series of Delaware Management Business Trust) and Delaware Distributors, L.P.; Executive Vice President, Chief Operating Officer, Chief Financial Officer and Trustee of 17 investment companies in the Delaware Group (which excludes Delaware Pooled Trust, Inc.) and Delaware Management Holdings, Inc.; President and Chief Executive Officer of Delaware Pooled Trust, Inc.; President and Director of Delaware Capital Management, Inc.;Business Trust; Executive Vice President, and Director of DMH Corp., Delaware International Holdings Ltd. and Founders Holdings, Inc.; Vice Chairman and Director of Delaware Distributors, Inc.; Vice Chairman of Delaware Distributors, L.P.; Director of Delaware Service Company, Inc., Delaware International Adviser Ltd., Delaware Management Trust Company and Delaware Investment & Retirement Services, Inc. Richard G. Unruh, Jr. Executive Vice President and Director of Delaware Management Company, Inc.; Executive Vice President of the 18 investment companies in the Delaware Group; Senior Vice President of Delaware Management Holdings, Inc.; Director of Delaware International Advisers Ltd. David K. Downes Executive Vice President/Chief Operating Officer/Officer, Chief Financial Officer and Director of Delaware Management Company, Inc.; Senior Vice President/Chief Administrative Officer/Chief Financial Officer of the 18 investment companies in the, DMH Corp., Delaware Group; ChairmanDistributors, Inc., Founders Holdings, Inc. and Director of Delaware Management Trust Company and Delaware Investment & Retirement Services,Delvoy, Inc.; President/President, Chief Executive Officer/Officer, Chief Financial Officer and Director of Delaware Service Company, Inc.; Executive Vice President/President, Chief Operating Officer/Officer, Chief Financial Officer and Director of DMH Corp., Delaware Distributors, Inc., Founders Holdings, Inc. and Delaware International Holdings Ltd.; Executive Vice President/Chief Operating Officer/Chief Financial Officer of Delaware Management Holdings, Inc. and Delaware Capital Management, Inc.; Senior Vice President/Chief Administrative Officer/Chief Financial Officer of Delaware Distributors, L.P., Director of Delaware International Advisers Ltd. George M. Chamberlain, Jr. Senior Vice President, Secretary and Director of Delaware Management Company, Inc.; Senior Vice President and Secretary of the 18 investment companies in the Delaware Group, Delaware Management Holdings, Inc. and Delaware Distributors, L.P.; Executive Vice President, SecretaryChairman and Director of Delaware Management Trust Company; Senior Vice President, SecretaryChairman, Chief Executive Officer and Director of DMH Corp.,Retirement Financial Services, Inc. During the past five years, Mr. Downes has served in various executive capacities at different times in the Delaware Distributors,Investments organization. Richard G. Unruh (59) Executive Vice President of each of the 34 investment companies in the Delaware Investments family, Delaware Management Holdings, Inc., Delaware ServiceManagement Company Inc.,(a series of Delaware Investment & Retirement Services, Inc., Founders Holdings, Inc.Management Business Trust) and Delaware Capital Management, Inc.; Secretary and DirectorPresident of Delaware International Holdings Ltd.,Investment Advisers (a series of Delaware Management Business Trust); Executive Vice President and Director/Trustee of Delaware Management Company, Inc. and Delaware Management Business Trust; Director of Delaware International Advisers Ltd., Attorney. DMC currently serves as investment adviser for the following funds that have investment objectives similar to those of one or more of the Funds being asked to approve new investment advisory agreements under Proposal Two: [NAME OF FUND, RATE OF COMPENSATION, FEES WAIVED PURSUANT TO ADVISORY AGREEMENT, NET ASSETS OF FUND AS OF DECEMBER 31, 1996.] EXECUTIVE OFFICERS OF VOYAGEUR FUNDS Certain information about the executive officers of the Funds is set forth below. Unless otherwise indicated, all positions have been held more than five years. Position and Term of Office with the Funds and Name (Age) Business Experience During the Past Five Years - ---------- ---------------------------------------------- John G. Taft (42) President ofpast five years, Mr. Unruh has served in various executive capacities at different times within the Funds (Executive Vice President of Colorado Tax Free Fund); President of VFM; Director of VFM and of VFD since 1993; Executive Vice President of VFD (since 1995); Management Committee member of VFM from 1991 to 1993. Andrew M. McCullagh, Jr. (48) Executive Vice President of the Funds (President of Colorado Tax Free Fund); Senior Tax Exempt Portfolio Manager of VFM; previously, Director of VFM and VFD from 1993 to 1995. Jane M. Wyatt (42) Executive Vice President of the Funds; Director and Chief Investment Officer of VFM since 1993; Director and Executive Vice President of VFD since 1993; previously, Executive Vice President and Portfolio Manager of VFM from 1992 to 1993. Steve Eldredge (40) Vice President of the Funds since 1995; Senior Tax Exempt Portfolio Manager of VFM since 1995; previously, portfolio manager for ABT Mutual Funds, Palm Beach, Florida, from 1989 to 1995. Elizabeth H. Howell (35) Vice President of the Funds; Senior Tax Exempt Portfolio Manager of VFM. James C. King (56) Vice President of the Funds; Senior Equity Portfolio Manager of VFM since 1993; previously, Director of VFM and VFD from 1993 to 1995. Kenneth R. Larsen (33) Treasurer of the Funds; Treasurer of VFM and VFD; previously, Director, Secretary and Treasurer of VFM and VFD from 1993 to 1995. Thomas J. Abood (33) Secretary of the Funds since 1995; Senior Vice President and General Counsel since 1994 of DFG; Senior Vice President of VFM, VFD and Voyageur Companies, Inc. since 1995; previously, Vice President of VFM and Voyageur Companies, Inc. from 1994 to 1995; previously, associated with the law firm of Skadden, Arps, Slate, Meagher & Flom, Chicago, Illinois from 1988 to 1994. All of such individuals [EXCEPT MS. HOWELL AND MR. MCCULLAGH] will resign their positions with the Funds immediately prior to Closing. It is expected that, after consummation of the Merger, the newly elected Boards of Directors will elect the following individuals to serve as officers of the Funds: Expected Position with Funds and Business Name (Age) Experience During the Past Five Years - ---------- ----------------------------------------- Wayne A. Stork (59) Chairman, President, Chief Executive Officer, Director and/or Trustee of the Funds. See "Supplemental Information About Delaware Management Company, Inc." for a description of Mr. Stork's business experience. Winthrop S. Jessup (51) Executive Vice President of the Funds. See "Supplemental Information About Delaware Management Company, Inc." for a description of Mr. Jessup's business experience. Richard G. Unruh, Jr. (57) Executive Vice President of the Funds. See "Supplemental Information About Delaware Management Company, Inc." for a description of Mr. Unruh's business experience.Investments organization. Paul E. Suckow (49)(51) Executive Vice President/Chief Investment Officer, Fixed Income of the Funds andeach of the 1834 investment companies in the Delaware GroupInvestments family, Delaware Management Company, Inc., Delaware Management Business Trust, Delaware Management Company (a series of Delaware Management Business Trust), Delaware Investment Advisers (a series of Delaware Management Business Trust) and Delaware Management Company,Holdings, Inc.; Executive Vice President and Director of Founders Holdings, Inc.; Senior Vice President/Chief Investment Officer, Fixed Income of Delaware Management Holdings, Inc.; SeniorExecutive Vice President of Delaware Capital Management, Inc.; Director of Founders CBO Corporation; Director of HYPPCO Finance Company Ltd.; before returning to During the past five years, Mr. Suckow has served in various executive capacities at different times within the Delaware GroupInvestments organization. Michael P. Bishof (36) Senior Vice President/Treasurer of each of the 34 investment companies in 1993, Mr. Suckow was Executivethe Delaware Investments family and Founders Holdings, Inc.; Senior Vice President/Investment Accounting of Delaware Management Company, Inc., Delaware Management Business Trust, Delaware Management Company (a series of Delaware Management Business Trust) and Delaware Service Company, Inc.; Senior Vice President and DirectorTreasurer/Manager of Fixed IncomeInvestment Accounting of Delaware Distributors, L.P. and Delaware Investment Advisers (a series of Delaware Management Business Trust); Senior Vice President and Manager of Investment Accounting of Delaware International Holdings Ltd.; Senior Vice President and Assistant Treasurer of Founders CBO Corporation. Before joining Delaware Investments in 1995, Mr. Bishof was a Vice President for OppenheimerBankers Trust, New York, NY, from 1994 to 1995, a Vice President for CS First Boston Investment Management, New York, NY, from 1993 to 1994, and an Assistant Vice President for Equitable Capital Management Corporation, New York, New YorkNY, from 19851987 to 1992; prior to 1985, he was a fixed-income portfolio manager for the Delaware Group. David K. Downes (57) Senior Vice President/Chief Administrative Officer/ Chief Financial Officer of the Funds. See "Supplemental Information About Delaware Management Company, Inc." for a description of Mr. Downes' business experience.1993. George M. Chamberlain, Jr. (50)(51) Senior Vice President, Secretary and General Counsel of each of the 34 investment companies in the Delaware Investments family; Senior Vice President and Secretary of the Funds. See "Supplemental Information AboutDelaware Distributors, L.P., Delaware Management Company Inc." for a description(a series of Delaware Management Business Trust), Delaware Investment Advisers (a series of Delaware Management Business Trust) and Delaware Management Holdings, Inc.; Senior Vice President, Secretary and Director/Trustee of DMH Corp., Delaware Management Company, Inc., Delaware Distributors, Inc., Delaware Service Company, Inc., Founders Holdings, Inc., Retirement Financial Services Inc., Delaware Capital Management, Inc., Delvoy, Inc. and Delaware Management Business Trust; Executive Vice President, Secretary and Director of Delaware Management Trust Company. Joseph H. Hastings (48) Senior Vice President/Corporate Controller of each of the 34 investment companies in the Delaware Investments family and Founders Holdings, Inc.; Senior Vice President/Corporate Controller and Treasurer of Delaware Management Holdings, Inc., DMH Corp., Delaware Management Company, Inc., Delaware Management Business Trust, Delaware Management Company (a series of Delaware Management Business Trust), Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware Capital Management, Inc., Delaware International Holdings Ltd. and Delvoy, Inc.; Chief Financial Officer/Treasurer of Retirement Financial Services, Inc.; Executive Vice President/Chief Financial Officer/Treasurer of Delaware Management Trust Company; Senior Vice President/Assistant Treasurer of Founders CBO Corporation. During the past five years, Mr. Chamberlain's business experience.Hastings has served in various executive capacities at different times within the Delaware Investments organization. C-1 Patrick P. Coyne (33)(35) Vice President/Senior Portfolio Manager of the tax-free FundsDelaware Management Company, Inc., Delaware Management Business Trust, Delaware Management Company (a series of Delaware Management Business Trust), Delaware Investment Advisers (a series of Delaware Management Business Trust), Delaware Capital Management, Inc., and of the tax-free and fixed-income investment companiesfunds in the Delaware Group, Delaware Management Company, Inc. and Delaware Capital Management, Inc.; duringInvestments family. During the past five years, Mr. Coyne has served in various capacities at different times within the Delaware Investments organization. Mitchell L. Conery (38)(39) Vice President/Senior Portfolio Manager of the tax-free FundsDelaware Management Company, Inc., Delaware Management Business Trust, Delaware Management Company (a series of Delaware Management Business Trust), Delaware Investment Advisers (a series of Delaware Management Business Trust), and of the tax-free and fixed-income investment companiesfunds in the Delaware Group andInvestments family. Before joining Delaware Management Company, Inc.; from 1995 to 1996,Investments in 1997, Mr. Conery was an investment officer with Travelers Insurance and from 1992 to 1995 he wasthrough 1996, and a research analyst with CS First Boston. Mr. Conery joined the Delaware Group in 1997. Edward N. Antoian (41)Boston from 1992 to 1995. Elizabeth H. Howell (36) Vice President/Senior Portfolio Manager of the equity FundsDelaware Management Company, Inc., Delaware Management Business Trust, Delaware Management Company (a series of Delaware Management Business Trust), Delaware Investment Advisers (a series of Delaware Management Business Trust) and of the equity investment companiesfixed-income funds in the Delaware Group,Investments family. Before joining Delaware Management Company,Investments in 1997, Ms. Howell was a senior portfolio manager with Voyageur Fund Managers, Inc. and Delaware Capital Management, Inc.; during the past five years, Mr. Antoian has served in various capacities within the Delaware organization. Gerald S. FreyAndrew M. McCullagh (50) Vice President/Senior Portfolio Manager of the equity FundsDelaware Management Company, Inc., Delaware Management Business Trust, Delaware Management Company (a series of Delaware Management Business Trust), Delaware Investment Advisers (a series of Delaware Management Business Trust) and of the fixed-income funds in the Delaware Investments family. Before joining Delaware Investments in 1997, Mr. McCullagh was a senior portfolio manager with Voyageur Fund Managers, Inc. Gary A. Reed (43) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., Delaware Management Business Trust, Delaware Management Company (a series of Delaware Management Business Trust), Delaware Investment Advisers (a series of Delaware Management Business Trust), and Delaware Capital Management, Inc.; and an officer of the fixed-income funds in the Delaware Investments family. During the past five years, Mr. Reed has served in various capacities at different times within the Delaware Investments organization. Babak Zenouzi (35) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., Delaware Management Business Trust, Delaware Management Company (a series of Delaware Management Business Trust), Delaware Investment Advisers (a series of Delaware Management Business Trust), and of the equity funds in the Delaware Investments family. During the past five years, Mr. Zenouzi has served in various capacities at different times within the Delaware Investments organization. George H. Burwell (36) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., Delaware Management Business Trust, Delaware Management Company (a series of Delaware Management Business Trust), Delaware Investment Advisers (a series of Delaware Management Business Trust), and 8 investment companies in Delaware Investments and of Delaware Management Company. Before joining Delaware Investments in 1992, Mr. Burwell was a portfolio manager for Midlantic Bank, New Jersey. In addition, he was a security analyst for Balis & Zorn, New York and for First Fidelity Bank, New Jersey. Gerald S. Frey (52) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., Delaware Management Business Trust, Delaware Management Company (a series of Delaware Management Business Trust), Delaware Investment Advisers (a series of Delaware Management Business Trust), and 8 investment companies in the Delaware Group and of Delaware Management Company, Inc.; before Before joining the Delaware Group in 1996, Mr. Frey was a Senior Director with Morgan Grenfell Capital Management, New York, New YorkNY from 1986 to 1995. Michael P. Bishof (34) Vice President/TreasurerC-2 EXHIBIT D SHAREHOLDINGS BY DIRECTORS AND NOMINEES IN THE DELAWARE INVESTMENTS FUNDS AS OF OCTOBER 31, 1998
Percentage of Company Shares Owned Fund/Company Owned ------- ------------ ------------------ JEFFREY J. NICK Delaware Group Equity Funds II, Inc. Decatur Total Return Fund................................... 1,270.806 Less than 1%/Less than 1% Delaware Group Cash Reserve, Inc............................ 31,403.410 Less than 1%/Less than 1% Delaware Group State Tax-Free Income Trust Tax-Free New Jersey Fund................................... 19,012.257 - / - WALTER P. BABICH Delaware Group Cash Reserve, Inc............................ 7,869.800 Less than 1%/Less than 1% Delaware Group Equity Funds II, Inc. Decatur Total Return Fund.................................. 9,651.044 Less than 1%/Less than 1% Delaware Group Equity Funds V, Inc. Small Cap Value Fund....................................... 4,314.040 Less than 1%/Less than 1% Voyageur Mutual Funds III, Inc. Aggressive Growth Fund..................................... 6,938.292 Less than 1%/Less than 1% ANTHONY D. KNERR None
D-1
Percentage of Company Shares Owned Fund/Company Owned ------- ------------ ------------------ ANN R. LEVEN Delaware Group Equity Funds I, Inc. Delaware Fund........................................... 750.665 Less than 1%/Less than 1% Delaware Group Equity Funds I, Inc. Devon Fund.............................................. 254.789 Less than 1%/Less than 1% Delaware Group Equity Funds II, Inc. Decatur Income Fund..................................... 2,025.428 Less than 1%/Less than 1% Delaware Group Equity Funds II, Inc. Decatur Total Return Fund............................... 2,036.432 Less than 1%/Less than 1% Delaware Group Equity Funds III, Inc. Trend Fund............................................... 2,527.037 Less than 1%/Less than 1% Delaware Group Equity Funds V, Inc. Small Cap Value Fund.................................... 994.566 Less than 1%/Less than 1% Delaware Group Global & International Funds, Inc. International Equity Fund............................... 1,174.926 Less than 1%/Less than 1% W. THACHER LONGSTRETH Delaware Group Equity Funds I, Inc. Delaware Fund .......................................... 40,815.95 Less than 1%/Less than 1% Delaware Group Equity Funds II, Inc. Decatur Income Fund..................................... 67,652.453 Less than 1%/Less than 1% Delaware Group Equity Funds II, Inc. Decatur Total Return Fund............................... 4,161.893 Less than 1%/Less than 1% Delaware Group Equity Funds III, Inc. Trend Fund.............................................. 5,296.988 Less than 1%/Less than 1% Delaware Group Equity Funds IV, Inc. DelCap Fund............................................. 1,942.898 Less than 1%/Less than 1% Delaware Group Equity Funds V, Inc. Small Cap Value Fund.................................... 934.814 Less than 1%/Less than 1% Delaware Group Income Funds, Inc. Delchester Fund......................................... 60,197.084 Less than 1%/Less than 1% Delaware Group Government Fund, Inc. U.S. Government Fund.................................... 96.057 Less than 1%/Less than 1% Delaware Group Limited-Term Government Funds, Inc. U.S. Government Money Fund.............................. 90.100 Less than 1%/Less than 1% Delaware Group Limited-Term Government Funds, Inc. Limited-Term Government Fund............................ 25,648.646 Less than 1%/Less than 1% Delaware Group Cash Reserve, Inc............................ 40,105.860 Less than 1%/Less than 1% Delaware Group Tax-Free Fund, Inc. Tax-Free USA Fund....................................... 40,050.721 Less than 1%/Less than 1% Delaware Group State Tax-Free Income Trust Tax-Free Pennsylvania Fund.............................. 221.163 Less than 1%/Less than 1% Delaware Group Tax-Free Money Fund, Inc..................... 470.830 Less than 1%/Less than 1% Delaware Group Dividend and Income Fund, Inc................ 1,000.000 Less than 1%/Less than 1% Delaware Group Global Dividend and Income Fund, Inc......... 1,274.000 Less than 1%/Less than 1% WAYNE A. STORK Delaware Group Equity Funds I, Inc. Devon Fund ................................................ 65,720.574 Less than 1%/Less than 1% Delaware Group Equity Funds II, Inc. Decatur Income Fund........................................ 1,118.749 Less than 1%/Less than 1% Delaware Group Equity Funds V, Inc. Small Cap Value Fund....................................... 2,862.459 Less than 1%/Less than 1% Delaware Group Income Funds, Inc. Delchester Fund............................................ 601,720.448 Less than 1%/Less than 1% Delaware Group Income Funds, Inc. High-Yield Opportunities Fund.............................. 1,066,253.089 40.28%/Less than 1% Delaware Group Government Fund, Inc. Government Income Series................................... 5,322.055 Less than 1%/Less than 1% Delaware Group Cash Reserve, Inc. .......................... 4,783,208.930 Less than 1%/Less than 1% Delaware Group Tax-Free Money Fund, Inc..................... 1,075.010 Less than 1%/Less than 1% Delaware Group State Tax-Free Income Trust Tax-Free Pennsylvania Fund................................. 1,231,454.464 1.11%/1.10% Delaware Group Global & International Funds, Inc. International Equity Series................................ 11,838.599 Less than 1%/Less than 1% Voyageur Mutual Funds III, Inc. Aggressive Growth Fund..................................... 1,225.190 Less than 1%/Less than 1%
D-2
Percentage of Company Shares Owned Fund/Company Owned ------- ------------ ------------------ THOMAS F. MADISON Delaware Group Equity Funds I, Inc. Devon Fund............................................... 246.327 Less than 1%/Less than 1% Delaware Group Global & International Funds, Inc. International Equity Fund................................ 159.373 Less than 1%/Less than 1% Voyageur Mutual Funds III, Inc. Aggressive Growth Fund................................... 132.162 Less than 1%/Less than 1% CHARLES E. PECK Delaware Group Equity Funds I, Inc. Delaware Fund............................................ 16,151.178 Less than 1%/Less than 1% Delaware Group Equity Funds I, Inc. Devon Fund............................................... 12,876.107 Less than 1%/Less than 1% Delaware Group Equity Funds II, Inc. Decatur Total Return Fund................................ 9,633.481 Less than 1%/Less than 1% Delaware Group Equity Funds III, Inc. Trend Fund............................................... 21,771.736 Less than 1%/Less than 1% Delaware Group Equity Funds IV, Inc. DelCap Fund.............................................. 7,583.990 Less than 1%/Less than 1% Delaware Group Equity Funds V, Inc. Small Cap Value Fund..................................... 7,248.518 Less than 1%/Less than 1% Delaware Group Adviser Funds, Inc. U.S. Growth Fund......................................... 14,417.178 Less than 1%/Less than 1% Delaware Group Income Funds, Inc. Delchester Fund.......................................... 67,477.705 Less than 1%/Less than 1% Delaware Group Limited-Term Government Funds, Inc. Limited-Term Government Fund............................. 16,939/372 Less than 1%/Less than 1% Delaware Group Global & International Funds, Inc. International Equity Fund................................ 8,691.150 Less than 1%/Less than 1%
D-3 EXHIBIT E LISTS OF CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS Table of Contents Voyageur Funds, Inc. Delaware-Voyageur U.S. Government Securities Fund...........................E2 Voyageur Insured Funds, Inc. Delaware-Voyageur Tax-Free Arizona Insured Fund.............................E4 Delaware-Voyageur Minnesota Insured Fund....................................E4 Voyageur Intermediate Tax Free Funds, Inc. Delaware-Voyageur Tax-Free Minnesota Intermediate Fund......................E4 Voyageur Mutual Funds, Inc. Delaware-Voyageur Tax-Free Arizona Fund.....................................E6 Delaware-Voyageur Tax-Free California Fund..................................E6 Delaware-Voyageur Tax-Free Idaho Fund.......................................E6 Delaware-Voyageur Tax-Free Iowa Fund........................................E8 Delaware-Voyageur Minnesota High Yield Municipal Bond Fund.................E10 National High-Yield Municipal Bond Fund....................................E12 Delaware-Voyageur Tax-Free New York Fund....................................E6 Delaware-Voyageur Tax-Free Wisconsin Fund...................................E8 Voyageur Mutual Funds II, Inc. Delaware-Voyageur Tax-Free Colorado Fund...................................E14 Voyageur Mutual Funds III, Inc. Aggressive Growth Fund.....................................................E16 Growth Stock Fund..........................................................E18 Tax-Efficient Equity Fund..................................................E20 Voyageur Tax Free Funds, Inc. Delaware-Voyageur Tax-Free Minnesota Fund...................................E4 Delaware-Voyageur Tax-Free North Dakota Fund................................E4 E-1 Delaware-Voyageur US Government Securities Fund Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Diversification None. Concentration The Fund shall not invest more than 25% of its assets in the securities of issuers in any single industry; provided that there shall be no limitation on the purchase of securities issued by banks and obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities. Borrowing* The Fund shall not borrow money, except from banks for temporary or emergency purposes in an amount not exceeding 5% of the Funds andvalue of the 18 investment companiesFund's total assets. The Fund will not borrow for leverage purposes, and securities will not be purchased while borrowings are outstanding. Interest paid on any money borrowed will reduce the Fund's net income. The Fund shall not pledge, hypothecate, mortgage or otherwise encumber its assets in excess of 5% of its total assets (taken at the Delaware Group, Delaware Management Company, Inc., Delaware Distributors, Inc., Delaware Distributors, L.P., Delaware Service Company, Inc.,lower of cost or current value) and Founders Holdings, Inc.; Vice President/Managerthen only to secure borrowings permitted under "Borrowing". Issuing Senior Securities* None. Short Sales/Margin* The Fund shall not purchase securities on margin, except such short-term credits as may be necessary for the clearance of Investment Accountingpurchases and sales of Delaware International Holdings Ltd.; Assistant Treasurersecurities. The Fund shall not make short sales of Founders CBO Corporation; before joiningsecurities or maintain a short position for the Delaware Group in 1995, Mr. Bishof was a Vice President for Bankers Trust, New York, New York from 1994 to 1995, a Vice President for CS First Boston Investment Management, New York, New York from 1993 to 1994 and an Assistant Vice President for Equitable Capital Management Corporation, New York, New York from 1987 to 1993. SHAREHOLDER PROPOSALS As series of Minnesota corporations (or, in some instances, Massachusetts business trusts), the Funds are not required to hold annual shareholder meetings. Since the Funds do not hold regular meetings of shareholders, the anticipated date of the next shareholder meeting cannot be provided. Any shareholder proposal which may properly be included in the proxy solicitation material for a special shareholder meeting must be received by the Fund no later than four months prior to the date proxy materials are mailed to shareholders. Dated: February 21, 1997 Thomas J. Abood, Secretary EXHIBIT A (Changes from Current Agreement are in ITALICS) INVESTMENT ADVISORY AGREEMENT This Agreement, made this ___ day of ________, 1997, by and between ___________ Funds, Inc., a Minnesota corporation (the "Company"), on behalf of each Fund represented by a series of shares of common stockaccount of the Fund that adopts this Agreement (each a "Fund" and, collectively, the "Funds") (the Funds, together with the date each Fund adopts this Agreement, are set forth in Exhibit A hereto, which shall be updated from time to time to reflect additions, deletions or other changes thereto), and [Voyageur Fund Managers, Inc.] [Delaware Management Company, Inc.], a _________ corporation ("Adviser"), WITNESSETH: 1. INVESTMENT ADVISORY SERVICES. (a) The Company hereby engages Adviser on behalf of the Funds, and Adviser hereby agrees to act, as investment adviser for, and to manage the investment of the assets of, the Funds. (b) The investment of the assets of each Fund shallunless at all times be subjectwhen a short position is open it owns an equal amount of such securities or owns securities which, without payment of any further consideration, are convertible into or exchangeable for securities of the same issue as, and equal in amount to, the applicable provisionssecurities sold short. Underwriting The Fund shall not underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under federal securities laws. Real Estate The Fund shall not purchase or sell real estate, although it may purchase securities which are secured by or represent interests in real estate. Commodities The Fund shall not purchase or sell commodities or commodity contracts. Lending The Fund shall not make loans, except by purchase of debt obligations in which the Fund may invest consistent with its investment policies and through repurchase agreements. Illiquid Securities The Fund shall not purchase securities restricted as to resale. The Fund shall not invest in (a) securities which in the opinion of the ArticlesFund's investment adviser at the time of Incorporation,such investment are not readily marketable, and (b) securities the Bylaws,disposition of which is restricted under federal securities laws as described in the Registration Statement,preceding paragraph. Investment Companies The Fund shall not invest in securities of other investment companies, except as part of a merger, consolidation or acquisition of assets. Control or Management None. - ---------- * These activities will be covered by the proposed standard restriction concerning Senior Securities and Borrowing. E-2 Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Options The Fund shall not purchase options or puts, calls, straddles, spreads or combinations thereof; in connection with the current Prospectus andpurchase of fixed-income securities, however, the StatementFund may acquire attached warrants or other rights to subscribe for securities of Additional Information,companies issuing such fixed-income securities or securities of parents or subsidiaries of such companies. (The Fund's investment policies do not currently permit it to exercise warrants or rights with respect to equity securities.) Futures None. Unseasoned Issuers None. Warrants See "Options." Holdings by Affiliates The Fund shall not invest in securities of any issuer if, any,to the knowledge of the CompanyFund, officers and eachdirectors of the Fund or officers and directors of the Fund's investment adviser who beneficially own more than 1/2 of 1% of the securities of that issuer together own more than 5%. Oil or Gas The Fund shall conformnot buy or sell oil, gas or other mineral leases, rights or royalty contracts. Miscellaneous None. E-3 Delaware-Voyageur Tax-Free Arizona Insured Fund Delaware-Voyageur Tax-Free Minnesota Fund Delaware-Voyageur Minnesota Insured Fund Delaware-Voyageur Tax-Free Minnesota Intermediate Fund Delaware-Voyageur Tax-Free North Dakota Fund Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Diversification None. Concentration The Fund shall not invest 25% or more of its assets in the securities of issuers in any single industry, except that the Fund may invest without limitation, in circumstances in which other appropriate available investments may be in limited supply, in housing, health care and utility obligations; provided that there shall be no limitation on the purchase of Tax Exempt Obligations and, for defensive purposes, obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities. (Note: For purposes of this investment restriction, the Fund's investment adviser (the "Manager") interprets "Tax Exempt Obligations" to exclude limited obligation bonds payable only from revenues derived from facilities or projects within a single industry.) Borrowing* The Fund shall not borrow money, except from banks for temporary or emergency purposes in an amount not exceeding 20% of the value of the Fund's total assets, including the amount borrowed. The Fund may not borrow for leverage purposes, and securities will not be purchased while borrowings are outstanding. Interest paid on any money borrowed will reduce the Fund's net income. The Fund shall not pledge, hypothecate, mortgage or otherwise encumber its assets in excess of 10% of its total assets (taken at the lower of cost or current value) and then only to secure borrowings permitted by the restriction described in the preceding paragraph). Issuing Senior Securities* None. Short Sales/Margin* The Fund shall not purchase securities on margin, except such short-term credits as may be necessary for the clearance of purchases and sales of securities. The Fund shall not make short sales of securities or maintain a short position for the account of such Fund unless at all times when a short position is open it owns an equal amount of such securities or owns securities which, without payment of any further consideration, are convertible into or exchangeable for securities of the same issue as, and equal in amount to, the securities sold short. Underwriting The Fund shall not underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under federal securities laws. Real Estate The Fund shall not purchase or sell real estate, although it may purchase securities which are secured by or represent interests in real estate. Commodities The Fund shall not purchase or sell commodities or commodity contracts (including futures contracts). Lending The Fund shall not make loans, except by purchase of debt obligations in which the Fund may invest consistent with its investment policies, and through repurchase agreements. Illiquid Securities The Fund shall not invest more than 15% of its net assets in illiquid investments. - ---------- * These activities will be covered by the proposed standard restriction concerning Senior Securities and Borrowing. E-4 Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Investment Companies None. Control or Management None. Options None. Futures See "Commodities." Unseasoned Issuers None. Warrants None. Holdings by Affiliates The Fund shall not invest in securities of any issuer if, to the knowledge of the Fund, officers and directors or trustees [as applicable] of the Fund or officers and directors of the Fund's investment adviser who beneficially own more than 1/2 of 1% of the securities of that issuer together own more than 5% of such securities. Oil or Gas None. Miscellaneous None. E-5 Delaware-Voyageur Tax-Free Arizona Fund Delaware-Voyageur Tax-Free California Fund Delaware-Voyageur Tax-Free Idaho Fund Delaware-Voyageur Tax-Free New York Fund Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Diversification None. Concentration The Fund shall not invest 25% or more of its assets in the securities of issuers in any single industry (except that it may invest without limitation, in circumstances in which other appropriate available investments may be in limited supply, in housing, health care, utility, transportation, education and/or industrial obligations); provided that there shall be no limitation on the purchase of Tax Exempt Obligations and, for defensive purposes, obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities. (Note: For purposes of eachthis investment restriction, the Manager interprets "Tax Exempt Obligations" to exclude limited obligations bonds payable only from revenues derived from facilities or projects within a single industry.) Borrowing* The Fund as set forthshall not borrow money (provided that the Fund may enter into reverse repurchase agreements), except from banks for temporary or emergency purposes in such documents and as interpreted from time to time by the Board of Directorsan amount not exceeding 20% of the Company. Within the frameworkvalue of the investment policiesFund's total assets, including the amount borrowed. The Fund may not borrow for leverage purposes, provided that the Fund may enter into reverse repurchase agreements for such purposes, and securities will not be purchased while outstanding borrowings exceed 5% of eachthe value of the Fund's total assets. Issuing Senior Securities* The Fund and subject to such other limitations and directions asshall not issue any senior securities (as defined in the BoardInvestment Company Act of Directors may from time to time prescribe, Adviser shall have the sole and exclusive responsibility for the management of each Fund's assets and the making and execution of all investment decisions for each Fund,1940), except as set forth in the following paragraph. Adviser shall reportinvestment restriction pertaining to "Borrowing, and except to the Board of Directors regularly at such timesextent that using options, futures contracts and in such detail as the Boardoptions on futures contracts, purchasing or selling on a when-issued or forward commitment basis or using similar investment strategies may from timebe deemed to time determine appropriate, in order to permit the Board to determine the adherence of Adviserconstitute issuing a senior security. Short Sales/Margin* None. Underwriting The Fund shall not underwrite securities issued by other persons except to the investment policiesextent that, in connection with the disposition of portfolio investments, the Funds. (c) ADVISER MAY, AT ITS EXPENSE, SELECT AND CONTRACT WITH ONE OR MORE REGISTERED INVESTMENT ADVISERS ("SUB-ADVISER") FOR ANY OF THE FUNDS TO PERFORM SOME OR ALL OF THE SERVICES FOR SUCH FUNDS. SUCH SUB-ADVISER SHALL BE RESPONSIBLE FOR EXECUTING ORDERS FOR THE PURCHASE AND SALE OF PORTFOLIO SECURITIES. ADVISER WILL COMPENSATE ANY SUB-ADVISER FOR ITS SERVICES TO THE FUNDS. ADVISER MAY TERMINATE THE SERVICES OF ANY SUB-ADVISER AT ANY TIME IN ITS SOLE DISCRETION, AND SHALL AT SUCH TIME ASSUME THE RESPONSIBILITIES OF SUCH SUB-ADVISER UNLESS AND UNTIL A SUCCESSOR SUB-ADVISER IS SELECTED. (d) Adviser shall, at its own expense, furnish all office facilities, equipment and personnel necessary to discharge its responsibilities and duties hereunder. Adviser shall arrange, if requested by the Company, for officers or employees of Adviser to serve without compensation from any Fund as directors, officers, or employees of the Company if duly elected to such positions by the shareholders or directors of the Company (as required by law). (e) Adviser hereby acknowledges that all records pertaining to each Fund's investments are the property of the Company, and in the event that a transfer of investment advisory services to someone other than Adviser should ever occur, Adviser will promptly, and at its own cost, take all steps necessary to segregate such records and deliver them to the Company. (f) SUBJECT TO THE PRIMARY OBJECTIVE OF OBTAINING THE BEST AVAILABLE PRICES AND EXECUTION, ADVISER WILL PLACE ORDERS FOR THE PURCHASE AND SALE OF PORTFOLIO SECURITIES WITH SUCH BROKER/DEALERS WHO PROVIDE STATISTICAL, FACTUAL AND FINANCIAL INFORMATION AND SERVICES TO THE FUNDS, ADVISER OR TO ANY OTHER FUND FOR WHICH ADVISER PROVIDES INVESTMENT ADVISORY SERVICES AND/OR WITH BROKER/DEALERS WHO SELL SHARES OF THE FUNDS OR WHO SELL SHARES OF ANY OTHER FUND FOR WHICH ADVISER PROVIDES INVESTMENT ADVISORY SERVICES. BROKER/DEALERS WHO SELL SHARES OF THE FUNDS OF WHICH ADVISER IS INVESTMENT MANAGER, SHALL ONLY RECEIVE ORDERS FOR THE PURCHASE OR SALE OF PORTFOLIO SECURITIES TO THE EXTENT THAT THE PLACING OF SUCH ORDERS IS IN COMPLIANCE WITH THE RULES OF THE SECURITIES AND EXCHANGE COMMISSION AND THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (g) NOTWITHSTANDING THE PROVISIONS OF SUBPARAGRAPH (f) ABOVE, AND SUBJECT TO SUCH POLICIES AND PROCEDURES AS MAY BE ADOPTED BY THE BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY, ADVISER MAY ASK THE FUNDS AND THE FUNDS MAY AGREE TO PAY A MEMBER OF AN EXCHANGE, BROKER OR DEALER AN AMOUNT OF COMMISSION FOR EFFECTING A SECURITIES TRANSACTION IN EXCESS OF THE AMOUNT OF COMMISSION ANOTHER MEMBER OF AN EXCHANGE, BROKER OR DEALER WOULD HAVE CHARGED FOR EFFECTING THAT TRANSACTION, IN SUCH INSTANCES WHERE IT AND ADVISER HAVE DETERMINED IN GOOD FAITH THAT SUCH AMOUNT OF COMMISSION WAS REASONABLE IN RELATION TO THE VALUE OF THE BROKERAGE AND RESEARCH SERVICES PROVIDED BY SUCH MEMBER, BROKER OR DEALER, VIEWED IN TERMS OF EITHER THAT PARTICULAR TRANSACTION OR ADVISER'S OVERALL RESPONSIBILITIES WITH RESPECT TO THE FUNDS AND TO OTHER FUNDS AND OTHER ADVISORY ACCOUNTS FOR WHICH ADVISER EXERCISES INVESTMENT DISCRETION. 2. COMPENSATION FOR SERVICES. In payment for the investment advisory and management servicesmay be deemed to be rendered by Adviser hereunder, eachan underwriter under federal securities laws. Real Estate The Fund shall pay to Adviser a monthly fee,not purchase or sell real estate, although it may purchase securities which fee shall be paid to Adviser not later than the fifth business day of the month following the monthare secured by or represent interests in which said services were rendered.real estate. Commodities The monthly fee payable by each Fund shall be as set forthnot purchase or sell commodities or futures or options contracts with respect to physical commodities. This restriction shall not restrict the Fund from purchasing or selling, on a basis consistent with any restrictions contained in Exhibit A hereto,its then-current prospectus, any financial contracts or instruments which may be updated from time to time to reflect amendments, if any, to Exhibit A. The monthly fee payable by each Fund shall be based on the average of the net asset values of all of the issued and outstanding shares of the Fund as determined as of the close of each business day of the month pursuant to the Articles of Incorporation, Bylaws, and currently effective Prospectus and Statement of Additional Information of the Company and the Fund. For purposes of calculating each Fund's average daily net assets, as such term is used in this Agreement, each Fund's net assets shall equal its total assets minus (a) its total liabilities and (b) its net orders receivable from dealers. 3. ALLOCATION OF EXPENSES. (a) In addition to the fee described in Section 2 hereof, each Fund shall pay all its costs and expenses which are not assumed by Adviser. These Fund expenses include,deemed commodities (including, by way of example butand not by way of limitation, all expenses incurredoptions, futures, and options on futures with respect, in each case, to interest rates, currencies, stock indices, bond indices or interest rate indices). Lending The Fund shall not make loans, except by purchase of debt obligations in which the Fund may invest consistent with its investment policies, and through repurchase agreements. Illiquid Securities None. - ---------- * These activities will be covered by the proposed standard restriction concerning Senior Securities and Borrowing. E-6 Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Investment Companies None. Control or Management None. Options See "Commodities." Futures See "Commodities." Unseasoned Issuers None. Warrants None. Holdings by Affiliates None. Oil or Gas None. Miscellaneous None. E-7 Delaware-Voyageur Tax-Free Iowa Fund Delaware-Voyageur Tax-Free Wisconsin Fund Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Diversification None. Concentration The Fund shall not invest 25% or more of its assets in the operationsecurities of issuers in any single industry, except that it may invest without limitation, in circumstances in which other appropriate available investments may be in limited supply, in housing, health care and/or utility obligations; provided that there shall be no limitation on the purchase of Tax Exempt Obligations and, for defensive purposes, obligations issued or guaranteed by U.S. government, its agencies or instrumentalities. (Note: For purposes of this investment restriction, the Manager interprets "Tax Exempt Obligations" to exclude limited obligations bonds payable only from revenues derived from facilities or projects within a single industry.) Borrowing* The Fund shall not borrow money, except from banks for temporary or emergency purposes in an amount not exceeding 20% of the value of the Fund's total assets, including the amount borrowed. The Fund may not borrow for leverage purposes, and securities will not be purchased while borrowings are outstanding. Interest paid on any money borrowed will reduce the Fund's net income. Issuing Senior Securities* The Fund shall not issue any senior securities (as defined in the Investment Company Act of 1940), except as set forth in the investment restriction pertaining to "Borrowing," and except to the extent that purchasing or selling on a when-issued or forward commitment basis may be deemed to constitute issuing a senior security. Short Sales/Margin* The Fund shall not make short sales of securities or maintain a short position for the account of the Fund andunless at all times when a short position is open it owns an equal amount of such securities or owns securities which, without payment of any public offering of its shares, including, among others, Rule 12b-1 plan of distribution fees (if any), interest, taxes, brokerage fees and commissions, feesfurther consideration, are convertible into or exchangeable for securities of the directors who aresame issue as, and equal in amount to, the securities sold short. Underwriting The Fund shall not employees of Adviser or the principal underwriter of the Fund's shares (the "Underwriter"), or any of their affiliates, expenses of directors' and shareholders' meetings, including the cost of printing and mailing proxies, expenses of insurance premiums for fidelity andunderwrite securities issued by other coverage, expenses of redemption of shares, expenses of issue and sale of shares (topersons except to the extent not borne by the Underwriter under its agreement with the Fund), expenses of printing and mailing stock certificates representing shares of the Fund, association membership dues, charges of custodians, transfer agents, dividend disbursing agents, accounting services agents, investor servicing agents, and bookkeeping, auditing, and legal expenses. Each Fund will also pay the fees and bear the expense of registering and maintaining the registration of the Fund and its shares with the Securities and Exchange Commission and registering or qualifying its shares under state or other securities laws and the expense of preparing and mailing prospectuses and reports to shareholders. (b) The Underwriter shall bear all advertising and promotional expensesthat, in connection with the distributiondisposition of its portfolio investments, it may be deemed to be an underwriter under federal securities laws. Real Estate The Fund shall not purchase or sell real estate, although it may purchase securities which are secured by or represent interests in real estate. Commodities The Fund shall not purchase or sell commodities or commodity contracts (including futures contracts). This restriction shall not restrict the Fund from purchasing or selling, on a basis consistent with any restrictions contained in its then-current prospectus, any financial contract or instruments which may be deemed commodities (including by way of example, and not by way of limitation, options, futures and options on futures with respect, in each case, to interest rates, currencies, stock indices, bond indices or interest rate indices). Lending The Fund shall not make loans, except by purchase of debt obligations in which the Fund may invest consistent with its investment policies and through repurchase agreements. Illiquid Securities None. Investment Companies None. - ---------- * These activities will be covered by the proposed standard restriction concerning Senior Securities and Borrowing. E-8 Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Control or Management None. Options See "Commodities." Futures See "Commodities." Unseasoned Issuers None. Warrants None. Holdings by Affiliates None. Oil or Gas None. Miscellaneous None. E-9 Delaware-Voyageur Minnesota High-Yield Municipal Bond Fund Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Diversification None. Concentration The Fund shall 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. Borrowing* The Fund shall not borrow money (provided that the Fund may enter into reverse repurchase agreements with respect to not more than 10% of its total assets), except from banks for temporary or emergency purposes in an amount not exceeding 20% of the value of the Fund's shares,total assets, including payingthe amount borrowed. The Fund may not borrow for prospectusesleverage purposes, provided that the Fund may enter into reverse repurchase agreements for new shareholders,such purposes, and securities will not be purchased while outstanding borrowings exceed 5% of the value of the Fund's total assets. Issuing Senior Securities* The Fund shall not issue any senior securities (as defined in the Investment Company Act of 1940), except as providedset forth in investment restriction pertaining to "Borrowing," and except to the following sentence. Noextent that using options, futures contracts and options on futures contracts, purchasing or selling on a when-issued or forward commitment basis or using similar investment strategies may be deemed to constitute issuing a senior security. Short Sales/Margin* None. Underwriting The Fund shall use any of its assetsnot underwrite securities issued by other persons except to finance costs incurredthe extent that, in connection with the distributiondisposition of portfolio investments, the Fund may be deemed to be an underwriter under federal securities laws. Real Estate The Fund shall not purchase or sell real estate, although it may purchase securities which are secured by or represent interests in real estate. Commodities The Fund shall not purchase or sell commodities or futures or options contracts with respect to physical commodities. This restriction shall not restrict the Fund from purchasing or selling, on a basis consistent with any restrictions contained in its then-current Prospectus, any financial contracts or instruments which may be deemed commodities (including, by way of example and not by way of limitation, options, futures, and options on futures with respect, in each case, to interest rates, currencies, stock indices, bond indices or interest rate indices). Lending The Fund shall not make loans, except by purchase of debt obligations in which the Fund may invest consistent with its investment policies, and through repurchase agreements. Illiquid Securities None. Investment Companies None. - ---------- * These activities will be covered by the proposed standard restriction concerning Senior Securities and Borrowing. E-10 Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Control or Management None. Options See "Issuing Senior" and "Commodities." Futures See "Issuing Senior" and "Commodities." Unseasoned Issuers None. Warrants None. Holdings by Affiliates None. Oil or Gas None. Miscellaneous None. E-11 National High-Yield Municipal Bond Fund Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Diversification None. Concentration The Fund shall not invest 25% or more of its sharestotal 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. Borrowing* The Fund shall not borrow money (provided that the Fund may enter into reverse repurchase agreements with respect to not more than 10% of its total assets), except pursuantfrom banks for temporary or emergency purposes in an amount not exceeding 20% of the value of the Fund's total assets, including the amount borrowed. The Fund may not borrow for leverage purposes, provided that the Fund may enter into reverse repurchase agreements for such purposes, and securities will not be purchased while outstanding borrowings exceed 5% of the value of the Fund's total assets. Issuing Senior Securities* The Fund shall not issue any senior securities (as defined in the Investment Company Act of 1940), except as set forth under "Borrowing," and except to the extent that using options, futures contracts and options on futures contracts, purchasing or selling on a Planwhen-issued or forward commitment basis or using similar investment strategies may be deemed to constitute issuing a senior security. Short Sales/Margin* None. Underwriting The Fund shall not underwrite securities issued by other persons except to the extent that, in connection with the disposition of Distribution,portfolio investments, the Fund may be deemed to be an underwriter under federal securities laws. Real Estate The Fund shall not purchase or sell real estate, although it may purchase securities which are secured by or represent interests in real estate. Commodities The Fund shall not purchase or sell commodities or futures or options contracts with respect to physical commodities. This restriction shall not restrict the Fund from purchasing or selling, on a basis consistent with any restrictions contained in its then-current prospectus, any financial contracts or instruments which may be deemed commodities (including, by way of example and not by way of limitation, options, futures, and options on futures with respect, in each case, to interest rates, currencies, stock indices, bond indices or interest rate indices). Lending The Fund shall not make loans, except by purchase of debt obligations in which the Fund may invest consistent with its investment policies, and through repurchase agreements. Illiquid Securities None. Investment Companies None. - ---------- * These activities will be covered by the proposed standard restriction concerning Senior Securities and Borrowing. E-12 Control or Management None. Options See "Commodities." Futures See "Commodities." Unseasoned Issuers None. Warrants None. Holdings by Affiliates None. Oil or Gas None. Miscellaneous None. E-13 Delaware-Voyageur Tax-Free Colorado Fund Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Diversification None. Concentration The Fund shall not invest 25% or more of its assets in the securities of issuers in any single industry, except that the Fund may invest without limitation, in circumstances in which other appropriate available investments may be in limited supply, in housing, health care and utility obligations; provided that there shall be no limitation on the purchase of Tax Exempt Obligations and, for defensive purposes, obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities. (Note: For purposes of this investment restriction, the Fund's investment adviser (the "Manager") interprets "Tax Exempt Obligations" to exclude limited obligation bonds payable only from revenues derived from facilities or projects within a single industry.) Borrowing* The Fund shall not borrow money, except from banks for temporary or emergency purposes in an amount not exceeding 10% of the value of the Fund's total assets, including the amount borrowed. The Funds may not borrow for leverage purposes, and securities will not be purchased while borrowings are outstanding. Interest paid on any money borrowed will reduce the Fund's net income. The Fund shall not pledge, hypothecate, mortgage or otherwise encumber its assets in excess of 10% of its total assets (taken at the lower of cost or current value) and then only to secure borrowings permitted by the restriction described in the preceding paragraph). Issuing Senior Securities* None. Short Sales/Margin* The Fund shall not purchase securities on margin, except such short-term credits as may be necessary for the clearance of purchases and sales of securities. The Fund shall not make short sales of securities or maintain a short position for the account of the Fund unless at all times when a short position is open it owns an equal amount of such securities or owns securities which, without payment of any further consideration, are convertible into or exchangeable for securities of the same issue as, and equal in amount to, the securities sold short. Underwriting The Fund shall not underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under federal securities laws. Real Estate The Fund shall not purchase or sell real estate, although it may purchase securities which are secured by or represent interests in real estate. Commodities The Fund shall not purchase or sell commodities or commodity contracts (including futures contracts). Lending The Fund shall not make loans, except by purchase of debt obligations in which the Fund may invest consistent with its investment policies, and through repurchase agreements. Illiquid Securities The Fund shall not invest more than 15% of its net assets in illiquid investments. Investment Companies None. - ---------- * These activities will be covered by the proposed standard restriction concerning Senior Securities and Borrowing. E-14 Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Control or Management None. Options None. Futures See "Commodities." Unseasoned Issuers None. Warrants None. Holdings by Affiliates The Fund shall not invest in securities of any issuer if, to the knowledge of the Fund, officers and directors (or trustees) of the Fund or officers and directors of the Fund's investment adviser who beneficially own more than 1/2 of 1% of the securities of that issuer together own more than 5% of such securities. Oil or Gas None. Miscellaneous None. E-15 Aggressive Growth Fund Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Diversification None. Concentration The Fund shall not invest more than 25% of the value of its total assets in securities of issuers in any adopted pursuantone industry. For purposes of this restriction, the term industry will be deemed to Ruleinclude the government of any country other than the United States, but not the U.S. government. Borrowing* The Fund shall not borrow money, except that the Fund may borrow from banks for temporary or emergency (not leveraging) purposes, including the meeting of redemption requests and cash payments of dividends and distributions that might otherwise require the untimely disposition of securities, in an amount not to exceed 20% of the value of the Fund's total assets (including the amount borrowed) valued at market less liabilities (not including the amount borrowed) at the time the borrowing is made. Whenever borrowings exceed 5% of the value of the total assets of the Fund, the Fund will not make any additional investments. Issuing Senior Securities* None. Short Sales/Margin* None. Underwriting The Fund shall not act as an underwriter of securities, except that the Fund may acquire securities under circumstances in which, if the securities were sold, the Fund might be deemed to be an underwriter for purposes of the Securities Act of 1933, as amended. Real Estate The Fund shall not purchase or sell real estate or real estate limited partnership interests, except that the Fund may purchase and sell securities of companies that deal in real estate or interests in real estate. Commodities The Fund shall not purchase or sell commodities or commodity contracts, except futures contracts and related options and other similar contracts. Lending The Fund shall not lend money to other persons, except through purchasing debt obligations, lending portfolio securities and entering into repurchase agreements. Illiquid Securities None. Investment Companies None. - ---------- * These activities will be covered by the proposed standard restriction concerning Senior Securities and Borrowing. E-16 Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Control or Management None. Options None. Futures See "Commodities." Unseasoned Issuers None. Warrants None. Holdings by Affiliates None. Oil or Gas None. Miscellaneous None. E-16 Growth Stock Fund Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Diversification The Fund shall not invest more than 5% of the value of its total assets in the securities of any one issuer (other than securities of the U.S. Government or its agencies or instrumentalities). Concentration The Fund shall not concentrate its investments in any particular industry; however, it may invest up to 25% of the value of its total assets in the securities of issuers conducting their principal business activities in any one industry. Borrowing* The Fund shall not borrow money, except from banks for temporary or emergency purposes in an amount not exceeding 5% of the value of the Fund's total assets. The Fund shall not mortgage, pledge or hypothecate its assets except in an amount not exceeding 10% of the value of its total assets, to secure temporary or emergency borrowing. For purposes of this policy, collateral arrangements for margin deposits on futures contracts or with respect to the writing of options are not deemed to be a pledge of assets. Issuing Senior Securities* The Fund shall not issue any senior securities as defined in the Investment Company Act of 1940 (the "1940 Act"), except to the extent that using options and futures contracts may be deemed to constitute issuing a senior security. Short Sales/Margin* The Fund shall not purchase securities on margin, except that it may obtain such short-term credits as may be necessary for the clearance of purchases or sales of securities and except that it may make margin deposits in connection with futures contracts. The Fund shall not make short sales except where, by virtue of ownership of other securities, it has the right to obtain without payment of further consideration, securities equivalent in kind and amount to those sold. Underwriting The Fund shall not underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under federal securities laws. Real Estate The Fund shall not purchase or sell real estate or real estate mortgage loans, except the Fund may purchase or sell securities issued by companies owning real estate or interests therein. Commodities The Fund shall not purchase or sell commodities or commodities futures contracts, except that it may enter into financial futures contracts and engage in related options transactions. Lending The Fund shall not make loans to other persons, except to the extent that repurchase agreements are deemed to be loans under the 1940 Act, and except that it may purchase debt securities as described in the Prospectus under "Investment Objectives and Policies." The purchase of a portion of an issue of bonds, debentures or other debt securities distributed to the public or to financial institutions will not be considered the making of a loan. - ---------- * These activities will be covered by the proposed standard restriction concerning Senior Securities and Borrowing. E-18 Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Illiquid Securities The Fund shall not invest more than 15% of its net assets in illiquid investments. Investment Companies The Fund shall not invest more than 5% of the value of its total assets in the securities of any single investment company or more than 10% of the value of its total assets in the securities of two or more investment companies except as part of a merger, consolidation or acquisition of assets. Control or Management The Fund shall not invest for the purpose of exercising control or management. The Fund shall not purchase more than 10% of any class of securities of any one issuer (taking all preferred stock issues of an issuer as a single class and all debt issues of an issuer as a single class) or acquire more than 10% of the outstanding voting securities of an issuer. Options The Fund shall not write, purchase or sell puts, calls or combinations thereof, except that it may (a) purchase or write put and call options on stock indexes listed on national securities exchanges, (b) write and purchase put and call options with respect to the securities in which it may invest and (c) engage in financial futures contracts and related options transactions. See "Borrowing." Futures See "Borrowing," "Short Sales/Margin" and "Commodities." Unseasoned Issuers The Fund shall not invest more than 5% of the value of its total assets in the securities of any issuers which, with their predecessors, have a record of less than three years' continuous operation. (Securities of such issuers will not be deemed to fall within this limitation if they are guaranteed by an entity in continuous operation for more than three years.) Warrants None. Holdings by Affiliates The Fund shall not purchase or retain the securities of any issuer, if, to the Fund's knowledge, those officers or directors of Delaware Voyageur Mutual Funds III, Inc. or its affiliates or of its investment adviser or sub-adviser who individually own beneficially more than 0.5% of the outstanding securities of such issuer, together own beneficially more than 5% of such outstanding securities. Oil or Gas The Fund shall not purchase or sell oil, gas or other mineral leases, rights or royalty contracts, except the Fund may purchase or sell securities of companies investing in the foregoing. Miscellaneous The Fund shall not participate on a joint or a joint and several basis in any securities trading account. E-19 Tax-Efficient Equity Fund Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Diversification None. Concentration The Fund shall not invest more than 25% of the value of its total assets in securities of issuers in any one industry. For purposes of this restriction, the term industry will be deemed to include the government of any country other than the United States, but not the U.S. government. Borrowing* The Fund shall not borrow money, except that the Fund may borrow from banks for temporary or emergency (not leveraging) purposes, including the meeting of redemption requests and cash payments of dividends and distributions that might otherwise require the untimely disposition of securities, in an amount not to exceed 20% of the value of the Fund's total assets (including the amount borrowed) valued at market less liabilities (not including the amount borrowed) at the time the borrowing is made. Whenever borrowings exceed 5% of the value of the total assets of the Fund, the Fund will not make any additional investments. Issuing Senior Securities* The Fund shall not issue any senior securities, as defined in the Investment Company Act of 1940, other than as set forth under "Borrowing" above and except to the extent that using options and futures contracts or purchasing or selling securities on a when-issued or delayed delivery basis may be deemed to constitute issuing a senior security. Short Sales/Margin* None. Underwriting The Fund shall not act as an underwriter of securities, except that the Fund may acquire securities under circumstances in which, if the securities were sold, the Fund might be deemed to be an underwriter for purposes of the Securities Act of 1933, as amended. Real Estate The Fund shall not purchase or sell real estate or real estate limited partnership interests, except that the Fund may purchase and sell securities of companies that deal in real estate or interests in real estate. Commodities The Fund shall not purchase or sell commodities or commodity contracts, except futures contracts and related options and other similar contracts. Lending The Fund shall not lend money to other persons, except through purchasing debt obligations, lending portfolio securities and entering into repurchase agreements. Illiquid Securities None. Investment Companies None. - ---------- * These activities will be covered by the proposed standard restriction concerning Senior Securities and Borrowing. E-20 Category Current Fundamental Investment Restriction - -------- ------------------------------------------ Control or Management None. Options See "Issuing Senior Securities." Futures See "Issuing Senior Securities" and "Commodities." Unseasoned Issuers None. Warrants None. Holdings by Affiliates None. Oil or Gas None. Miscellaneous None. E-21 EXHIBIT F INFORMATION RELATING TO INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ Current Management (or Sub-Advisory) Fee Rate Proposed Management (or Investment Asset Size Based On Sub-Advisory) Fee Rate Manager or Date of as of Average Daily Based on Average Daily Fund/Series Sub-Adviser Agreement 10/31/98 Net Assets Net Assets - ------------------------------------------------------------------------------------------------------------------------------------ Voyageur Insured Funds, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur Tax-Free Arizona Delaware 4/30/97(1) 0.50% per year 0.50% on first $500 million Insured Fund Management 0.475% on next $500 million Company, 0.45% on next $1,500 million Inc. 0.425% on assets in excess of ("DMC") $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur Minnesota Insured DMC 4/30/97(1) 0.50% per year 0.50% on first $500 million Fund 0.475% on next $500 million 0.45% on next $1,500 million 0.425% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------ Voyageur Intermediate Tax Free Funds, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur Tax-Free Minnesota DMC 4/30/97(1) 0.40% per year 0.50% on first $500 million Intermediate Fund 0.475% on next $500 million 0.45% on next $1,500 million 0.425% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------ Voyageur Mutual Funds, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur Tax-Free Arizona Fund DMC 4/30/97(1) 0.50% per year 0.55% on first $500 million 0.50% on next $500 million 0.45% on next $1,500 million 0.425% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur Tax-Free California DMC 4/30/97(1) 0.50% per year 0.55% on first $500 million Fund 0.50% on next $500 million 0.45% on next $1,500 million 0.425% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------
[RESTUBBED FROM PREVIOUS PAGE]
- ------------------------------------------------------------------------------------------------------- Management Fees that Would Have Been Due Servicing During The /Distribution Management Last Fiscal Fees Paid Fees Due Year Under Percentage Last Fiscal and/or Proposed Difference Year to Waived Last Management Between Affiliates Fund/Series Fiscal Year A Fee Rate B Rate A & B of Manager - ------------------------------------------------------------------------------------------------------- Voyageur Insured Funds, Inc. - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur Tax-Free Arizona N/A N/A Insured Fund - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur Minnesota Insured N/A N/A Fund - ------------------------------------------------------------------------------------------------------- Voyageur Intermediate Tax Free Funds, Inc. - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur Tax-Free Minnesota Intermediate Fund - ------------------------------------------------------------------------------------------------------- Voyageur Mutual Funds, Inc. - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur Tax-Free Arizona Fund - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur Tax-Free California Fund - -------------------------------------------------------------------------------------------------------
- ------------------------ (1) Last submitted to shareholders for approval on April 11, 1997 in connection with Lincoln National Corporation's acquisition of the previous investment manager, Voyageur Fund Managers, Inc. F-1 EXHIBIT F INFORMATION RELATING TO INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ Current Management (or Sub-Advisory) Fee Rate Proposed Management (or Investment Asset Size Based On Sub-Advisory) Fee Rate Manager or Date of as of Average Daily Based on Average Daily Fund/Series Sub-Adviser Agreement 10/31/98 Net Assets Net Assets - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur Tax-Free Idaho Fund DMC 4/30/97(1) 0.50% per year 0.55% on first $500 million 0.50% on next $500 million 0.45% on next $1,500 million 0.425% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur Tax-Free Iowa Fund DMC 4/30/97(1) 0.50% per year 0.55% on first $500 million 0.50% on next $500 million 0.45% on next $1,500 million 0.425% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur Minnesota High Yield DMC 4/30/97(1) 0.65% per year 0.55% on first $500 million Municipal Bond Fund 0.50% on next $500 million 0.45% on next $1,500 million 0.425% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------ - --National High-Yield Municipal Bond DMC 4/30/97(1) 0.65% per year 0.55% on first $500 million Fund 0.50% on next $500 million 0.45% on next $1,500 million 0.425% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur Tax-Free New York DMC 4/30/97(1) 0.50% per year 0.55% on first $500 million Fund 0.50% on next $500 million 0.45% on next $1,500 million 0.425% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur Tax-Free Wisconsin DMC 4/30/97(1) 0.50% per year 0.55% on first $500 million Fund 0.50% on next $500 million 0.45% on next $1,500 million 0.425% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------ Voyageur Mutual Funds II, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur Tax-Free Colorado DMC 4/30/97(1) 0.50% per year 0.55% on first $500 million Fund 0.50% on next $500 million 0.45% on next $1,500 million 0.425% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------ (1) Last submitted to shareholders for approval on April 11, 1997 in connection with Lincoln National Corporation's acquisition of the previous investment manager, Voyageur Fund Managers, Inc. [RESTUBBED FROM PREVIOUS PAGE]
- ------------------------------------------------------------------------------------------------------- Management Fees that Would Have Been Due Servicing During The /Distribution Management Last Fiscal Fees Paid Fees Due Year Under Percentage Last Fiscal and/or Proposed Difference Year to Waived Last Management Between Affiliates Fund/Series Fiscal Year A Fee Rate B Rate A & B of Manager - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur Tax-Free Idaho Fund - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur Tax-Free Iowa Fund - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur Minnesota High Yield Municipal Bond Fund - ------------------------------------------------------------------------------------------------------- - --National High-Yield Municipal Bond Fund - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur Tax-Free New York Fund - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur Tax-Free Wisconsin Fund - ------------------------------------------------------------------------------------------------------- Voyageur Mutual Funds II, Inc. - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur Tax-Free Colorado Fund - -------------------------------------------------------------------------------------------------------
F-2 EXHIBIT F INFORMATION RELATING TO INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ Current Management (or Sub-Advisory) Fee Rate Proposed Management (or Investment Asset Size Based On Sub-Advisory) Fee Rate Manager or Date of as of Average Daily Based on Average Daily Fund/Series Sub-Adviser Agreement 10/31/98 Net Assets Net Assets - ------------------------------------------------------------------------------------------------------------------------------------ Voyageur Tax Free Funds, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur Tax-Free Minnesota DMC 4/30/97(1) 0.50% per year 0.55% on first $500 million Fund 0.50% on next $500 million 0.45% on next $1,500 million 0.425% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur Tax-Free North DMC 4/30/97(1) 0.50% per year 0.55% on first $500 million Dakota Fund 0.50% on next $500 million 0.45% on next $1,500 million 0.425% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------ Voyageur Mutual Funds III, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ - --Aggressive Growth Fund DMC 4/30/97(1) 1.00% per year 0.75% on first $500 million 0.70% on next $500 million 0.65% on next $1,500 million 0.60% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------ - --Growth Stock Fund DMC 4/30/97(1) 1.00% per year 0.65% on first $500 million 0.60% on next $500 million (Investment Management) 0.55% on next $1,500 million 0.50% on assets in excess of $2,500 million; all per year - ----------------------------------------------------------------------------------------------------------------------------------- - --Growth Stock Fund Voyageur 4/30/97(1) 0.50% per year 0.325 % per year Asset (Sub-Advisory) Management [Does DMC want LLC ("VAM") breakpoints; BD materials don't say] - ----------------------------------------------------------------------------------------------------------------------------------- - --Tax-Efficient Equity Fund DMC 4/30/97(1) 0.75% on first 0.75% on first $500 million $500 million 0.70% on next $500 million 0.725% on next 0.65% on next $1,500 million $500 million 0.60% on assets in excess of 0.70% on assets $2,500 million; all per year in excess of $1,000 million; all per year - -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------ (1) Last submitted to shareholders for approval on April 11, 1997 in connection with Lincoln National Corporation's acquisition of the previous investment manager, Voyageur Fund Managers, Inc. [RESTUBBED FROM PREVIOUS PAGE]
- ------------------------------------------------------------------------------------------------------- Management Fees that Would Have Been Due Servicing During The /Distribution Management Last Fiscal Fees Paid Fees Due Year Under Percentage Last Fiscal and/or Proposed Difference Year to Waived Last Management Between Affiliates Fund/Series Fiscal Year A Fee Rate B Rate A & B of Manager - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Voyageur Tax Free Funds, Inc. - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur Tax-Free Minnesota Fund - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur Tax-Free North Dakota Fund - ------------------------------------------------------------------------------------------------------- Voyageur Mutual Funds III, Inc. - ------------------------------------------------------------------------------------------------------- - --Aggressive Growth Fund - ------------------------------------------------------------------------------------------------------- - --Growth Stock Fund (Investment Management) - ------------------------------------------------------------------------------------------------------- - --Growth Stock Fund (Sub-Advisory) - ------------------------------------------------------------------------------------------------------- - --Tax-Efficient Equity Fund N/A N/A - -------------------------------------------------------------------------------------------------------
F-3 EXHIBIT F INFORMATION RELATING TO INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ Current Management (or Sub-Advisory) Fee Rate Proposed Management (or Investment Asset Size Based On Sub-Advisory) Fee Rate Manager or Date of as of Average Daily Based on Average Daily Fund/Series Sub-Adviser Agreement 10/31/98 Net Assets Net Assets - ------------------------------------------------------------------------------------------------------------------------------------ Voyageur Tax Free Funds, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur US Government DMC 4/30/97(1) 0.50% per year 0.55% on first $500 million Securities Fund 0.50% on next $500 million (Investment Management) 0.45% on next $1,500 million 0.425% on assets in excess of $2,500 million; all per year - ------------------------------------------------------------------------------------------------------------------------------------ - --Delaware-Voyageur US Government VAM 4/30/97(1) 0.25% per year No Change Securities Fund (Sub-Advisory) - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------ (1) Last submitted to shareholders for approval on April 11, 1997 in connection with Lincoln National Corporation's acquisition of the previous investment manager, Voyageur Fund Managers, Inc. [RESTUBBED FROM PREVIOUS PAGE]
- ------------------------------------------------------------------------------------------------------- Management Fees that Would Have Been Due Servicing During The /Distribution Management Last Fiscal Fees Paid Fees Due Year Under Percentage Last Fiscal and/or Proposed Difference Year to Waived Last Management Between Affiliates Fund/Series Fiscal Year A Fee Rate B Rate A & B of Manager - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Voyageur Tax Free Funds, Inc. - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur US Government Securities Fund (Investment Management) - ------------------------------------------------------------------------------------------------------- - --Delaware-Voyageur US Government Securities Fund (Sub-Advisory) - -------------------------------------------------------------------------------------------------------
F-4 EXHIBIT G ACTUAL AND HYPOTHETICAL EXPENSE TABLES
Class A Shares Class B & C Shares Institutional Shares Names of Fund/Company Actual Proposed Actual Proposed Actual Proposed - --------------------- ------ -------- ------ -------- ------ -------- Delaware-Voyageur US Government Securities Fund (Voyageur Funds, Inc.) Management Fees................................ 0.50% 0.55% 0.50% 0.55% 0.50% 0.55% 12b-1 Fees..................................... 0.25% 0.25% 1.00% 1.00% None None Other Expenses................................. 0.27% 0.27% 0.27% 0.27% 0.27% 0.27% ---- ---- ---- ---- ---- ---- Total Operating Expenses.............. 1.02% 1.07% 1.77% 1.82% ==== ==== ==== ==== ==== ==== Total Operating Expenses After Waiver*................ 1.02% **% 1.77% **% ==== == ==== == ==== ==== Delaware-Voyageur Tax-Free Minnesota Intermediate Fund (Voyageur Intermediate Tax Free Funds, Inc.) Management Fees................................ 0.40% 0.50% 0.40%` 0.50% N/A N/A 12b-1 Fees..................................... 0.15% 0.15% 1.00% 1.00% N/A N/A Other Expenses................................. 0.31% 0.31% 0.31% 0.31% N/A N/A ----- ----- ----- ----- --- --- Total Operating Expenses.............. 0.86% 0.96% 1.71% 1.81% N/A N/A ==== ==== ===== ===== === === Total Operating Expenses After Waiver*................ 0.86% **% 1.71% **% N/A N/A ==== == ===== == === === Delaware Voyageur Tax-Free Arizona Fund (Voyageur Mutual Funds, Inc.) Management Fees................................ 0.50% 0.55% 0.50%` 0.55% N/A N/A 12b-1 Fees..................................... 0.25% 0.25% 1.00% 1.00% N/A N/A Other Expenses................................. 0.28% 0.28% 0.28% 0.28% N/A N/A ---- ---- ---- ---- --- --- Total Operating Expenses....... 1.03% 1.08% 1.78% 1.83% ==== ==== ==== ==== Total Operating Expenses After Waiver*................ 0.50% **% 1.25% **% N/A N/A ==== == ==== == === === Delaware-Voyageur Tax-Free California Fund (Voyageur Mutual Funds, Inc.) Management Fees................................ 0.50% 0.55% 0.50% 0.55% N/A N/A 12b-1 Fees..................................... 0.25% 0.25% 1.00% 1.00% N/A N/A Other Expenses................................. 0.54% 0.54% 0.54% 0.54% N/A N/A ---- ---- ---- ---- --- --- Total Operating Expenses.............. 1.29% 1.34% 2.04% 2.09% N/A N/A ==== ==== ==== ==== === === Total Operating Expenses After Waiver*................ 0.25% **% 1.00% **% N/A N/A ==== == ==== == === === Delaware-Voyageur Tax-Free Idaho Fund (Voyageur Mutual Funds, Inc.) Management Fees................................ 0.50% 0.55% 0.50% 0.55% N/A N/A 12b-1 Fees..................................... 0.25% 0.25% 1.00% 1.00% N/A N/A Other Expenses................................. 0.24% 0.24% 0.24% 0.24% N/A N/A ---- ---- ---- ---- --- --- Total Operating Expenses.............. 0.99% 1.04% 1.74% 1.79% N/A N/A ==== ==== ==== ==== === === Total Operating Expenses After Waiver*................ 0.99% **% 1.74% **% N/A N/A ==== == ==== == === === Delaware-Voyageur Tax-Free Iowa Fund (Voyageur Mutual Funds, Inc.) Management Fees................................ 0.50% 0.55% 0.50% 0.55% N/A N/A 12b-1 Fees..................................... 0.25% 0.25% 1.00% 1.00% N/A N/A Other Expenses................................. 0.32% 0.32% 0.32% 0.32% N/A N/A ---- ---- ---- ---- --- ---
* DMC or DIAL voluntarily waived all or a portion of its management fee and, in some cases, made expense payments on behalf of the Funds, all in order to limit total operating expenses to certain amounts during the past fiscal year. These voluntary waivers and payments can be ended at any time. ** Hypothetical expense figures after waivers are not shown along with the proposed fee rates, because fee waivers have not been determined for future fiscal years. G-1
Class A Shares Class B & C Shares Institutional Shares Names of Fund/Company Actual Proposed Actual Proposed Actual Proposed - --------------------- ------ -------- ------ -------- ------ -------- Total Operating Expenses.............. 1.07% 1.12% 1.82% 1.87% N/A N/A ==== ==== ==== ==== === === After Waiver*................ 1.00% **% 1.75% **% N/A N/A ===== == ==== == === === Delaware-Voyageur Tax-Free New York Fund (Voyageur Mutual Funds, Inc.) 0.75% 0.50% 0.55% 0.50% 0.55% N/A N/A 12b-1 Fees..................................... 0.25% 0.25% 1.00% 1.00% N/A N/A Other Expenses................................. 0.33% 0.33% 0.33% 0.33% N/A N/A ---- ---- ---- ---- --- --- Total Operating Expenses.............. 1.08% 1.13% 1.83% 1.88% N/A N/A ==== ==== ==== ==== === === Total Operating Expenses After Waiver*................ 1.00% **% 21.75% **% N/A N/A ==== == ===== == === === Delaware-Voyageur Tax-Free Wisconsin Fund (Voyageur Mutual Funds, Inc.) Management Fees................................ 0.50% 0.55% 0.50% 0.55% N/A N/A 12b-1 Fees..................................... 0.25% 0.25% 1.00% 1.00% N/A N/A Other Expenses................................. 0.29% 0.29% 0.29% 0.29% N/A N/A ---- ---- ---- ---- --- --- Total Operating Expenses.............. 1.04% 1.09% 1.79% 1.84% N/A N/A ==== ==== ==== ==== === === Total Operating Expenses After Waiver*................ 1.00% ** % 1.75% **% N/A N/A ==== === ==== == === === Delaware-Voyageur Tax-Free Colorado Fund (Voyageur Mutual Funds II, Inc.) Management Fees................................ 0.50% 0.55% 0.50% 0.55% N/A N/A 12b-1 Fees..................................... 0.25% 0.25% 1.00% 1.00% N/A N/A Other Expenses................................. 0.24% 0.24% 0.24% 0.24% N/A N/A ---- ---- ---- ---- --- --- Total Operating Expenses.............. 0.99% 1.04% 1.74% 1.79% N/A N/A ==== ==== ==== ==== === === Total Operating Expenses After Waiver*................ 0.87% **% 1.62% **% N/A N/A ==== == ==== == === === Delaware-Voyageur Tax-Free Minnesota Fund (Voyageur Tax Free Funds, Inc.) Management Fees................................ 0.50% 0.55% 0.50% 0.55% N/A N/A 12b-1 Fees..................................... 0.25% 0.25% 1.00% 1.00% N/A N/A Other Expenses................................. 0.22% 0.22% 0.22% 0.22% N/A N/A ---- ---- ---- ---- --- --- Total Operating Expenses.............. 0.97% 1.02% 1.72% 1.77% N/A N/A ==== ==== ==== ==== === === Total Operating Expenses After Waiver*................ 0.94% **% 1.69% **% N/A N/A ==== == ==== == === === Declaware-Voyageur Tax-Free North Dakota Fund (Voyageur Tax Free Funds, Inc.) Management Fees................................ 0.50% 0.55% 0.50% 0.55% N/A N/A 12b-1 Fees..................................... 0.25% 0.25% 1.00% 1.00% N/A N/A Other Expenses................................. 0.40% 0.40% 0.40% 0.40% N/A N/A ---- ---- ---- ---- --- --- Total Operating Expenses.............. 1.15% 1.20% 1.90% 1.95% N/A N/A ==== ==== ==== ==== === === Total Operating Expenses After Waiver*................ 1.00% **% 1.75% **% N/A N/A ==== === ==== == === ===
*DMC or DIAL voluntarily waived all or a portion of its management fee and, in some cases, made expense payments on behalf of the Funds, all in order to limit total operating expenses to certain amounts during the past fiscal year. These voluntary waivers and payments can be ended at any time. **Hypothetical expense figures after waivers are not shown along with the proposed fee rates, because fee waivers have not been determined for future fiscal years. G-2 EXHIBIT H FUNDS SIMILARLY MANAGED BY THE INVESTMENT MANAGER AND SUB-ADVISER Domestic Equity Funds
Investment Current Management (or Proposed Management (or Manager or Asset Size Sub-Advisory) Fee Rate Based Sub-Advisory) Fee Rate Based Fund Sub-Adviser* as of 10/31/98 On Average Daily Net Assets on Average Daily Net Assets ---- ------------ -------------- ---------------------------- ---------------------------- Blue Chip Fund DMC $_________ .65% on first $500 million .65% on first $500 million (Investment Management) .625% on next $500 million .60% on next $500 million .60% on assets in excess of .55% on next $1,500 million $1,000 million; all per year .50% on assets in excess of $2,500 million; all per year Blue Chip Fund VGA $_________ .15% on average daily net N/A (Sub-Advisory) assets averaging one year old or less .20% on average daily net assets averaging two years old or less, but greater than one year old .35% on average daily net assets averaging over two years old; all per year Capital Appreciation Fund DMC $_________ .75% on first $500 million .75% on first $500 million .725% on next $500 million .70% on next $500 million .70% on assets in excess of .65% on next $1,500 million $1,000 million; all per year .60% on assets in excess of $2,500 million; all per year Convertible Securities Series DMC $_________ .75% per year .75% on first $500 million (Variable Annuity) .70% on next $500 million .65% on next $1,500 million .60% on assets in excess of $2,500 million, all per year Decatur Income Fund DMC $_________ .60% on first $100 million .65% on first $500 million .525% on next $150 million .60% on next $500 million .50% on next $250 million .55% on next $1,500 million .475% on assets in excess of .50% on assets in excess of $500 million; all per year $2,500 million; all per year less directors' fees Decatur Total Return Fund DMC $_________ .60% on first $500 million .65% on first $500 million .575% on next $250 million .60% on next $500 million .55% on assets in excess of .55% on next $1,500 million $750 million; all per year .50% on assets in excess of less directors' fees $2,500 million; all per year Decatur Total Return Series DMC $_________ .60% per year less .65% on first $500 million (Variable Annuity) directors' fees .60% on next $500 million .55% on next $1,500 million .50% on assets in excess of $2,500 million, all per year
- ---------- * Investment Managers/Sub-Advisers: Delaware Management Company ("DMC") Delaware International Advisers Ltd. ("DIAL") Lincoln Investment Management, Inc. ("LIM") Voyageur Asset Management LLC ("VAM") Vantage Global Advisors, Inc. ("VGA") Lynch & Mayer, Inc. ("L&M") AIB Govett, Inc. ("AIBG") ** These funds are institutional funds and are only sold to investors who invest a minimum of $1,000,000. *** Closed-end fund that does not accept new investments; therefore, there are no breakpoints in the management fees. H-1
Investment Current Management (or Proposed Management (or Manager or Asset Size Sub-Advisory) Fee Rate Based Sub-Advisory) Fee Rate Based Fund Sub-Adviser* as of 10/31/98 On Average Daily Net Assets on Average Daily Net Assets ---- ------------ -------------- ---------------------------- ---------------------------- Delaware Fund DMC $_________ .60% on first $100 million .65% on first $500 million .525% on next $150 million .60% on next $500 million .50% on next $250 million .55% on next $1,500 million .475% on assets in excess of .50% on assets in excess of $500 million; all per year, $2,500 million; all per year less directors' fees Delaware Series DMC $_________ .60% per year less .65% on first $500 million (Variable Annuity) directors' fees .60% on next $500 million .55% on next $1,500 million .50% on assets in excess of $2,500 million; all per year DelCap Fund DMC $_________ .75% per year less .75% on first $500 million directors' fees .70% on next $500 million .65% on next $1,500 million .60% on assets in excess of $2,500 million; all per year DelCap Series DMC $_________ .75% per year less .75% on first $500 million (Variable Annuity) directors' fees .70% on next $500 million .65% on next $1,500 million .60% on assets in excess of $2,500 million; all per year Devon Fund DMC $_________ .60% on first $500 million .65% on first $500 million .50% on assets in excess of .60% on next $500 million $500 million; all per year .55% on next $1,500 million .50% on assets in excess of $2,500 million; all per year Devon Series DMC $_________ .60% per year .65% on first $500 million (Variable Annuity) .60% on next $500 million .55% on next $1,500 million .50% on assets in excess of $2,500 million; all per year Diversified Value Fund DMC $_________ .65% on first $500 million N/A .60% on next $500 million .55% on next $1,500 million .50% on assets in excess of $2,500 million; all per year The Growth & Income DMC $_________ .55% per year N/A Portfolio** The Large Cap Value Equity DMC $_________ .55% per year less .55% per year Portfolio** directors' fees Mid Cap Value Fund DMC $_________ .75% on first $500 million N/A .70% on next $500 million .65% on next $1,500 million .60% on assets in excess of $2,500 million; all per year The Mid Cap Growth Equity DMC $_________ .80% per year less .75% per year Portfolio** directors' fees
- ---------- * Investment Managers/Sub-Advisers: Delaware Management Company ("DMC") Delaware International Advisers Ltd. ("DIAL") Lincoln Investment Management, Inc. ("LIM") Voyageur Asset Management LLC ("VAM") Vantage Global Advisors, Inc. ("VGA") Lynch & Mayer, Inc. ("L&M") AIB Govett, Inc. ("AIBG") ** These funds are institutional funds and are only sold to investors who invest a minimum of $1,000,000. *** Closed-end fund that does not accept new investments; therefore, there are no breakpoints in the management fees. H-2
Investment Current Management (or Proposed Management (or Manager or Asset Size Sub-Advisory) Fee Rate Based Sub-Advisory) Fee Rate Based Fund Sub-Adviser* as of 10/31/98 On Average Daily Net Assets on Average Daily Net Assets ---- ------------ -------------- ---------------------------- ---------------------------- The Real Estate Investment DMC $_________ .75% per year .75% on first $500 million Trust Portfolio** .70% on next $500 million (Investment Management) .65% on next $1,500 million .60% on assets in excess of $2,500 million per year The Real Estate Investment LIM $_________ 30% on management fee paid N/A Trust Portfolio** to DMC (Sub-Advisory) The Real Estate Investment DMC $_________ .75% per year N/A Trust Portfolio II** (Investment Management) The Real Estate Investment LIM $_________ 30% of management fee paid N/A Trust Portfolio II** to DMC (Sub-Advisory) REIT Series DMC $_________ .75% on first $500 million N/A (Variable Annuity) .70% on next $500 million (Investment Management) .65% on next $1,500 million .60% on assets in excess of $2,500 million; all per year REIT Series LIM $_________ 30% of management fee paid N/A (Variable Annuity) to DMC (Sub-Advisory) Retirement Income Fund DMC $_________ .65% on first $500 million .65% on first $500 million .625% on next $500 million .60% on next $500 million .60% on assets in excess of .55% on next $1,500 million $1,000; all per year .50% on assets in excess of $2,500; all per year Small Cap Contrarian Fund DMC $_________ .75% on first $500 million N/A .70% on next $500 million .65% on next $1,500 million .60% on assets in excess of $2,500 million; all per year The Small Cap Growth Equity DMC $_________ .75% per year N/A Portfolio** The Small/Mid Cap Value DMC $_________ .65% per year N/A Equity Portfolio** Small Cap Value Fund DMC $_________ .75% per year less .75% on first $500 million directors' fees .70% on next $500 million .65% on next $1,500 million .60% on assets in excess of $2,500 million; all per year Small Cap Value Series DMC $_________ .75% per year .75% on first $500 million (Variable Annuity) .70% on next $500 million .65% on next $1,500 million .60% on assets in excess of $2,500 million; all per year
- ---------- * Investment Managers/Sub-Advisers: Delaware Management Company ("DMC") Delaware International Advisers Ltd. ("DIAL") Lincoln Investment Management, Inc. ("LIM") Voyageur Asset Management LLC ("VAM") Vantage Global Advisors, Inc. ("VGA") Lynch & Mayer, Inc. ("L&M") AIB Govett, Inc. ("AIBG") ** These funds are institutional funds and are only sold to investors who invest a minimum of $1,000,000. *** Closed-end fund that does not accept new investments; therefore, there are no breakpoints in the management fees. H-3
Investment Current Management (or Proposed Management (or Manager or Asset Size Sub-Advisory) Fee Rate Based Sub-Advisory) Fee Rate Based Fund Sub-Adviser* as of 10/31/98 On Average Daily Net Assets on Average Daily Net Assets ---- ------------ -------------- ---------------------------- ---------------------------- Social Awareness Fund DMC $_________ .75% on first $500 million .75% on first $500 million (Investment Management) .725% on next $500 million .70% on next $500 million .70% on assets in excess of .65% on next $1,500 million $1,000; all per year .60% on assets in excess of $2,500 million; all per year Social Awareness Fund VGA $_________ .20% on average daily net N/A (Sub-Advisory) assets averaging one year old or less .25% of average daily net assets averaging two years old or less, but greater than one year old .40% of average daily net assets averaging over two years old; all per year Social Awareness Series DMC $_________ .75% per year .75% on first $500 million (Variable Annuity) .70% on next $500 million (Investment Management) .65% on next $1,500 million .60% on assets in excess of $2,500 million; all per year Social Awareness Series VGA $_________ .25% on first $20 million N/A (Variable Annuity) .35% on next $30 million (Sub-Advisory) .40% on assets in excess of $50 million; all per year Trend Fund DMC $_________ .75% per year less .75% on first $500 million director's fees .70% on next $500 million .65% on next $1,500 million .60% on assets in excess of $2,500 million; all per year Trend Series DMC $_________ .75% per year .75% on first $500 million (Variable Annuity) .70% on next $500 million .65% on next $1,500 million .60% on assets in excess of $2,500 million; all per year U.S. Growth Fund DMC $_________ .70% per year .65% on first $500 million (Investment Management) .60% on next $500 million .55% on next $1,500 million .50% on assets in excess of $2,500 million; all per year U.S. Growth Fund L&M $_________ .40% per year N/A (Sub-Advisory)
- ---------- * Investment Managers/Sub-Advisers: Delaware Management Company ("DMC") Delaware International Advisers Ltd. ("DIAL") Lincoln Investment Management, Inc. ("LIM") Voyageur Asset Management LLC ("VAM") Vantage Global Advisors, Inc. ("VGA") Lynch & Mayer, Inc. ("L&M") AIB Govett, Inc. ("AIBG") ** These funds are institutional funds and are only sold to investors who invest a minimum of $1,000,000. *** Closed-end fund that does not accept new investments; therefore, there are no breakpoints in the management fees. H-4
Domestic Fixed-Income Funds Investment Current Management (or Proposed Management (or Manager or Asset Size Sub-Advisory) Fee Rate Based Sub-Advisory) Fee Rate Based Fund Sub-Adviser* as of 10/31/98 On Average Daily Net Assets on Average Daily Net Assets ---- ------------ -------------- ---------------------------- ---------------------------- The Aggregate Fixed Income DMC $_________ .40% per year N/A Portfolio** Corporate Bond Fund DMC $_________ .50% on first $500 million N/A .475% on next $500 million .45% on next $1,500 million .425% on assets in excess of $2,500 million; all per year Delaware Group Dividend and DMC $_________ .55% per year N/A Income Fund, Inc.*** Delchester Fund DMC $_________ .60% on first $500 million .65% on first $500 million .575% on next $250 million .60% on next $500 million .55% on assets in excess of .55% on next $1,500 million $750 million; all per year .50% on assets in excess of less directors' fees $2,500 million; all per year Delchester Series DMC $_________ .60% per year less .65% on first $500 million (Variable Annuity) directors' fees .60% on next $500 million .55% on next $1,500 million .50% on assets in excess of $2,500 million; all per year The Diversified Core Fixed DMC $_________ .43% per year N/A Income Portfolio** (Investment Management) The Diversified Core Fixed DIAL $_________ Fee equal to portion of N/A Income Portfolio** management fee attributable (Sub-Advisory) to foreign investments Extended Duration Bond Fund DMC $_________ .55% on first $500 million N/A .50% on next $500 million .45% on next $1,500 million .425% on assets in excess of $2,500 million; all per year U.S. Government Fund DMC $_________ .60% per year less .55% on first $500 million directors' fees .50% on next $500 million .45% on next $1,500 million .425% on assets in excess of $2,500 million; all per year The High-Yield Bond DMC $_________ .45% per year N/A Portfolio** High-Yield Opportunities Fund DMC $_________ .65% on first $500 million .65% on first $500 million .625% on next $500 million .60% on next $500 million .60% on assets in excess of .55% on next $1,500 million $1,000 million; all per year .50% on assets in excess of $2,500 million; all per year The Intermediate DMC $_________ .40% per year less .40% per year Fixed-Income Portfolio** directors' fees Limited Term Government Fund DMC $_________ .50% per year less .50% on first $500 million directors' fees .475% on next $500 million .45% on next $1,500 million .425% on assets in excess of $1,500 million; all per year
- ---------- * Investment Managers/Sub-Advisers: Delaware Management Company ("DMC") Delaware International Advisers Ltd. ("DIAL") Lincoln Investment Management, Inc. ("LIM") Voyageur Asset Management LLC ("VAM") Vantage Global Advisors, Inc. ("VGA") Lynch & Mayer, Inc. ("L&M") AIB Govett, Inc. ("AIBG") ** These funds are institutional funds and are only sold to investors who invest a minimum of $1,000,000. *** Closed-end fund that does not accept new investments; therefore, there are no breakpoints in the management fees. H-5
Investment Current Management (or Proposed Management (or Manager or Asset Size Sub-Advisory) Fee Rate Based Sub-Advisory) Fee Rate Based Fund Sub-Adviser* as of 10/31/98 On Average Daily Net Assets on Average Daily Net Assets ---- ------------ -------------- ---------------------------- ---------------------------- The Limited-Term Maturity DMC $_________ .30% per year N/A Portfolio** Strategic Income Fund DMC $_________ .65% on first $500 million .65% on first $500 million (Investment Management) .625% on next $500 million .60% on next $500 million .60% on assets in excess of .55% on next $1,500 million $1,000 million; all per year .50% on assets in excess of $2,500 million; all per year Strategic Income Fund DIAL $_________ 1/3 of management fees paid N/A (Sub-Advisory) to DMC Strategic Income Series DMC $_________ .65% per year .65% on first $500 million (Variable Annuity) .60% on next $500 million (Investment Management) .55% on next $1,500 million .50% on assets in excess of $2,500 million; all per year Strategic Income Series DIAL $_________ 1/3 of management fee paid N/A (Variable Annuity) to DMC (Sub-Advisory)
National Tax Free Funds Investment Current Management (or Proposed Management (or Manager or Asset Size Sub-Advisory) Fee Rate Based Sub-Advisory) Fee Rate Based Fund Sub-Adviser* as of 10/31/98 On Average Daily Net Assets on Average Daily Net Assets ---- ----------- -------------- ------------------------ ------------------------ Tax Free Insured Fund DMC $_________ .60% per year less .50% on first $500 million directors' fees .475% on next $500 million .45% on next $1,500 million .425% on assets in excess of $1,500 million; all per year Tax Free USA Fund DMC $_________ .60% on first $500 million .55% on first $500 million .575% on next $250 million .50% on next $500 million .55% on assets in excess of .45% on next $1,500 million $750 million; all per year .425% on assets in excess of less directors' fees $2,500 million per year Tax Free USA Intermediate DMC $_________ .50% per year .50% on first $500 million Fund .475% on next $500 million .45% on next $1,500 million .425% on assets in excess of $2,500 million per year less directors' fees
- ---------- * Investment Managers/Sub-Advisers: Delaware Management Company ("DMC") Delaware International Advisers Ltd. ("DIAL") Lincoln Investment Management, Inc. ("LIM") Voyageur Asset Management LLC ("VAM") Vantage Global Advisors, Inc. ("VGA") Lynch & Mayer, Inc. ("L&M") AIB Govett, Inc. ("AIBG") ** These funds are institutional funds and are only sold to investors who invest a minimum of $1,000,000. *** Closed-end fund that does not accept new investments; therefore, there are no breakpoints in the management fees. H-6
State Tax Free Funds Investment Current Management (or Proposed Management (or Manager or Asset Size Sub-Advisory) Fee Rate Based Sub-Advisory) Fee Rate Based Fund Sub-Adviser* as of 10/31/98 On Average Daily Net Assets on Average Daily Net Assets ---- ------------ -------------- ------------------------ ------------------------ Voyageur Arizona Municipal DMC $_________ .40% per year N/A Income Fund, Inc.*** Delaware-Voyageur Tax-Free DMC $_________ .50% on first $500 million N/A California Insured Fund .475% on next $500 million .45% on next $1,500 million .425% on assets in excess of $2,500 million; all per year Voyageur Colorado Insured DMC $_________ .40% per year N/A Municipal Income Fund, Inc.*** Delaware-Voyageur Tax Free DMC $_________ .55% on first $500 million N/A Florida Fund .50% on next $500 million .45% on next $1,500 million .425% on assets in excess of $2,500 million; all per year Delaware-Voyageur Tax Free DMC $_________ .50% on first $500 million N/A Florida Insured Fund .475% on next $500 million .45% on next $1,500 million .425% on assets in excess of $2,500 million; all per year Voyageur Florida Insured DMC $_________ .40% per year N/A Municipal Income Fund*** Delaware-Voyageur Tax Free DMC $_________ .55% on first $500 million N/A Kansas Fund .50% on next $500 million .45% on next $1,500 million .425% on assets in excess of $2,500 million; all per year Delaware-Voyageur Tax-Free DMC $_________ .50% on first $500 million N/A Missouri Insured Fund .475% on next $500 million .45% on next $1,500 million .425% on assets in excess of $2,500 million; all per year Voyageur Minnesota Municipal DMC $_________ .40% per year N/A Income Fund, Inc.*** Voyageur Minnesota Municipal DMC $_________ .40% per year N/A Income Fund II, Inc.*** Voyageur Minnesota Municipal DMC $_________ .40% per year N/A Income Fund III, Inc.*** Tax Free New Jersey Fund DMC $_________ .55% on the first $500 .55% on first $500 million million .50% on next $500 million .525% on next $500 million .45% on next $1,500 million .50% on assets in excess of .425% on assets in excess of $1,000 million; all per year $2,500 million per year Delaware-Voyageur Tax Free DMC $_________ .55% on first $500 million N/A New Mexico Fund .50% on next $500 million .45% on next $1,500 million .425% on assets in excess of $2,500 million; all per year
- ---------- * Investment Managers/Sub-Advisers: Delaware Management Company ("DMC") Delaware International Advisers Ltd. ("DIAL") Lincoln Investment Management, Inc. ("LIM") Voyageur Asset Management LLC ("VAM") Vantage Global Advisors, Inc. ("VGA") Lynch & Mayer, Inc. ("L&M") AIB Govett, Inc. ("AIBG") ** These funds are institutional funds and are only sold to investors who invest a minimum of $1,000,000. *** Closed-end fund that does not accept new investments; therefore, there are no breakpoints in the management fees. H-7
Investment Current Management (or Proposed Management (or Manager or Asset Size Sub-Advisory) Fee Rate Based Sub-Advisory) Fee Rate Based Fund Sub-Adviser* as of 10/31/98 On Average Daily Net Assets on Average Daily Net Assets ---- ------------ -------------- ---------------------------- ---------------------------- Tax Free Ohio Fund DMC $_________ .55% on first $500 million .55% on first $500 million .525% on next $500 million .50% on next $500 million .50% on assets in excess of .45% on next $1,500 million $1,000 million all per year .425% on assets in excess of $2,500 million per year Delaware-Voyageur Tax Free DMC $_________ .50% on first $500 million N/A Oregon Insured Fund .475% on next $500 million .45% on next $1,500 million .425% on assets in excess of $2,500 million; all per year Tax Free Pennsylvania Fund DMC $_________ .60% on first $500 million .55% on first $500 million .575% on next $250 million .50% on next $500 million .55% on assets in excess of .45% on next $1,500 million $750 million; all per year .425% on assets in excess of $2,500 million per year Delaware-Voyageur Tax Free DMC $_________ .55% on first $500 million N/A Utah Fund .50% on next $500 million .45% on next $1,500 million .425% on assets in excess of $2,500 million; all per year Delaware-Voyageur Tax Free DMC $_________ .50% on first $500 million N/A Washington Insured Fund .475% on next $500 million .45% on next $1,500 million .425% on assets in excess of $2,500 million; all per year
- ---------- * Investment Managers/Sub-Advisers: Delaware Management Company ("DMC") Delaware International Advisers Ltd. ("DIAL") Lincoln Investment Management, Inc. ("LIM") Voyageur Asset Management LLC ("VAM") Vantage Global Advisors, Inc. ("VGA") Lynch & Mayer, Inc. ("L&M") AIB Govett, Inc. ("AIBG") ** These funds are institutional funds and are only sold to investors who invest a minimum of $1,000,000. *** Closed-end fund that does not accept new investments; therefore, there are no breakpoints in the management fees. H-8 EXHIBIT I FORM OF INVESTMENT MANAGEMENT AGREEMENT AGREEMENT, made by and between [REGISTRANT], a[____________] ("Fund") on behalf of the [SERIES] ("Series"), and [MANAGER NAME] , a ________________] ("Investment Manager"). WITNESSETH: WHEREAS, the Fund has been organized and operates as an investment company registered under the Investment Company Act of 1940 (as amended,and is currently comprised of [_] series, including the "1940 Act")Series; as a separate series of the Fund, each series engages in the business of investing and reinvesting its assets in securities, and WHEREAS, the Investment Manager is a registered investment adviser under the Investment Advisers Act of 1940 and engages in the business of providing investment management services; and WHEREAS, the Fund on behalf of the Series and the Investment Manager desire to enter into this Agreement. NOW, THEREFORE, in consideration of the mutual covenants herein contained, and each of the parties hereto intending to be legally bound, it is agreed as follows: 1. The Fund hereby employs the Investment Manager to manage the investment and reinvestment of the Series' assets and to administer its affairs, subject to the direction of the Fund's Board of Directors and officers of the Fund for the period and on the terms hereinafter set forth. The Investment Manager hereby accepts such employment and agrees during such period to render the services and assume the obligations herein set forth for the compensation herein provided. The Investment Manager shall for all purposes herein be deemed to be an independent contractor, and shall, unless otherwise expressly provided and authorized, have no authority to act for or represent the Fund in any way, or in any way be deemed an agent of the Fund. The Investment Manager shall regularly make decisions as to what securities and other instruments to purchase and sell on behalf of the Series and shall effect the purchase and sale of such investments in furtherance of the Series' objectives and policies and shall furnish the Board of Directors of the Fund with such information and reports regarding the Series' investments as the Investment Manager deems appropriate or as the Directors of the Fund may reasonably request. 2. The Fund shall conduct its own business and affairs and shall bear the expenses and salaries necessary and incidental thereto including, but not in limitation of the foregoing, the costs incurred in: the maintenance of its corporate existence; the maintenance of its own books, records and procedures; dealing with its own shareholders; the payment of dividends; transfer of stock, including issuance, redemption and repurchase of shares; preparation of share certificates; reports and notices to shareholders; calling and holding of shareholders' meetings; miscellaneous office expenses; brokerage commissions; custodian fees; legal and accounting fees; taxes; and federal and state registration fees. Directors, officers and employees of the Investment Manager may be directors, officers and employees of any of the investment companies within the Delaware Investments family (including the Fund). Directors, officers and employees of the Investment Manager who are directors, officers and/or employees of these investment companies shall not receive any compensation from such companies for acting in such dual capacity. In the conduct of the respective businesses of the parties hereto and in the performance of this Agreement, the Fund and Investment Manager may share facilities common to each, which may include legal and accounting personnel, with appropriate proration of expenses between them. 3. (a) Subject to the primary objective of obtaining the best available prices and execution, the Investment Manager will place orders for the purchase and sale of portfolio securities and other instruments with such broker/dealers selected who provide statistical, factual and financial information and services to the Fund, to the Investment Manager, to any Sub-Adviser, as defined in Paragraph 5 hereof, or to any other fund for which the Investment Manager or any such Sub-Adviser provides investment advisory services and/or with broker/dealers who sell shares of the Fund or who sell shares of any other fund for which the Investment Manager or any such Sub-Adviser provides investment advisory services. Broker/dealers who sell shares of the funds of which Delaware Management Company is investment manager, shall only receive orders for the purchase or sale of portfolio securities to the extent that the placing of such orders is in compliance with the Rules of the Securities and Exchange Commission and the National Association of Securities Dealers, Inc. I-1 (b) Notwithstanding the provisions of subparagraph (a) above and subject to such policies and procedures as may be adopted by the Board of Directors and officers of the Fund, the Investment Manager may ask the Fund and the Fund may agree to pay a member of an exchange, broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another member of an exchange, broker or dealer would have charged for effecting that transaction, in such instances where the Fund and the Investment Manager have determined in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such member, broker or dealer, viewed in terms of either that particular transaction or the Investment Manager's overall responsibilities with respect to the Fund and to other funds and other advisory accounts for which the Investment Manager or any Sub-Adviser, as defined in Paragraph 5 hereof, exercises investment discretion. 4. FREEDOM TO DEAL WITH THIRD PARTIES. AdviserAs compensation for the services to be rendered to the Fund by the Investment Manager under the provisions of this Agreement, the Fund shall pay to the Investment Manager monthly from the Series' assets, a fee based on the average daily net assets of the Series during the month. Such fee shall be calculated in accordance with the following schedule: Monthly Annual Rate Average Daily Net Assets ------- ----------- ------------------------ If this Agreement is terminated prior to the end of any calendar month, the management fee shall be prorated for the portion of any month in which this Agreement is in effect according to the proportion which the number of calendar days, during which the Agreement is in effect, bears to the number of calendar days in the month, and shall be payable within 10 days after the date of termination. 5. The Investment Manager may, at its expense, select and contract with one or more investment advisers registered under the Investment Advisers Act of 1940 ("Sub-Advisers") to perform some or all of the services for the Series for which it is responsible under this Agreement. The Investment Manager will compensate any Sub-Adviser for its services to the Series. The Investment Manager may terminate the services of any Sub-Adviser at any time in its sole discretion, and shall at such time assume the responsibilities of such Sub-Adviser unless and until a successor Sub-Adviser is selected and the requisite approval of the Series' shareholders is obtained. The Investment Manager will continue to have responsibility for all advisory services furnished by any Sub-Adviser. 6. The services to be rendered by the Investment Manager to the Fund under the provisions of this Agreement are not to be deemed to be exclusive, and the Investment Manager shall be free to render similar or different services to others similarso long as its ability to those rendered underrender the services provided for in this Agreement shall not be impaired thereby. 7. The Investment Manager, its directors, officers, employees, agents and shareholders may engage in other businesses, may render investment advisory services to other investment companies, or to any other corporation, association, firm or individual, and may render underwriting services to the Fund or to any other investment company, corporation, association, firm or individual. 8. It is understood and agreed that so long as the Investment Manager and/or its advisory affiliates shall continue to serve as the Fund's investment adviser, other mutual funds as may be sponsored or advised by the Investment Manager or its affiliates shall have the right permanently to adopt and to use the words "Delaware," "Delaware Investments" or "Delaware Group" in their names and in the names of any series or class of shares of such funds. 9. In the absence of willful misfeasance, bad faith, gross negligence, or a reckless disregard of the performance of its duties as the Investment Manager to the Fund, the Investment Manager shall not be subject to liability to the Fund or to any shareholder of the Fund for any action or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security, or otherwise. 10. This Agreement shall be executed and become effective as of the date written below if approved by the vote of a different nature except as such services may conflict with the services to be rendered or the duties to be assumed hereunder. 5. REPORTS TO DIRECTORS OF THE FUND. Appropriate officers of Adviser shall provide the directorsmajority of the Company with such information as is required by any planoutstanding voting securities of distribution adopted by the Company on behalf of any Fund pursuant to Rule 12b-1 under the 1940 Act. 6. STANDARD OF CARE. IN THE ABSENCE OF WILLFUL MISFEASANCE, BAD FAITH, GROSS NEGLIGENCE OR A RECKLESS DISREGARD OF THE PERFORMANCE OF DUTIES OF THE ADVISER TO THE FUNDS, THE INVESTMENT MANAGER SHALL NOT BE SUBJECT TO LIABILITIES OF THE FUNDS OR TO ANY SHAREHOLDERS OF THE FUNDS FOR ANY ACTION OR OMISSION IN THE COURSE OF, OR CONNECTED WITH, RENDERING SERVICES HEREUNDER OR FOR ANY LOSSES THAT MAY BE SUSTAINED IN THE PURCHASE, HOLDING OR SALE OF ANY SECURITY, OR OTHERWISE. 7. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT. (a) The effective date of this Agreement with respect to each Fund shall be the date set forth on Exhibit A hereto. (b) Unless sooner terminated as hereinafter provided, this AgreementSeries. It shall continue in effect with respect to each Fund for a period of two years from the date of its execution, and may be renewed thereafter shall continue in effect only so long as such renewal and continuance is specifically approved at least annually by (i) the Board of Directors of the Company or by the vote of a majority of the outstanding voting securities of the applicable Fund,Series and (ii)only if the terms and the renewal hereof have been approved by the vote of a majority of the directorsDirectors of the CompanyFund who are not parties to this Agreementhereto or "interested persons", as defined in the 1940 Act,interested persons of Adviser or of the Companyany such party, cast in person at a meeting called for the purpose of voting on such approval. (c) ThisNotwithstanding the foregoing, this Agreement may be terminated with respect to anyby the Fund at any time, without the payment of anya penalty, on sixty days' written notice to the Investment Manager of the Fund's intention to do so, pursuant to action by the Board of Directors of the CompanyFund or bypursuant to the vote of a majority of the outstanding voting securities of such Fund, or by Adviser, upon 60the Series. The Investment Manager may I-2 terminate this Agreement at any time, without the payment of a penalty, on sixty days' written notice to the other party. (d)Fund of its intention to do so. Upon termination of this Agreement, the obligations of all the parties hereunder shall cease and terminate as of the date of such termination, except for any obligation to respond for a breach of this Agreement committed prior to such termination, and except for the obligation of the Fund to pay to the Investment Manager the fee provided in Paragraph 4 hereof, prorated to the date of termination. This agreementAgreement shall automatically terminate automatically in the event of its "assignment" (as defined in the 1940 Act). (e) No amendment to thisassignment. 11. This Agreement shall be effective with respectextend to any Fund until approved byand bind the vote of: (i) a majorityheirs, executors, administrators and successors of the directorsparties hereto. 12. For the purposes of the Company who are not parties to this Agreement or "interested persons" (as defined in the 1940 Act) of Adviser or of the Company cast in person at a meeting called for the purpose of voting on such approval; and (ii) a majority of the outstanding voting securities of the applicable Fund. (f) Wherever referred to in this Agreement, the vote or approval of the holdersterms "vote of a majority of the outstanding voting securities or sharessecurities"; "interested persons"; and "assignment" shall have the meaning defined in the Investment Company Act of a Fund shall mean the lesser of (i) the vote of 67% or more of the voting securities of such Fund present at a regular or special meeting of shareholders duly called, if more than 50% of the Fund's outstanding voting securities are present or represented by proxy, or (ii) the vote of more than 50% of the outstanding voting securities of such Fund. 8. NOTICES. Any notice under this Agreement shall be in writing, addressed, delivered or mailed, postage prepaid, to the other party at such address as such other party may designate in writing for receipt of such notice.1940. IN WITNESS WHEREOF, the Company and Adviserparties hereto have caused this Agreementtheir corporate seals to be executedaffixed and duly attested and their presents to be signed by their duly authorized officers as of the day and year first above written. VOYAGEUR ______________________ FUNDS, INC. By __________________________________ Its of , 19 . [MANAGER NAME] [REGISTRANT NAME] for the [SERIES NAME] By:_________________________________ Name:_______________________________ Title:______________________________ By:________________________________ Name:______________________________ Title:_____________________________ Attest:_____________________________ Name:_______________________________ Title:______________________________ Attest:____________________________ [VOYAGEUR FUND MANAGERS, INC.] [DELAWARE MANAGEMENT COMPANY, INC.] By __________________________________ Its ___________________________ Exhibit A to Investment Advisory Agreement between [Voyageur Fund Managers, Inc.] [Delaware Management Company, Inc.] and Voyageur _____________ Funds, Inc. MONTHLY ADVISORY FEE (as % of average FUND EFFECTIVE DATE daily net assets) ---- -------------- -----------------Name:______________________________ Title:_____________________________ I-3 EXHIBIT B (Changes from Current Agreement are in ITALICS)J FORM OF SUB-ADVISORY AGREEMENT Agreement, dated __________, 1997,AGREEMENT, made by and between Delaware Management Company, Inc. (the "Adviser"[MANAGER NAME] ("Investment Manager"), a corporation, and Voyageur Asset Management LLC, a Minnesota limited liability company[SUB-ADVISER NAME] ("Sub-Adviser"). WITNESSETH: WHEREAS, Voyageur Mutual Funds III, Inc.[REGISTRANT NAME], a Minnesota corporation (the"Company"[______________] ("Fund"), has been organized and operates as an investment company registered under the Investment Company Act of 1940 and engages in the business of investing and reinvesting its assets in securities, and WHEREAS, the Investment Manager and the Fund on behalf of its Growth Stockthe [Series] ("Series") have entered into an agreement of even date herewith ("Investment Management Agreement") whereby the Investment Manager will provide investment advisory services to the Fund a separately managed serieson behalf of the Company (the "Fund"), has appointed Adviser as the Fund's investment adviser pursuant to an Investment Advisory Agreement dated ________, 1997 (the "Advisory Agreement");Series; and WHEREAS, pursuantthe Investment Management Agreement permits the Investment Manager to hire one or more sub-advisers to assist the Investment Manager in providing investment advisory services to the termsFund on behalf of the Advisory Agreement, Adviser desires to appoint Sub-Adviser as its sub-adviser for the Fund, and Sub-Adviser is willing to act in such capacity upon the terms set forth herein;Series; and WHEREAS, pursuant to the termsInvestment Manager and the Sub-Adviser are registered Investment Advisers under the Investment Advisers Act of 1940 and engage in the Advisory Agreement, the Company has approved the appointmentbusiness of Sub-Adviser as Sub-Adviser for the Fund.providing investment management services. NOW, THEREFORE, in consideration of the mutual agreementscovenants herein made, Advisercontained, and Sub-Adviser agreeeach of the parties hereto intending to be legally bound, it is agreed as follows: 1. AdviserThe Investment Manager hereby employs the Sub-Adviser, subject always to serve as sub-adviser for,the Investment Manager's control and supervision, to manage the investment and reinvestment of that portion of the Series' assets as the Investment Manager shall designate from time to time and to furnish the Investment Manager with investment recommendations, asset allocation advice, research, economic analysis and other investment services with respect to securities in which the Series may invest, subject to the direction of the Board and officers of the Fund asfor the period and on the terms hereinafter set forth herein.forth. The Sub-Adviser hereby accepts such employment and agrees during such period to render the services and assume the obligations herein set forth for the compensation herein provided, to assume all obligations herein set forth and to bear all expenses of its performance of such obligations (but no other expenses). Sub-Adviser shall not be required to pay expenses of the Fund, including, but not limited to (a) brokerage and commission expenses; (b) federal, state, local and foreign taxes, including issue and transfer taxes incurred by or levied on the Fund; (c) interest charges on borrowings; (d) the Fund's organizational and offering expenses, whether or not advanced by Adviser; (e) the cost of other personnel providing services to the Fund; (f) fees and expenses of registering or otherwise qualifying the shares of International Fund under applicable state securities laws; (g) expenses of printing and distributing reports to shareholders; (h) costs of shareholders' meetings and proxy solicitation; (i) charges and expenses of the Fund's custodian and registrar, transfer agent and dividend disbursing agent; (j) compensation of the Company's officers, directors and employees that are not Affiliated Persons or Interested Persons (as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the "1940 Act") and the rules, regulations and releases relating thereto) of Adviser; (k) legal and auditing expenses; (l) costs of certificates representing common shares of the Fund; (m) costs of stationery and supplies; (n) insurance expenses; (o) association membership dues; (p) the fees and expenses of registering the Fund and its shares with the Securities and Exchange Commission; (q) travel expenses of officers and employees of Sub-Adviser to the extent such expenses relate to the attendance of such persons at meetings at the request of the Board of Directors of the Company; and (r) all other charges and costs of the Fund's operation unless otherwise explicitly provided herein.provided. The Sub-Adviser shall for all purposes herein be deemed to be an independent contractor, and shall, except asunless otherwise expressly provided orand authorized, (whether herein or otherwise) have no authority to act for or on behalf ofrepresent the Fund in any way, or otherwisein any way be deemed an agent of the Fund. 2.The Sub-Adviser shall directregularly make decisions as to what securities to purchase and sell on behalf of the Fund'sSeries with respect to that portion of the Series' assets designated by the Investment Manager, shall effect the purchase and sale of such investments in accordance with applicable lawfurtherance of the Series' objectives and the investment objective, policies and restrictions set forth in the Fund's then-effective Registration Statement under the Securities Act of 1933, as amended, including the Prospectus and Statement of Additional Information of the Fund contained therein, subject to the supervision of the Company, its officers and directors, and Adviser and in accordance with the investment objectives, policies and restrictions from time to time prescribed byshall furnish the Board of Directors of the CompanyFund with such information and communicated by Adviser to Sub-Adviser and subject to such further limitationsreports regarding its activities as Adviser may from time to time impose by written notice to Sub-Adviser. 3. Sub-Adviser shall formulate and implement a continuing program for managing the investmentInvestment Manager deems appropriate or as the Directors of the Fund's assets, and shall amend and update such program from time to time as financial and other economic conditions warrant. Sub-Adviser shall make all determinations with respect to managing the investment of the Fund's assets and shall take such steps as may be necessary to implement the same, including the placement of purchase and sale orders on behalf of the Fund. 4. Sub-Adviser shall furnish such reports to Adviser as AdviserFund may reasonably request for Adviser's use in dischargingthe performance of its duties and obligations under this Agreement, the Advisory Agreement, which reports may be distributed by Adviser toSub-Adviser shall act in conformity with the Company's BoardArticles of Directors at periodic meetingsIncorporation, By-Laws and Prospectus of the Fund and with the instructions and directions of the Investment Manager and of the Board of Directors and at such other times as may be reasonably requested by the Board of Directors. Copies of all such reports shall be furnished to Adviser for examination and review within a reasonable time prior to the presentation of such reports to Company's Board of Directors. 5. Sub-Adviser shall select the brokers and dealers that will execute the purchases and sales of securities for the Fund and markets on or in which such transactions will be executedconform to and comply with the requirements of the 1940 Act, the Internal Revenue Code of 1986 and all other applicable federal and state laws and regulations consistent with the provisions of Section 15(c) of the Investment Company Act of 1940. 2. Under the terms of the Investment Management Agreement, the Fund shall conduct its own business and affairs and shall place,bear the expenses and salaries necessary and incidental thereto including, but not in limitation of the foregoing, the costs incurred in: the maintenance of its corporate existence; the maintenance of its own books, records and procedures; dealing with its own shareholders; the payment of dividends; transfer of stock, including issuance and repurchase of shares; preparation of share certificates; reports and notices to shareholders; calling and holding of shareholders' meetings; miscellaneous office expenses; brokerage commissions; custodian fees; legal and accounting fees; taxes; and federal and state registration fees. Without limiting the foregoing, except as the Investment Manager and the Sub-Adviser may agree in writing from time to time, the Sub-Adviser shall have no responsibility for record maintenance and preservation obligations under Section 31 of the Investment Company Act of 1940. Directors, officers and employees of the Sub-Adviser may be directors, officers and employees of other funds which have employed the Sub-Adviser as sub-adviser or investment manager. Directors, officers and employees of the Sub-Adviser who J-1 are Directors, officers and/or employees of the Fund, shall not receive any compensation from the Fund for acting in such dual capacity. In the conduct of the respective business of the parties hereto and in the nameperformance of this Agreement, the Fund, the Investment Manager and the Sub-Adviser may share facilities common to each, which may include legal and accounting personnel, with appropriate proration of expenses between and among them. 3. (a) Subject to the primary objective of obtaining the best available prices and execution, the Sub-Adviser will place orders for the purchase and sale of portfolio securities and other instruments with such broker/dealers who provide statistical, factual and financial information and services to the Fund, to the Investment Manager, to the Sub-Adviser or to any other Fund for which the Investment Manager or Sub-Adviser provides investment advisory services and/or with broker/dealers who sell shares of the Fund or its nominee, all such orders. (a) SUBJECT TO THE PRIMARY OBJECTIVE OF OBTAINING THE BEST AVAILABLE PRICES AND EXECUTION, SUB-ADVISER WILL PLACE ORDERS FOR THE PURCHASE AND SALE OF PORTFOLIO SECURITIES WITH SUCH BROKER/DEALERS WHO PROVIDE STATISTICAL, FACTUAL AND FINANCIAL INFORMATION AND SERVICES TO THE FUND, SUB-ADVISER OR TO ANY OTHER FUND FOR WHICH SUB-ADVISER PROVIDES INVESTMENT ADVISORY SERVICES AND/OR WITH BROKER/DEALERS WHO SELL SHARES OF THE FUND OR WHO SELL SHARES OF ANY OTHER FUND FOR WHICH SUB-ADVISER PROVIDES INVESTMENT ADVISORY SERVICES. BROKER/DEALERS WHO SELL SHARES OF THE FUNDS OF WHICH SUB-ADVISER OR ADVISER IS INVESTMENT MANAGER, SHALL ONLY RECEIVE ORDERS FOR THE PURCHASE OR SALE OF PORTFOLIO SECURITIES TO THE EXTENT THAT THE PLACING OF SUCH ORDERS IS IN COMPLIANCE WITH THE RULES OF THE SECURITIES AND EXCHANGE COMMISSION AND THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (b) NOTWITHSTANDING THE PROVISIONS OF SUBPARAGRAPH (a) ABOVE, AND SUBJECT TO SUCH POLICIES AND PROCEDURES AS MAY BE ADOPTED BY THE BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY OR SUB-ADVISER MAY ASK THE FUND AND THE FUND MAY AGREE TO PAY A MEMBER OF AN EXCHANGE, BROKER OR DEALER AN AMOUNT OF COMMISSION FOR EFFECTING A SECURITIES TRANSACTION IN EXCESS OF THE AMOUNT OF COMMISSION ANOTHER MEMBER OF AN EXCHANGE, BROKER OR DEALER WOULD HAVE CHARGED FOR EFFECTING THAT TRANSACTION, IN SUCH INSTANCES WHERE IT AND SUB-ADVISER HAVE DETERMINED IN GOOD FAITH THAT SUCH AMOUNT OF COMMISSION WAS REASONABLE IN RELATION TO THE VALUE OF THE BROKERAGE AND RESEARCH SERVICES PROVIDED BY SUCH MEMBER, BROKER OR DEALER, VIEWED IN TERMS OF EITHER THAT PARTICULAR TRANSACTION OR SUB-ADVISER'S OVERALL RESPONSIBILITIES WITH RESPECT TO THE FUND AND TO OTHER FUNDS AND OTHER ADVISORY ACCOUNTS FOR WHICH SUB-ADVISER EXERCISES INVESTMENT DISCRETION. (c) It is understood that certainwho sell shares of any other clients ofFund for which the Investment Manager or Sub-Adviser may haveprovides investment objectives and policies similar to thoseadvisory services. Broker/dealers who sell shares of the Fund, and thatFunds for which the Investment Manager or Sub-Adviser may, from time to time, make recommendations that result inprovides advisory services shall only receive orders for the purchase or sale of a particular security by its other clients simultaneously withportfolio securities to the Fund. If transactions on behalf of more than one client during the same period increase the demand for securities being purchased or the supply of securities being sold, there may be an adverse effect on price or quantity. In such event, Sub-Adviser shall allocate advisory recommendations andextent that the placing of such orders in a manner that is deemed equitable by Sub-Adviser to the accounts involved, including the Fund. When two or more of the clients of Sub-Adviser (including the Fund) are purchasing or selling the same security on a given day from the same broker or dealer, such transactions may be averaged as to price. (d) Sub-Adviser agrees that it will not purchase or sell securities for the Fund in any transaction in which it, Adviser or any "affiliated person" of the Company, Adviser or Sub-Adviser or any affiliated person of such "affiliated person" is acting as principal; provided, however, that Sub-Adviser may effect transactions pursuant to Rule 17a-7 under the 1940 Act in compliance with the Fund's then-effectiverules of the Securities and Exchange Commission and the National Association of Securities Dealers, Inc. (b) Notwithstanding the provisions of subparagraph (a) above and subject to such policies concerning such transactions. (e) Sub-Adviser agrees that it will not execute any portfolio transactions forand procedures as may be adopted by the Board of Directors and officers of the Fund, withthe Sub-Adviser may ask the Fund and the Fund may agree to pay a member of an exchange, broker or dealer or futures commission-merchant which is an "affiliated person"amount of commission for effecting a securities transaction in excess of the Company, Adviseramount of commission another member of an exchange, broker or dealer would have charged for effecting that transaction, in such instances where it and the Sub-Adviser or an "affiliated person"have determined in good faith that such amount of such an "affiliated person" withoutcommission was reasonable in relation to the prior written consent of Adviser. In effecting any such transactions with the prior written consent of Adviser, Sub-Adviser shall comply with Section 17(e)(1)value of the 1940 Act, other applicable provisionsbrokerage and research services provided by such member, broker or dealer, viewed in terms of the 1940 Act, if any, the then-effective Registration Statement of the Fund under the Securities Act of 1933, as amended and the Fund's then-effective policies concerning such transactions. (f) Sub-Adviser shall promptly communicate to Adviser and, if requested by Adviser, to the Company's Board of Directors, such information relating to portfolio transactions as Adviser may reasonably request. The parties understandeither that the Fund shall bear all brokerage commissions in connection with the purchases and sales of portfolio securities for the Fund and all ordinary and reasonableparticular transaction costs in connection with purchases of such securities in private placements and subsequent sales thereof. 6. Sub-Adviser may (at its cost except as contemplated by paragraph 5 of this Agreement) employ, retain or otherwise avail itself of the services and facilities of persons and entities within its own organization or any other organization for the purpose of providing Sub-Adviser, Adviser or the Fund with such information, advice or assistance, including but not limited to advice regarding economic factors and trends and advice as to transactions in specific securities, as Sub-Adviser may deem necessary, appropriate or convenient for the discharge of its obligations hereunder or otherwise helpful to Adviser or the Fund, or in the discharge of Sub-Adviser's overall responsibilities with respect to the Fund and to other funds and other advisory accounts for which it serves asthe Investment Manager or the Sub-Adviser exercises investment manager or investment adviser. 7. Sub-Adviser shall cooperate with and make available to Adviser, the Fund and any agents engaged by the Fund, Sub-Adviser's expertise relating to matters affecting the Fund. 8. Fordiscretion. 4. As compensation for the services to be rendered to the Fund for the benefit of the Series by the Sub-Adviser under the provisions of this Agreement, the Investment Manager shall pay to the Sub-Adviser: [(The following language is used for funds that do not have an asset-based sub-advisory fee rate:) a monthly fee equal to [%] of the fees paid to the Investment Manager under the Investment Management Agreement.] [(The following language is used for funds that have an asset-based sub-advisory fee rate:) a monthly fee equal to [insert asset-based fee rate]; provided however, that the Sub-Adviser shall waive all or a portion of the fees payable under this Agreement andto the facilitiesextent necessary to bear its proportionate share of any management fee waiver undertaken by the Investment Manager. The amount of such waiver by the Sub-Adviser shall be furnished for each fiscal yearcalculated by multiplying the dollar amount of the Fund, Adviser shall pay to Sub-Adviser a monthlymanagement fees waived by the investment manager by the percentage that the then-current sub-advisory fee rate represents of the then-current investment management fee atrate.] If this Agreement is terminated prior to the annual rateend of . of 1% ofany calendar month, the Fund's average daily net assets. This fee will be computed based on net assets at the beginning of each day and will be paid to Sub-Adviser monthly on or before the fifteenth day of the month next succeeding the month for which the fee is paid. TheSub-Advisory fee shall be prorated for the portion of any fractionmonth in which this Agreement is in effect according to the proportion which the number of a fiscal year atcalendar days, during which the commencementAgreement is in effect, bears to the number of calendar days in the month, and terminationshall be payable within 10 days after the date of termination. 5. The services to be rendered by the Sub-Adviser to the Fund for the benefit of the Series under the provisions of this Agreement. PursuantAgreement are not to be deemed to be exclusive, and the Sub-Adviser shall be free to render similar or different services to others so long as its ability to render the services provided for in this Agreement shall not be impaired thereby; provided, however, except for advisory arrangements implemented prior to the Advisorydate of this Agreement, Adviser receives monthly fromduring the term of this Agreement, the Sub-Adviser, will not, without the written consent of the Investment Manager, which consent will not be unreasonably withheld, render investment company (or portfolio thereof) which the Investment manger reasonably determines would be in competition with and which has investment policies similar to those of the Portfolio. 6. Subject to the limitation set forth in Paragraph 5, the Sub-Adviser, its directors, officers, employees, agents and shareholders may engage in other businesses, may render investment advisory services to other investment companies, or to any other corporation, association, firm or individual, and may render underwriting services to the Fund compensation ator to any other investment company, corporation, association, firm or individual. The Investment Manager agrees that it shall not use the annual rate of . %Sub-Adviser's name or otherwise refer to the Sub-Adviser in any materials distributed to third parties, including the Series' shareholders, without the prior written consent of the Fund's average daily net assets. If Adviser has undertakenSub-Adviser. J-2 7. In the absence of willful misfeasance, bad faith, gross negligence, or a reckless disregard of the performance of its duties as Sub-Adviser to the Fund, the Sub-Adviser shall not be subject to liability to the Fund, to the Investment Manager or to any shareholder of the Fund for any action or omission in the Fund's Registration Statementcourse of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security, or otherwise. 8. This Agreement shall be executed and become effective as filed under the 1940 Act or elsewhere to waive all or part of its fee under the Advisory Agreement or to reduce such fee upon order of the Board of Directors ordate written below if approved by the vote of a majority of the outstanding voting securities of the Fund, Sub-Adviser's fee payable under this Agreement will be proportionately waived. 9. Sub-Adviser represents, warrants and agrees that: (a) Sub-Adviser is registered as an "investment adviser" under the Investment Advisers Act of 1940 ("Advisers Act") and is currently in compliance and shall at all times continue to comply with the requirements imposed upon it by Advisers Act and other applicable laws and regulations. Sub-Adviser agrees to (i) supply Adviser with such documents as Adviser may reasonably request to document compliance with such laws and regulations and (ii) immediately notify Adviser of the occurrence of any event which would disqualify Sub-Adviser from serving as an investment adviser of an investment company pursuant to any applicable law or regulation. (b) Sub-Adviser will maintain, keep current and preserve on behalf of the Company all records required or permitted by the 1940 Act in the manner provided by such Act. Sub-Adviser agrees that such records are the property of the Company, and will be surrendered to the Company promptly upon request. (c) Sub-Adviser will complete such reports concerning purchases or sales of securities on behalf of Sub-Adviser as Adviser may from time to time require to document compliance with the 1940 Act, Advisers Act, the Internal Revenue Code, applicable state securities laws and other applicable laws and regulations or regulatory and taxing authorities in countries other than the United States. (d) After filing with the Securities and Exchange Commission any amendment to its Form ADV, Sub-Adviser will promptly furnish a copy of such amendment to Adviser. (e) Sub-Adviser will immediately notify Adviser of the occurrence of any event which would disqualify Sub-Adviser from serving as an investment adviser of an investment company pursuant to Section 9 of the 1940 Act or any other applicable statute or regulation. 10. Adviser represents, warrants and agrees that: (a)Series. It has been duly authorized by the Board of Directors of the Company to delegate to Sub-Adviser the provision of the services contemplated hereby. (b) Adviser and the Company are currently in compliance and shall at all times continue to comply with the requirements imposed upon Adviser and the Company by applicable law and regulations. 11. Sub-Adviser will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or its shareholders in connection with the performance of its duties under this Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its duties under this Agreement. 12. This Agreement shall become effective as of the date first set forth above. Wherever referred to in this Agreement, the vote or approval of the holders of a majority of the outstanding voting securities or shares of the Fund shall mean the vote of 67% or more of such shares if the holders of more than 50% of such shares are present in person or by proxy or the vote of more than 50% of such shares, whichever is less. Unless sooner terminated as hereinafter provided, this Agreement shall continue in effect for a period of two years from the date of its execution, and may be renewed thereafter shall continue in effect only so long as such renewal and continuance is specifically approved at least annually (a) by the Board of Directors of the Company or by the vote of a majority of the outstanding voting securities of the Fund,Series and (b)only if the terms and the renewal hereof have been approved by the vote of a majority of the directorsDirectors of the Fund who are not parties to this Agreementhereto or Interested Personsinterested persons of Adviser, Sub-Adviser or the Company,any such party, cast in person at a meeting called for the purpose of voting on such approval. ThisNotwithstanding the foregoing, this Agreement may be terminated by the Investment Manager or the Fund at any time, without the payment of anya penalty, (a)on sixty days' written notice to the Sub-Adviser, of the Investment Manager's or the Fund's intention to do so, in the case of the Fund pursuant to action by the vote of the Board of Directors of the CompanyFund or bypursuant to the vote of the holders of a majority of the outstanding voting securities of the Fund, upon 60 days' written notice to Adviser andSeries. The Sub-Adviser may terminate this Agreement at any time, without the Sub-Adviser, or (b) by Adviser, upon 60payment of a penalty on sixty days' written notice to the Sub-Adviser; or (c) byInvestment Manager and the Fund of its intention to do so. Upon termination of this Agreement, the obligations of all the parties hereunder shall cease and terminate as of the date of such termination, except for any obligation to respond for a breach of this Agreement committed prior to such termination, and except for the obligation of the Investment Manager to pay to the Sub-Adviser upon 60 days' written noticethe fee provided in Paragraph 4 hereof, prorated to Adviser.the date of termination. This Agreement shall automatically terminate in the event of its assignment asassignment. This Agreement shall automatically terminate upon the termination of the Investment Management Agreement. 9. This Agreement shall extend to and bind the successors of the parties hereto. 10. For the purposes of this Agreement, the terms "vote of a majority of the outstanding voting securities"; "interested person"; and "assignment" shall have the meaning defined in the 1940Investment Company Act of 1940. IN WITNESS WHEREOF, the parties hereto have caused their corporate seals to be affixed and duly attested and their presents to be signed by their duly authorized officers as of the day of [_____________], [______]. [MANAGER NAME] By:_______________________________________ Name: Title: Attest:___________________________________ [SUB-ADVISER NAME] By:_______________________________________ Name: Title: Attest:___________________________________ J-3 Agreed to and accepted as of the day and year first above written: [REGISTRANT NAME] on behalf of the [SERIES NAME] By:______________________________________ Chairman Attest:___________________________________ J-4 EXHIBIT K FORM OF AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION This Agreement and Plan of Reorganization ("Agreement") is made as of this ___ day of ______________, 1998 by and between [name of Delaware business trust], a Delaware business trust ("Fund"), and [name of Minnesota corporation], a Minnesota corporation ("Corporation") (the Fund and the rules thereunder,Corporation are hereinafter collectively referred to as the "parties"). In consideration of the mutual promises contained herein, and intending to be legally bound, the parties hereto agree as follows: 1. Plan of Reorganization. (a) Upon satisfaction of the conditions precedent described in Section 3 hereof, the Corporation will convey, transfer and deliver to the Fund at the closing provided however,for in Section 2 (hereinafter referred to as the "Closing") all of the Corporation's then-existing assets, the assets belonging to each series of the Corporation to be conveyed, transferred and delivered to the corresponding series of the Fund. In consideration thereof, the Fund agrees at the Closing (1) to assume and pay, to the extent that they exist on or after the Effective Date of the Reorganization (as defined in Section 2 hereof), all of the Corporation's obligations and liabilities, whether absolute, accrued, contingent or otherwise, including all fees and expenses in connection with the Agreement, which fees and expenses shall in turn include, without limitation, costs of legal advice, accounting, printing, mailing, proxy solicitation and transfer taxes, if any, the obligations and liabilities allocated to each series of the Corporation to become the obligations and liabilities of the corresponding series of the Fund, and (2) to deliver, in accordance with paragraph (b) of this Section 1, full and fractional shares of beneficial interest, $.01 par value, of each of the Fund's separate series and the respective classes of those series, all as set forth in the Appendix attached hereto (hereinafter, the series are individually and collectively referred to as "Series of the Fund" and the classes are individually referred to as a "Class of the Fund" and collectively as "Classes of the Fund"), equal in number to the number of full and fractional shares of common stock, ______ par value, of, respectively, each of the Corporation's separate series and the respective classes of those series, all as set forth in the Appendix attached hereto (hereinafter, the series are referred to individually and collectively as "Series of the Corporation" and the classes are referred to individually as a "Class of the Corporation" and collectively as "Classes of the Corporation") outstanding immediately prior to the Effective Date of the Reorganization. The transactions contemplated hereby are intended to qualify as a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended ("Code"). K-1 (b) In order to effect such automatic terminationdelivery, the Fund will establish an open account for each shareholder of each Series of the Corporation and, on the Effective Date of the Reorganization, will credit to such account full and fractional shares of such Series and Class of the Fund equal to the number of full and fractional shares such shareholder holds in the corresponding Series and Class of the Corporation at the close of regular trading on the New York Stock Exchange on the business day immediately preceding the Effective Date of the Reorganization; fractional shares of each Class of the Fund will be carried to the third decimal place. On the Effective Date of the Reorganization, the net asset value per share of beneficial interest of each Class of the Fund shall be preventeddeemed to be the same as the net asset value per share of the corresponding Class of the Corporation at the close of regular trading on the New York Stock Exchange on the business day immediately preceding the Effective Date of the Reorganization. On the Effective Date of the Reorganization, each certificate representing shares of a Series and Class of the Corporation will represent the same number of shares of the corresponding Series and Class of the Fund. Each shareholder of the Corporation will have the right to exchange his (her) share certificates for share certificates of the Fund. However, a shareholder need not make this exchange of certificates unless he (she) so desires. Simultaneously with the crediting of the shares of the Series and Classes of the Fund to the shareholders of record of the Corporation, the shares of the Series and Classes of the Corporation held by such shareholder shall be cancelled. (c) As soon as practicable after the Effective Date of the Reorganization, the Corporation shall take all necessary steps under Minnesota law to effect a complete dissolution of the Corporation. 2. Closing and Effective Date of the Reorganization. The Closing shall consist of (i) the conveyance, transfer and delivery of the Corporation's assets to the Fund, in a particular caseexchange for the assumption and payment by an orderthe Fund of exemptionthe Corporation's liabilities; and (ii) the issuance and delivery of the Fund's shares in accordance with Section 1(b), together with related acts necessary to consummate such transactions. The Closing shall occur either on (a) the business day immediately following the later of receipt of all necessary regulatory approvals and the final adjournment of the meeting of shareholders of the Corporation at which this Agreement will be considered or (b) such later date as the parties may mutually agree ("Effective Date of the Reorganization"). 3. Conditions Precedent. The obligations of the Corporation and the Fund to effectuate the reorganization hereunder shall be subject to the satisfaction of each of the following conditions: (a) Such authority and orders from the Securities and Exchange Commission ("Commission") as may be necessary to permit the parties to carry out the transactions contemplated by this Agreement shall have been received; (b) (i) One or a no-action lettermore post-effective amendments to the Corporation's Registration Statement on Form N-1A ("Registration Statement") under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended K-2 ("1940 Act"), containing such amendments to the Registration Statement as are determined by the Trustees of the staffFund to be necessary and appropriate as a result of this Agreement shall have been filed with the Commission; (ii) the Fund shall have adopted as its own such Registration Statement, as so amended; (iii) the most recent post-effective amendment to the Registration Statement filed with the Commission relating to the Fund shall have become effective, and no stop-order suspending the effectiveness of the Registration Statement shall have been issued, and no proceeding for that purpose shall have been initiated or threatened by the Commission (other than any such stop-order, proceeding or threatened proceeding that shall have been withdrawn or terminated); and (iv) an amendment of the Form N-8A Notification of Registration filed pursuant to Section 8(a) of the 1940 Act ("Form N-8A") reflecting the change in legal form of the Corporation to a Delaware business trust shall have been filed with the Commission and the Fund shall have expressly adopted such amended Form N-8A as its own for purposes of the 1940 Act; (c) Each party shall have received an opinion of Stradley, Ronon, Stevens & Young, LLP, Philadelphia, Pennsylvania, to the effect that such assignment does not require terminationthe reorganization contemplated by this Agreement qualifies as a statutory or regulatory matter. This Agreement shall automatically terminate upon completion"reorganization" under Section 368 of the dissolution, liquidationCode, and thus will not give rise to the recognition of income, gain or winding uploss for federal income tax purposes to the Corporation, the Fund, or the shareholders of the Fund. 13. No amendmentCorporation or the Fund; (d) The Corporation shall have received an opinion of Stradley, Ronon, Stevens & Young, LLP, dated the Effective Date of the Reorganization, addressed to or modificationand in form and substance satisfactory to the Corporation, to the effect that (i) the Fund is duly formed as a business trust under the laws of the State of Delaware; (ii) this Agreement and the reorganization provided for herein and the execution and delivery of this Agreement shall be effective unlesshave been duly authorized and until approved by the vote of a majorityall requisite action of the outstandingFund and this Agreement has been duly executed and delivered by the Fund and is a legal, valid and binding agreement of the Fund in accordance with its terms; and (iii) the shares of the Fund. 14. ThisFund to be issued in the reorganization have been duly authorized and, upon issuance thereof in accordance with this Agreement, will have been validly issued and fully paid and will be non-assessable by the Fund; (e) The Fund shall be binding upon,have received the opinion of Stradley, Ronon, Stevens & Young, LLP, dated the Effective Date of the Reorganization, addressed to and inurein form and substance satisfactory to the benefitFund, to the effect that: (i) the Corporation is a corporation, duly organized and validly existing under the laws of Adviserthe State of Minnesota; (ii) the Corporation is an open-end investment company of the management type registered under the 1940 Act; and Sub-Adviser,(iii) this Agreement and their respective successors. 15. If any provisionthe reorganization provided for herein and the execution of this Agreement shall be held or made invalidhave been duly authorized and approved by a court decision, statute, rule or otherwise,all requisite corporate action of the remainder ofCorporation and this Agreement shall not be affected thereby. 16. To the extent that state law is not preemptedhas been duly executed and delivered by the provisionsCorporation and is a legal, valid and binding agreement of any lawthe Corporation in accordance with its terms; K-3 (f) The shares of each Series and Class of the Fund are eligible for offering to the public in those states of the United States heretoforeand jurisdictions in which the shares of their corresponding Series and Class of the Corporation are presently eligible for offering to the public so as to permit the issuance and delivery of shares contemplated by this Agreement to be consummated; (g) This Agreement and the reorganization contemplated hereby shall have been adopted and approved by the appropriate action of shareholders at an annual or hereafter enacted,special meeting or any adjournment thereof; (h) The shareholders of the Corporation shall have voted to direct the Corporation to vote, and the Corporation shall have voted, as sole shareholder of the Fund, to: (i) Elect as Trustees of the Fund the following individuals: Messrs. Walter P. Babich, W. Thacher Longstreth, Charles E. Peck, Wayne A. Stork, Thomas F. Madison, and Jeffrey J. Nick, and Ms. Ann R. Leven; (ii) Select Ernst & Young LLP as the sameindependent auditors for the Fund for the fiscal year ending [month and day], 2000; (iii) (A) With respect to each Series, if at the annual or special meeting specified in paragraph (g) of this Section 3 (or any adjournment thereof) the shareholders of a Series of the Corporation (x) approve a proposal for a new investment management agreement ("New Investment Management Agreement") between the current investment advisor to the Series (the "Advisor") and the Corporation on behalf of such Series, approve an investment management agreement between the Advisor and the Fund on behalf of such Series that is substantially identical to the New Investment Management Agreement, or (y) do not approve a proposal for a New Investment Management Agreement between the Advisor and the Corporation on behalf of such Series, approve an investment management agreement between the Advisor and the Fund on behalf of such Series that is substantially identical to the then-current investment management agreement between the Advisor and the Corporation on behalf of such Series; (B) With respect to each Series that is subject to a sub-advisory agreement, if any, if at the annual or special meeting specified in paragraph (g) of this Section 3 (or any adjournment thereof) the shareholders of such Series of the Corporation (x) approve a proposal for a new sub-advisory agreement ("New Sub-Advisory Agreement") between the Advisor and the current sub-advisor (the "Sub-Advisor") with respect to the assets of such Series, approve a New Sub-Advisory Agreement between the Advisor and the Sub-Advisor with respect to the assets of such Series that is substantially identical to the New Sub-Advisory Agreement, or (y) do not approve a proposal for a New Sub-Advisory Agreement between the Advisor and the Sub-Advisor, approve a sub-advisory agreement between the Advisor and the Sub-Advisor with respect to the assets of such Series that is substantially identical to the then-current sub-advisory agreement between the Advisor and the Sub-Advisor with respect to the assets of such Series; K-4 (i) The Trustees of the Fund shall have taken the following actions at a meeting duly called for such purposes: (i) Approval of the investment management agreements and the sub-advisory agreements, if any, described in paragraph (h) of this Section 3 hereof, for each Series of the Fund; (ii) Approval of a distribution plan, if any, for each Class of each Series of the Fund, as adopted pursuant to Rule 12b-1 under the 1940 Act, that is substantially identical to the then-current distribution plan, if any, as adopted pursuant to Rule 12b-1 under the 1940 Act for each Class of each corresponding Series of the Corporation; (iii) Approval of the assignment of the Corporation's Custodian Agreement with Norwest Bank Minnesota, N.A. to the Fund; (iv) Selection of Ernst & Young LLP as the Fund's independent auditors for the fiscal year ending [month and day], 2000; (v) Approval of the Fund's Shareholders Services Agreement with Delaware Service Company, Inc.; (vi) Approval of the Fund Accounting Agreement with Delaware Service Company, Inc. that covers the funds comprising the Delaware Investments Family of Funds; (vii) Approval of the Distribution Agreement between the Fund and Delaware Distributors, L.P. on behalf of the Series and Classes; (viii) Authorization of the issuance by the Fund, prior to the Effective Date of the Reorganization, of one share of each Series and Class of the Fund to the Corporation in consideration for the payment of $10.00 per share for the purpose of enabling the Corporation to vote on the matters referred in paragraph (h) of this Section 3 hereof; (ix) Submission of the matters referred to in paragraph (h) of this Section 3 to the Corporation as sole shareholder of each Series of the Fund; and (x) Authorization of the issuance and delivery by the Fund of shares of each Series and Class of the Fund on the Effective Date of the Reorganization in exchange for the assets of the corresponding Series of the Corporation pursuant to the terms and provisions of this Agreement. At any time prior to the Closing, any of the foregoing conditions may be amended from timewaived by the Board of Directors of the Corporation if, in the judgment of such Board, such waiver will not effect in a materially adverse way the benefits intended to time,be accorded the shareholders of the Corporation under this Agreement. K-5 4. Termination. The Board of Directors of the Corporation may terminate this Agreement and abandon the reorganization contemplated hereby, notwithstanding approval thereof by the shareholders of the Corporation, at any time prior to the Effective Date of the Reorganization if, in the judgment of such Board, the facts and circumstances make proceeding with this Agreement inadvisable. 5. Entire Agreement. This Agreement embodies the entire agreement between the parties and there are no agreements, understandings, restrictions or warranties among the parties other than those set forth herein or herein provided for. 6. Further Assurances. The Corporation and the Fund shall take such further action as may be necessary or desirable and proper to consummate the transactions contemplated hereby. 7. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be administered,deemed an original, but all of which shall constitute one and the same instrument. 8. Governing Law. This Agreement and the transactions contemplated hereby shall be governed by and construed and enforced according toin accordance with the laws of the State of Minnesota. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers thereunto duly authorized in multiple counterparts, each of which shall be an original but all of which shall constitute one of the same instrument. DELAWARE MANAGEMENT COMPANY, INC. By ------------------------------------- Name: Title: VOYAGEUR ASSET MANAGEMENT LLC By ------------------------------------- Name: Title: EXHIBIT C _________________ FUND, A SERIES OF __________ FUNDS, INC. PLAN OF LIQUIDATION AND TERMINATION The following Plan of Liquidation and Termination (the "Plan") of ________________ Fund (the "Fund"), one of ___ series of ________ Funds, Inc. (the "Company"), a corporation organized and existing under the laws of the state of Minnesota, which has operated as an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"), is intended to accomplish the complete liquidation and termination of the Fund in conformity with the provisions of the Company's Articles of Incorporation and ByLaws, and Minnesota law. WHEREAS, the Company's Board of Directors (the "Board") has deemed that it is advisable and in the best interest of the Fund and its shareholders to liquidate and terminate the Fund and the Board, on February 7, and February 14, 1997, considered the matter and determined to recommend the liquidation and termination of the Fund pursuant toCorporation have each caused this Plan; NOW, THEREFORE, the liquidation and termination of the Fund shall be carried out in the manner hereinafter set forth: 1. EFFECTIVE DATE OF PLAN. This Plan shall be effective upon consummation of the merger of a wholly owned subsidiary of Lincoln National Corporation ("LNC") with and into Dougherty Financial Group Inc. ("DFG") pursuant to an Agreement and Plan of Merger by and among LNC, DFG, Michael E. Dougherty, James O. Pohlad, Robert C. Pohlad and William M. Pohlad, provided that the Plan has previously been adopted and approved at a meeting of shareholders of the Fund called for the purpose of voting upon the Plan, by a vote of holders of more than 50 percent of the outstanding shares of the Fund. The date of effectiveness of the Plan is hereinafter called the "Effective Date." 2. CESSATION OF BUSINESS. After the Effective Date, the Company shall not engage in any business activities on behalf of the Fund except for the purpose of winding up the Fund's business and affairs, preserving the value of its assets and distributing its assets to shareholders in accordance with the provisions of this Plan after the payment to (or reservation of assets for payment to) all creditors of the Fund. After the Effective Date, the Fund shall not issue any new shares except in connection with the reinvestment of dividends or distributions by existing shareholders. Notwithstanding the provisions of this Plan, the Company shall, prior to making the final liquidating distribution to Fund shareholders, continue to honor requests for the redemption of Fund shares received up to and including 4:00 p.m. on the day before the Liquidation Record Date (as defined in Section 5 below). 3. LIQUIDATION OF ASSETS. As soon as practicable after the Effective Date and consistent with the terms of the Plan, the Company shall cause the liquidation of the Fund's assets to cash form. 4. PAYMENT OF DEBTS. As soon as practicable after the Effective Date, the Company shall determine and pay (or reserve sufficient amounts to pay) the amount of all known or reasonably ascertainable liabilities of the Fund incurred or expectedReorganization to be incurred prior to the date of the liquidating distribution provided in Section 5 below. 5. LIQUIDATING DISTRIBUTION. As soon as practicable after the Effective Date,executed on its behalf by its Chairman, President or a Vice President and in any event within sixty (60) days thereafter, the Company will mail the following to each Fund shareholder of record who has not redeemedattested by its shares: (i) a liquidating distribution equal to the shareholder's proportionate interest in the remaining assets of the Fund (after the payment and creation of the reserves contemplated by Section 4 above); and (ii) information concerning the sources of the liquidating distribution. OnSecretary or before such mailing date the Company will compile the list of remaining shareholders of record entitled to receive a liquidation distribution. The day on which such list is determined shall be the "Liquidation Record Date." The payment of the liquidating distribution and the retirement and cancellation of Fund shares will be effected pursuant to an amendment to the Articles of Incorporation of the Company in the form attached hereto as Exhibit 1 (the "Amendment"). 6. TERMINATION AND DISSOLUTION. As promptly as practicable after the completion of the liquidating distribution described in the preceding paragraph, the Fund shall be terminated pursuant to the terms of this Plan and applicable provisions of Minnesota law. 7. EXPENSES OF LIQUIDATION AND TERMINATION. All expenses incurred by the Company in relation to the carrying out of this Plan, other than brokerage commissions and taxes, if any, shall be borne by Lincoln National Corporation. 8. POWER OF THE BOARD. The Board and, subject to the general direction of the Board, the officers of the Company, shall have authority to do or to authorize any orAssistant Secretary, all acts and things as provided for in this Plan and any and all such further acts and things as they may consider necessary or desirable to carry out the purposes of this Plan, including without limitation, the execution and filing of all articles, documents, information returns, tax returns, forms and other papers which may be necessary or appropriate to implement this Plan or which may be required by the provisions of the Investment Company Act of 1940, as amended, the Securities Act of 1933, as amended, and applicable Minnesota law. 9. AMENDMENTS TO THE PLAN. The Board shall have the authority to authorize such variations from or amendments to the provisions of this Plan (other than the terms of the liquidating distribution) as may be necessary or appropriate to effect the complete liquidation and termination of the Fund and the distribution of the Fund's assets to Fund shareholders in accordance with the purposes intended to be accomplished by this Plan. EXHIBIT 1 TO PLAN OF LIQUIDATION AND TERMINATION ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF ____________________ FUNDS, INC. The undersigned officer of _______________ Funds, Inc. (the "Corporation"), a corporation subject to the provisions of Chapter 302A of the Minnesota Statutes, hereby certifies that the Corporation's (a) Board of Directors, at a meeting held February 14, 1997, and (b) shareholders, at a meeting held ___________, 1997 adopted the resolutions hereinafter set forth; and such officer further certifies that the amendments to the Corporation's Articles of Incorporation set forth in such resolution were adopted pursuant to Chapter 302A. WHEREAS, the Corporation is registered as an open-end management investment company (I.E., a mutual fund) under the Investment Company Act of 1940 and offers its shares to the public in several series, each of which represents a separate and distinct portfolio of assets; and WHEREAS, it is desirable and in the best interest of the holders of the ___________________ Fund (the "Fund"), a series of the Corporation, to liquidate and terminate the Fund pursuant to the Plan of Liquidation and Termination (the "Plan") approved by Fund shareholders on __________________, 1997; WHEREAS, the Corporation wishes to provide for the distribution of the assets of the Fund to its shareholders and the simultaneous cancellation and retirement of the outstanding shares of the Fund; and WHEREAS, the Plan requires that, in order to bind all shareholders of the Fund to the foregoing and, in particular, to bind such shareholders to the cancellation and retirement of the outstanding shares of the Fund, it is necessary to adopt an amendment to the Corporation's Articles of Incorporation. NOW, THEREFORE, BE IT RESOLVED, that the Corporation's Articles of Incorporation be, and the same hereby are, amended to add the following Article 5E immediately following Article 5 thereof: 5E. (a) For purposes of this Article 5E, the following terms shall have the following meanings: "EFFECTIVE DATE" means the date on which the Fund shareholders adopt and approve the Plan of Liquidation and Termination (the "Plan") approved by the Fund shareholders on ___________________, 1997. THE "FUND" means the Series __ Common Shares of the Corporation, which have been designated _________________________ Fund in the bylaws of the Corporation. "LIQUIDATING DISTRIBUTION DATE" means the date, as soon as practicable after the Effective Date, for the consummation of the liquidation. (b) At the Liquidating Distribution Date, the assets belonging to the Fund shall be distributed, as described in the Plan, among the Fund's shareholders in proportion to each shareholder's interest in the remaining assets of the Fund. For purposes of the foregoing, the term "assets belonging to" has the meaning assigned to it in Article 7(b) of the Corporation's Articles of Incorporation. (c) All issued and outstanding shares of the Fund shall simultaneously be canceled on the Books of the Fund and retired. (d) From and after the Liquidating Distribution Date, the Fund Shares canceled and retired pursuant to paragraph (c) above shall have the status of authorized and unissued Shares of the Corporation without designation as to series. IN WITNESS WHEREOF, the undersigned officer of the Corporation has executed these Articles of Amendment on behalf of the Corporation on _______________, 1997. __________________________ FUNDS, INC. By ____________________________________ Its ______________________________ EXHIBIT D AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of the __ day and year first-above written.
[Name of Minnesota corporation] (a Minnesota Corporation) Attest: By: /s/ George M. Chamberlain, Jr. By: /s/ Jeffrey J. Nick ---------------------------------------- ------------------------------------------ George M. Chamberlain, Jr. Jeffrey J. Nick Secretary President and Chief Executive Officer K-6 [Name of Delaware business trust] (a Delaware business trust) Attest: By: /s/ Eric E. Miller By: /s/ Jeffrey J. Nick ---------------------------------------- ------------------------------------------ Eric E. Miller Jeffrey J. Nick Assistant Secretary President and Chief Executive Officer
K-7 Appendix Series and Classes of ______, 1997, byCorresponding Series and between Voyageur Mutual Funds III, Inc. ("Voyageur III"), on behalfClasses of its series Growth and Income Fund, and VAM Institutional Funds, Inc. ("VAM Funds"), on behalf of its newly formed series Growth and Income Fund ("New Growth and Income Fund"). Voyageur III and VAM Funds are Minnesota corporations. As used in this Agreement, the terms "New Growth and Income Fund" and "Growth and Income Fund" shall be construed to mean, respectively, "VAM Funds on behalf of New Growth and Income Fund" and "Voyageur III on behalf of Growth and Income Fund," where necessary to reflect the fact that a corporate series is generally considered the beneficiary of corporate level actions taken with respect to the series and is not itself recognized as a person under law. This Agreement is intended to be and is adopted as a "plan of reorganization," within the meaning of Treas. Reg. 1.368-2(g), for a reorganization under Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the "Reorganization") will consist of the transfer to New Growth and Income Fund of all of the assets of Growth and Income Fund in exchange for the assumption by New Growth and Income Fund of all liabilities of Growth and Income Fund and the issuance by New Growth and Income Fund of shares of common stock, par value $0.01 per share ("New Growth and Income Fund Shares"), to be distributed, after the Closing Date hereinafter determined, to the shareholders of Growth and Income Fund in liquidation of Growth and Income Fund as provided herein, all upon the terms and conditions hereinafter set forth in this Agreement. The distribution of New Growth and Income Fund Shares to Growth and Income Fund shareholders and the retirement and cancellation of Growth and Income Fund shares will be effected pursuant to an amendment to the Articles of Incorporation of Voyageur III in the form attached hereto as Exhibit 1 (the "Amendment"), to be adopted by Voyageur III in accordance with the Minnesota Business Corporation Act. In consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows: 1. REORGANIZATION AND LIQUIDATION OF GROWTH AND INCOME FUND 1.1. Subject to the terms and conditions set forth herein and in the Amendment and on the basis of the representations and warranties contained herein, Growth and Income Fund agrees to assign, deliver and otherwise transfer the Growth and Income Fund Assets (as defined in paragraph 1.2) to New Growth and Income Fund and New Growth and Income Fund agrees in exchange therefor to assume all liabilities of Growth and Income Fund on the Closing Date (as defined in paragraph 3.1) as set forth in paragraph 1.3 and to deliver to Growth and Income Fund Shareholders (as defined in paragraph 1.5) the number of New Growth and Income Fund Shares, including fractional New Growth and Income Fund Shares, determined in accordance with paragraph 2.2. Such transactions shall take place at the closing provided for in paragraph 3.1 (the "Closing"). 1.2. The "Growth and Income Fund Assets" shall consist of all property, including, without limitation, all cash, cash equivalents, securities, futures and interest receivables owned by Growth and Income Fund, and any deferred or prepaid expenses shown as an asset on Growth and Income Fund's books, on the Valuation Date (as defined in paragraph 2.1). 1.3. New Growth and Income Fund will assume all liabilities of Growth and Income Fund, which include, without limitation, all expenses, costs, charges and reserves reflected on an unaudited Statement of Assets and Liabilities of Growth and Income Fund prepared by the Treasurer of Growth and Income Fund as of the Valuation Date in accordance with generally accepted accounting principles consistently applied from the prior audited period ("Valuation Date Statement"). 1.4. On the Closing Date or as soon as practicable thereafter, pursuant to paragraph 1.1 hereof and the Amendment, Growth and Income Fund will distribute New Growth and Income Fund Shares received by Growth and Income Fund pro rata to its shareholders of record determined as of the close of business on the Valuation Date ("Growth and Income Fund Shareholders"). Thereafter, no additional shares representing interests in Growth and Income Fund shall be issued. Such distribution will be accomplished by an instruction, signed by Growth and Income Fund's Secretary, to transfer New Growth and Income Fund Shares then credited to Growth and Income Fund's account on the books of New Growth and Income Fund to open accounts on the books of VAM Funds in the names of the Growth and Income Fund Shareholders and representing the respective pro rata number of New Growth and Income Fund Shares due each such Growth and Income Fund Shareholder. All issued and outstanding shares of Growth and Income Fund simultaneously will be canceled on Growth and Income Fund's books. 1.5. Ownership of New Growth and Income Fund Shares will be shown on the books of VAM Fund's transfer agent. New Growth and Income Fund Shares will be issued in the manner described in New Growth and Income Fund's then-current Prospectus and Statement of Additional Information, except no front-end sales charges will be incurred by Growth and Income Fund Shareholders in connection with New Growth and Income Fund Shares received in the Reorganization. 1.6. Any transfer taxes payable upon issuance of New Growth and Income Fund Shares in a name other than the registered holder of Growth and Income Fund Shares on Growth and Income Fund's books as of the close of business on the Valuation Date shall, as a condition of such issuance and transfer, be paid by the person to whom New Growth and Income Fund Shares are to be issued and transferred. 1.7. Any reporting responsibility of Growth and Income Fund is and shall remain the responsibility of Growth and Income Fund. 1.8. All books and records maintained on behalf of Growth and Income Fund will be delivered to New Growth and Income Fund and, after the Closing, will be maintained by New Growth and Income Fund or its designee in compliance with applicable record retention requirements under the Investment Company Act of 1940, as amended (the "1940 Act"). 2. VALUATION 2.1. The "Valuation Date" shall be a business day not later than the 5th business day following the receipt of the requisite approval of this Agreement by shareholders of Growth and Income Fund or such other date after such shareholder approval as may be mutually agreed upon. The value of the Growth and Income Fund Assets shall be the value of such assets computed as of 4:00 p.m., Eastern time, on the Valuation Date, using the valuation procedures set forth in New Growth and Income Fund's then current Prospectus and Statement of Additional Information. 2.2. The New Growth and Income Fund Shares to be issued hereunder will have an aggregate net asset value equal to the value of the Growth and Income Fund Assets, net of the liabilities of Growth and Income Fund, determined in accordance with paragraph 2.1. 2.3. All computations of value shall be made by Voyageur Fund Managers, Inc. ("VFM") in accordance with its regular practice in pricing Growth and Income Fund. New Growth and Income Fund shall cause VFM to deliver a copy of its valuation report at the Closing. 3. CLOSING AND CLOSING DATE 3.1. The Closing shall take place on the Valuation Date as of 5:00 p.m., Eastern time, or at such other day or time as the parties may agree (the "Closing Date"). The Closing shall be held in a location mutually agreeable to the parties hereto. All acts taking place at the Closing shall be deemed to take place simultaneously as of 5:00 p.m., Eastern time, on the Closing Date unless otherwise provided. 3.2. Portfolio securities held by Growth and Income Fund (together with any cash or other assets) shall be delivered by Growth and Income Fund to Norwest Bank Minnesota, N.A. (the "Custodian"), as custodian for New Growth and Income Fund, for the account of New Growth and Income Fund on or before the Closing Date in conformity with applicable custody provisions under the 1940 Act and duly endorsed in proper form for transfer in such condition as to constitute good delivery thereof in accordance with the custom of brokers. The portfolio securities shall be accompanied by all necessary federal and state stock transfer stamps or a check for the appropriate purchase price of such stamps. Portfolio securities and instruments deposited with a securities depository (as defined in Rule 17f-4 under the 1940 Act) shall be delivered on or before the Closing Date by book-entry in accordance with customary practices of such depository and the Custodian. The cash delivered shall be in the form of a Federal Funds wire, payable to the order of "Norwest Bank Minnesota, N.A., Custodian for Growth and Income Fund, a series of VAM Institutional Funds, Inc." 3.3. In the event that on the Valuation Date, (a) the New York Stock Exchange shall be closed to trading or trading thereon shall be restricted or (b) trading or the reporting of trading on such Exchange or elsewhere shall be disrupted so that, in the judgment of both New Growth and Income Fund and Growth and Income Fund, accurate appraisal of the value of the Growth and Income Fund Assets is impracticable, the Valuation Date shall be postponed until the first business day after the day when trading shall have been fully resumed without restriction or disruption and reporting shall have been restored. 3.4. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, share certificates, if any, receipts or other documents as such other party or its counsel may reasonably request. 4. COVENANTS OF NEW GROWTH AND INCOME FUND AND GROWTH AND INCOME FUND 4.1. Except as otherwise expressly provided herein, Growth and Income Fund will operate its business in the ordinary course between the date hereof and the Closing Date, it being understood that such ordinary course will include customary dividends and other distributions. 4.2. VAM Funds will prepare and file with the Securities and Exchange Commission (the "Commission") a registration statement on Form N-1A under the Securities Act of 1933, as amended (the "1933 Act"), relating to New Growth and Income Fund Shares (the "Registration Statement"). 4.3. Growth and Income Fund will call a meeting of its shareholders to consider and act upon this Agreement and the Amendment and to take all other action necessary to obtain approval of the transactions contemplated herein, including, if necessary, the waiver of any existing investment limitations that might otherwise preclude Growth and Income Fund from holding all of its assets as New Growth and Income Fund Shares until such shares are distributed to Growth and Income Fund shareholders. Voyageur III will prepare the notice of meeting, form of proxy and proxy statement (collectively, "Proxy Materials") to be used in connection with such meeting. VAM Funds will furnish Voyageur III with such information relating to New Growth and Income Fund as is reasonably necessary for the preparation of the Proxy Materials. 4.4. Subject to the provisions of this Agreement, New Growth and Income Fund and Growth and Income Fund will each take, or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement. 4.5. As soon after the Closing Date as is reasonably practicable, Voyageur III (a) shall prepare and file all federal and other tax returns and reports of Growth and Income Fund required by law to be filed with respect to all periods ending on or before the Closing Date but not theretofore filed, and (b) shall pay all federal and other taxes shown as due thereon and/or all federal and other taxes that were unpaid as of the Closing Date, including without limitation, all taxes for which the provision for payment was made as of the Closing Date (as represented in paragraph 5.2(l)). 4.6. New Growth and Income Fund agrees to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act and the 1940 Act as it may deem appropriate in order to continue its operations after the Closing Date. 5. REPRESENTATIONS AND WARRANTIES 5.1. VAM Funds represents and warrants to Voyageur III as follows: (a) New Growth and Income Fund is a series of VAM Funds. VAM Funds is a corporation validly existing and in good standing under the laws[name of Minnesota with corporate power to carry on itscorporation] [name of Delaware business as presently conducted. (b) VAM Funds is a duly registered management investment company,trust] K-8 EXHIBIT L COMPARISON and its registration with the Commission as an investment company under the 1940 Act is in full forceSIGNIFICANT DIFFERENCES for DELAWARE BUSINESS TRUSTS and effect. (c) The Prospectus and Statement of Additional Information of New Growth and Income Fund will, on the Closing Date, conform in all materials respects to the applicable requirements of the 1933 Act and the 1940 Act and the regulations thereunder and will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. (d) New Growth and Income Fund is not in, and the execution, delivery and performance of this Agreement will not result in, a material violation of any provision of VAM Funds's Articles of Incorporation or Bylaws or of any agreement, indenture, instrument, contract, lease or other undertaking to which New Growth and Income Fund is a party or by which it is bound. (e) No material litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to its knowledge, threatened against VAM Funds or New Growth and Income Fund or any of its properties or assets which, if adversely determined, would materially and adversely affect its financial condition or the conduct of its business; and New Growth and Income Fund is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects, or is reasonably likely to materially and adversely affect, its business or its ability to consummate the transactions herein contemplated. (f) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of VAM Funds, and this Agreement constitutes a valid and binding obligation of New Growth and Income Fund enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other laws relating to or affecting creditors rights and to general equity principles. No other consents, authorizations or approvals are necessary in connection with VAM Funds' performance of this Agreement, except such as have been obtained under the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act and such as may be required under state securities laws; (g) New Growth and Income Fund Shares to be issued and delivered to Growth and Income Fund, for the account of the Growth and Income Fund Shareholders, pursuant to the terms of this Agreement will at the Closing Date have been duly authorized and, when so issued and delivered, will be duly and validly issued New Growth and Income Fund Shares, and will be fully paid and nonassessable with no personal liability attaching to the ownership thereof; (h) The information furnished or to be furnished by New Growth and Income Fund for use in registration statements, proxy materials and other documents which may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations applicable thereto. (i) The Proxy Materials, insofar as they relate to New Growth and Income Fund, will, at the time of the meeting of Growth and Income Fund's shareholders and on the Closing Date, not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not materially misleading. 5.2 Voyageur III represents and warrants to VAM Funds as follows: (a) Growth and Income Fund is a series of Voyageur III. Voyageur III is a corporation validly existing and in good standing under the laws of Minnesota. (b) Voyageur III is a duly registered management investment company, and its registration with the Commission as an investment company under the 1940 Act and the registration of its shares under the 1933 Act are in full force and effect. (c) All of the issued and outstanding shares of common stock of Growth and Income Fund have been offered and sold in compliance in all material respects with applicable registration requirements of the 1933 Act and state securities laws. Shares of Growth and Income Fund are registered in all jurisdictions in which they are required to be registered under state securities laws and other laws, and Voyageur III is not subject to any stop order and is fully qualified to sell Growth and Income Fund shares in each state in which such shares have been registered. (d) The current Prospectus and Statement of Additional Information of Growth and Income Fund conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the regulations thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (e) Growth and Income Fund is not in, and the execution, delivery and performance of this Agreement will not result in, a material violation of any provision of Voyageur III's Articles of Incorporation or Bylaws or of any agreement, indenture, instrument, contract, lease or other undertaking to which Growth and Income Fund is a party or by which it is bound. (f) No material litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to its knowledge, threatened against Growth and Income Fund or any of its properties or assets which, if adversely determined, would materially and adversely affect its financial condition or the conduct of its business; and Growth and Income Fund knows of no facts that might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects, or is reasonably likely to materially and adversely affect, its business or its ability to consummate the transactions herein contemplated. (g) The Statement of Assets and Liabilities, Statement of Operations, Statement of Changes in Net Assets and Financial Highlights of Growth and Income Fund as of April 30, 1996 and for the year then ended, certified by KPMG Peat Marwick LLP, and the unaudited Statement of Assets and Liabilities, Statement of Operations, Statement of Changes in Net Assets and Financial Highlights of Growth and Income Fund as of October 30, 1996 and for the six months then ended, fairly present, in all material respects, Growth and Income Fund's financial condition as of such date, and its results of operations, changes in its net assets and financial highlights for such period in accordance with generally accepted accounting principles, and as of such date there were no known liabilities of Growth and Income Fund (contingent or otherwise) not disclosed therein that would be required in accordance with generally accepted accounting principles to be disclosed therein. (h) Since the date of the most recent unaudited financial statements, there has not been any material adverse change in Growth and Income Fund's financial condition, assets, liabilities or business, other than changes occurring in the ordinary course of business, or any incurrence by Growth and Income Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed in writing to and acknowledged by New Growth and Income Fund prior to the date of this Agreement and prior to the Closing Date. All liabilities of Growth and Income Fund (contingent and otherwise) are reflected in the Valuation Date Statement. For the purpose of this subparagraph (h), neither a decline in Growth and Income Fund's net asset value per share nor a decrease in Growth and Income Fund's size due to redemptions by Growth and Income Fund shareholders shall constitute a material adverse change. (i) Growth and Income Fund has no material contracts or other commitments (other than this Agreement) that will be terminated with liability to it prior to the Closing Date. (j) All issued and outstanding shares of Growth and Income Fund are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and nonassessable with no personal liability attaching to the ownership thereof. Growth and Income Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any of its shares, nor is there outstanding any security convertible into any of its shares. All such shares will, at the time of Closing, be held by the persons and in the amounts recorded by Growth and Income Fund's transfer agent. (k) The execution, delivery and performance of this Agreement will have been duly authorized prior to the Closing Date by all necessary action on the part of Voyageur III and, subject to the approval of Growth and Income Fund's shareholders, this Agreement constitutes a valid and binding obligation of Growth and Income Fund enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other laws relating to or affecting creditors' rights and to general equity principles. No other consents, authorizations or approvals are necessary in connection with Growth and Income Fund's performance of this Agreement, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and such as may be required under state securities laws. (l) All material federal and other tax returns and reports of Growth and Income Fund required by law to be filed on or before the Closing Date shall have been filed and are correct and all federal and other taxes shown as due or required to be shown as due on said returns and reports have been paid or provision has been made for the payment thereof and, to the best of Growth and Income Fund's knowledge, no such return is currently under audit and no assessment has been asserted with respect to any such return and there are no facts that might form the basis for such proceedings. (m) For each taxable year since its inception, Growth and Income Fund has met all the requirements of Subchapter M of the Code for qualification and treatment as a "regulated investment company" and neither the execution or delivery of, nor the performance of its obligations under, this Agreement will adversely affect, and no other events, to the best of Growth and Income Fund's knowledge, are reasonably likely to occur which will adversely affect the ability of Growth and Income Fund to continue to meet the requirements of Subchapter M of the Code. (n) At the Closing Date, Growth and Income Fund will have good and valid title to the Growth and Income Fund Assets, subject to no liens (other than the obligation, if any, to pay the purchase price of portfolio securities purchased by Growth and Income Fund which have not settled prior to the Closing Date), security interests or other encumbrances, and full right, power and authority to assign, deliver and otherwise transfer such assets hereunder, and upon delivery and payment for such assets, New Growth and Income Fund will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including any restrictions as might arise under the 1933 Act. (o) At the time of the meeting of Growth and Income Fund's shareholders and on the Closing Date, the Proxy Materials will (i) comply in all material respects with the provisions of the 1934 Act and the 1940 Act and the regulations thereunder and (ii) not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Neither Growth and Income Fund nor Voyageur III shall be construed to have made the foregoing representation with respect to portions of the Proxy Materials furnished by New Growth and Income Fund. Any other information furnished by Growth and Income Fund for use in any other manner that may be necessary in connection with the transactions contemplated hereby shall be accurate and complete and shall comply in all material respects with the applicable federal securities and other laws and regulations thereunder. (p) Growth and Income Fund has maintained or has caused to be maintained on its behalf all books and accounts as required of a registered investment company in compliance with the requirements of Section 31 of the 1940 Act and the Rules thereunder. (q) Growth and Income Fund is not acquiring New Growth and Income Fund Shares to be issued hereunder for the purpose of making any distribution thereof other than in accordance with the terms of this Agreement. 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF GROWTH AND INCOME FUND The obligations of Growth and Income Fund to consummate the transactions provided for herein shall be subject, at its election, to the performance by New Growth and Income Fund of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following conditions: 6.1. All representations and warranties of New Growth and Income Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date. 6.2. New Growth and Income Fund shall have delivered to Growth and Income Fund a certificate of its President and Treasurer, in a form reasonably satisfactory to Growth and Income Fund and dated as of the Closing Date, to the effect that the representations and warranties of VAM Funds made in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and as to such other matters as Voyageur III shall reasonably request. 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF NEW GROWTH AND INCOME FUND The obligations of New Growth and Income Fund to complete the transactions provided for herein shall be subject, at its election, to the performance by Growth and Income Fund of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following conditions: 7.1. All representations and warranties of Voyageur III contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date. 7.2. Growth and Income Fund shall have delivered to New Growth and Income Fund at the Closing a certificate of its President and its Treasurer, in form and substance satisfactory to New Growth and Income Fund and dated as of the Closing Date, to the effect that the representations and warranties of Growth and Income Fund made in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and as to such other matters as New Growth and Income Fund shall reasonably request. 7.3. Growth and Income Fund shall have delivered to New Growth and Income Fund a statement, certified by the Treasurer of Voyageur III, of the Growth and Income Fund Assets and its liabilities, together with a list of Growth and Income Fund's portfolio securities and other assets showing the respective adjusted bases and holding periods thereof for income tax purposes, such statement to be prepared as of the Closing Date and in accordance with generally accepted accounting principles consistently applied. 8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF NEW GROWTH AND INCOME FUND AND GROWTH AND INCOME FUND. The obligations of Growth and Income Fund and New Growth and Income Fund hereunder are each subject to the further conditions that on or before the Closing Date: 8.1. This Agreement and the Amendment and the transactions contemplated herein and therein shall have been approved by the requisite vote of the holders of the outstanding shares of Growth and Income Fund in accordance with the provisions of Voyageur III's Articles of Incorporation, and certified copies of the resolutions evidencing such approval shall have been delivered to New Growth and Income Fund. 8.2. On the Closing Date, no action, suit or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated herein. 8.3. All consents of other parties and all other consents, orders and permits of federal, state and local regulatory authorities (including those of the Commission and of state blue sky and securities authorities, including "no-action" positions of and exemptive orders from such federal and state authorities) deemed necessary by New Growth and Income Fund or Growth and Income Fund to permit consummation, in all material respects, of the transactions contemplated herein shall have been obtained, except where failure to obtain any such consent, order or permit would not involve risk of a material adverse effect on the assets or properties of New Growth and Income Fund or Growth and Income Fund. 8.4. On or prior to the Valuation Date, Growth and Income Fund shall have declared and paid a dividend or dividends and/or other distribution or distributions that, together with all previous such dividends or distributions, shall have the effect of distributing to its shareholders all of Growth and Income Fund's investment company taxable income (computed without regard to any deduction for dividends paid) and all of its net capital gain (after reduction for any capital loss carry-forward and computed without regard to any deduction for dividends paid) for the taxable year during which the Reorganization occurs. 8.5. The parties shall have received an opinion of the law firm of Dorsey & Whitney LLP (based on such representations as such law firm shall reasonably request), addressed to VAM Funds and Voyageur III, which opinion may be relied upon by the shareholders of Growth and Income Fund, substantially to the effect that the federal income tax consequences of the Reorganization will be as follows: (i) the Reorganization will constitute a reorganization within the meaning of Section 368(a)(1)(F) of the Code, and New Growth and Income Fund and Growth and Income Fund each will qualify as a party to the Reorganization under Section 368(b) of the Code; (ii) Growth and Income Fund shareholders will recognize no income, gain or loss upon receipt, pursuant to the Reorganization, of New Growth and Income Fund shares. Growth and Income Fund shareholders subject to taxation will recognize income upon receipt of any net investment income or net capital gains of Growth and Income Fund which are distributed by Growth and Income Fund prior to the Reorganization; (iii) the tax basis of New Growth and Income Fund shares received by each Growth and Income Fund shareholder pursuant to the Reorganization will be equal to the tax basis of Growth and Income Fund shares exchanged therefor; (iv) the holding period of New Growth and Income Fund shares received by each Growth and Income Fund shareholder pursuant to the Reorganization will include the period during which the Growth and Income Fund shareholder held the Growth and Income Fund shares exchanged therefor, provided that the Growth and Income Fund shares were held as a capital asset on the date of the Reorganization; (v) Growth and Income Fund will recognize no income, gain or loss by reason of the Reorganization; (vi) New Growth and Income Fund will recognize no income, gain or loss by reason of the Reorganization; (vii) the tax basis of the assets received by New Growth and Income Fund pursuant to the Reorganization will be the same as the basis of those assets in the hands of Growth and Income Fund immediately prior to the Reorganization; (viii) the holding period of the assets received by New Growth and Income Fund pursuant to the Reorganization will include the period during which such assets were held by Growth and Income Fund; and (ix) New Growth and Income Fund will succeed to and take into account the earnings and profits, or deficit in earnings and profits, of Growth and Income Fund immediately prior to the Reorganization. Notwithstanding anything herein to the contrary, neither New Growth and Income Fund nor Growth and Income Fund may waive the condition set forth in this paragraph 8.5. 8.6. The Amendment shall have been filed in accordance with applicable provisions of Minnesota law. 9. FEES AND EXPENSES 9.1. (a) Lincoln National Corporation shall bear all direct expenses incurred in connection with entering into and carrying out the provisions of this Agreement, including expenses incurred in connection with the preparation, printing, filing and solicitation of proxies to obtain requisite shareholder approvals. (b) VFM shall pay any unamortized organizational expenses on the books of Growth and Income Fund immediately prior to the Reorganization. 10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES 10.1. This Agreement constitutes the entire agreement between the parties. 10.2. The representations, warranties and covenants contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall survive the consummation of the transactions contemplated herein. 11. TERMINATION 11.1. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing: (a) by the mutual written consent of Voyageur III and VAM Funds; (b) by either VAM Funds or Voyageur III by notice to the other, without liability to the terminating party on account of such termination (providing the terminating party is not otherwise in material default or breach of this Agreement) if the Closing shall not have occurred on or before December 31, 1997; or (c) by either New Growth and Income Fund or Growth and Income Fund, in writing without liability to the terminating party on account of such termination (provided the terminating party is not otherwise in material default or breach of this Agreement), if (i) the other party shall fail to perform in any material respect its agreements contained herein required to be performed on or prior to the Closing Date, (ii) the other party materially breaches any of its representations, warranties or covenants contained herein, (iii) the Growth and Income Fund shareholders fail to approve this Agreement at any meeting called for such purpose at which a quorum was present, or (iv) any other condition herein expressed to be precedent to the obligations of the terminating party has not been met and it reasonably appears that it will not or cannot be met. 11.2. (a) Termination of this Agreement pursuant to paragraphs 11.1(a) or (b) shall terminate all obligations of the parties hereunder and there shall be no liability for damages on the part of New Growth and Income Fund or Growth and Income Fund or the directors or officers of New Growth and Income Fund or Growth and Income Fund, to any other party or its directors or officers. (b) Termination of this Agreement pursuant to paragraph 11.1(c) shall terminate all obligations of the parties hereunder and there shall be no liability for damages on the part of New Growth and Income Fund or Growth and Income Fund or the directors or officers of New Growth and Income Fund or Growth and Income Fund, except that any party in breach of this Agreement shall, upon demand, reimburse the non-breaching party for all reasonable out-of-pocket fees and expenses incurred in connection with the transactions contemplated by this Agreement, including legal, accounting and filing fees. 12. AMENDMENTS This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the parties; PROVIDED, HOWEVER, that following the meeting of Growth and Income Fund's shareholders called by Growth and Income Fund pursuant to paragraph 4.3, no such amendment may have the effect of changing the provisions for determining the number of New Growth and Income Fund shares to be issued to the Growth and Income Fund Shareholders under this Agreement to the detriment of such Growth and Income Fund Shareholders without their further approval. 13 MISCELLANEOUS 13.1. The article and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 13.2. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 13.3. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. 13.4. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement. 13.5. The obligations and liabilities of VAM Funds hereunder are solely those of New Growth and Income Fund. It is expressly agreed that no shareholder, nominee, director, officer, agent or employee of VAM Funds on behalf of New Growth and Income Fund shall be personally liable hereunder. The execution and delivery of this Agreement have been authorized by the directors of VAM Funds and signed by authorized officers of VAM Funds acting as such, and neither such authorization by such directors nor such execution and delivery by such officers shall be deemed to have been made by any of them individually or to impose any liability on any of them personally. 13.6. The obligations and liabilities of Voyageur III hereunder are solely those of Growth and Income Fund. It is expressly agreed that no shareholder, nominee, director, officer, agent or employee of Growth and Income Fund shall be personally liable hereunder. The execution and delivery of this Agreement have been authorized by the directors of Voyageur III and signed by authorized officers of Voyageur III acting as such, and neither such authorization by such directors nor such execution and delivery by such officers shall be deemed to have been made by any of them individually or to impose any liability on any of them personally. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by a duly authorized officer. VOYAGEUR MUTUAL FUNDS III, INC., on behalf of Growth and Income Fund By _________________________________ Its ________________________________ VAM INSTITUTIONAL FUNDS, INC., on behalf of Growth and Income Fund By _________________________________ Its ________________________________ FOR VOYAGEUR FUNDS VOTING ON PROPOSALS 1, 2 AND 6: [AGGRESSIVE GROWTH FUND ARIZONA INSURED TAX FREE FUND ARIZONA TAX FREE FUND CALIFORNIA INSURED TAX FREE FUND CALIFORNIA TAX FREE FUND COLORADO TAX FREE FUND FLORIDA INSURED TAX FREE FUND FLORIDA LIMITED TERM TAX FREE FUND FLORIDA TAX FREE FUND IDAHO TAX FREE FUND IOWA TAX FREE FUND KANSAS TAX FREE FUND MINNESOTA HIGH YIELD MUNICIPAL BOND FUND MINNESOTA INSURED FUND MINNESOTA LIMITED TERM MUNICIPAL BOND FUND MINNESOTA TAX FREE FUND MISSOURI INSURED TAX FREE FUND NATIONAL HIGH YIELD MUNICIPAL BOND FUND NEW MEXICO TAX FREE FUND NEW YORK TAX FREE FUND NORTH DAKOTA TAX FREE FUND OREGON INSURED TAX FREE FUND UTAH TAX FREE FUND WASHINGTON INSURED TAX FREE FUND WISCONSIN TAX FREE FUND]CORPORATIONS L-1 DELAWARE INVESTMENTS 1818 MARKET STREET PHILADELPHIA, PA 19103 THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENTTHE BOARD OF DIRECTORS, The undersigned appoints _______________________________, ____________________________, and _______________________________________, and eachUndersigned hereby Appoints {________________}, or any of them, with power to act without the other and with the right of substitution, in each, the proxies of the undersigned to vote all shares of ________________________ [name of Voyageur Fund] Tax Free Fund (the "Fund"), held byat the undersigned at a special meeting of shareholdersSpecial Meeting Of Shareholders of the Fundabove fund to be held AT The Union League, 140 South Broad Street, Philadelphia, Pennsylvania, on April 11, 1997, andMarch 17, 1999 at 10:00 A.M., or at any postponement or adjournments thereof, with all the powers which the undersigned would possess, if personally present, in person. All previous proxies given with respect to the meeting are revoked. THE PROXIES ARE INSTRUCTED: 1. To vote: ______FOR all nominees listed below (except as marked to the contrary below) ______WITHHOLD AUTHORITY to vote for all nominees listed below NOMINEES: Walter P. Babich, Anthony D. Knerr, Ann R. Leven, W. Thacher Longstreth, Thomas F. Madison, Jeffrey J. Nick, Charles E. Peck and Wayne A. Stork (Instruction: To withhold authority to vote for any individual nominee, write that nominee's name on the line provided below.) _______________________________________________________________________________ 2. To vote: FOR __________ AGAINST __________ approval of a new Investment Advisory Agreement. 6. To vote: FOR __________ AGAINST __________ ABSTAIN __________ ratification of the selection of _______________________ as independent public accountants for the Fund. In their discretion, the proxies are authorizedinstructs them to vote upon such other business asany matters which may properly come beforebe acted upon at this meeting and specifically as indicated on the annual meeting or any adjournments or postponements thereof.lower portion of this form. Please refer to the proxy statement for a discussion of each of these matters. BY SIGNING AND DATING THIS CARE, YOU AUTHORIZE THE PROXIES TO VOTE EACH PROPOSAL AS MARKED, OR IF NOT MARKED, TO VOTE "FOR" EACH PROPOSAL, AND TO USE THEIR DISCREITION TO VOTE ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING, PLEASE COMPLETE AND MAIL THIS CARD AT ONCE IN THE ENCLOSED ENVELOPE. - ------------------------------------------------------------------------------- THIS PROXY WILL BE VOTED AS INSTRUCTED ON THE ABOVE MATTERS. ITCARD IS UNDERSTOOD THAT, IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED "FOR" ALL ITEMS. UPON ALL OTHER MATTERS THE PROXIES SHALL VOTE AS THEY DEEM IN THE BEST INTERESTS OF THE FUND. RECEIPT OF NOTICE OF MEETINGVALID ONLY SIGNED AND PROXY STATEMENT IS ACKNOWLEDGED BY YOUR EXECUTION OF THIS PROXY. SIGN, DATE, AND RETURN IN THE ADDRESSED ENVELOPE--NO POSTAGE REQUIRED. PLEASE MAIL PROMPTLY TO SAVE THE FUND FURTHER SOLICITATION EXPENSE. Dated:_______________________________, 1997 ___________________________________________ ___________________________________________ IMPORTANT: Please date and sign this Proxy. If the stock is held jointly, signature should include both names. Executors, administrators, trustees, guardians, and others signing in a representative capacity should give their full title as such. VOYAGEUR GROWTH AND INCOME FUND THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT The undersigned appoints _______________________________, ____________________________, and _______________________________________, and each of them, with power to act without the other and with the right of substitution in each, the proxies of the undersigned to vote all shares of Voyageur Growth and Income Fund (the "Fund"), held by the undersigned at a special meeting of shareholders of the Fund to be held on April 11, 1997, and at any adjournments thereof, with all the powers the undersigned would possess if present in person. All previous proxies given with respect to the meeting are revoked. THE PROXIES ARE INSTRUCTED: 1. To vote: ______FOR all nominees listed below (except as marked to the contrary below) ______WITHHOLD AUTHORITY to vote for all nominees listed below NOMINEES: Walter P. Babich, Anthony D. Knerr, Ann R. Leven, W. Thacher Longstreth, Thomas F. Madison, Jeffrey J. Nick, Charles E. Peck and Wayne A. Stork (Instruction: To withhold authority to vote for any individual nominee, write that nominee's name on the line provided below.) _______________________________________________________________________________ 5. To vote: FOR __________ AGAINST __________ approval of an Agreement and Plan of Reorganization pursuant to which all of the assets of the Fund would be acquired by a newly formed series of VAM Institutional Funds, Inc., also called Growth and Income Fund, and shareholders would become shareholders of the newly formed series. 6. To vote: FOR __________ AGAINST __________ ABSTAIN __________ ratification of the selection of ________________________ as independent public accountants for the Fund. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the annual meeting or any adjournments or postponements thereof. THIS PROXY WILL BE VOTED AS INSTRUCTED ON THE ABOVE MATTERS. IT IS UNDERSTOOD THAT, IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED "FOR" ALL ITEMS. UPON ALL OTHER MATTERS THE PROXIES SHALL VOTE AS THEY DEEM IN THE BEST INTERESTS OF THE FUND. RECEIPT OF NOTICE OF MEETING AND PROXY STATEMENT IS ACKNOWLEDGED BY YOUR EXECUTION OF THIS PROXY. SIGN, DATE, AND RETURN IN THE ADDRESSED ENVELOPE--NO POSTAGE REQUIRED. PLEASE MAIL PROMPTLY TO SAVE THE FUND FURTHER SOLICITATION EXPENSE. Dated:_______________________________, 1997 ___________________________________________ ___________________________________________ IMPORTANT: Please date and sign this Proxy. If the stock is held jointly, signature should include both names. Executors, administrators, trustees, guardians, and others signing in a representative capacity should give their full title as such. VOYAGEUR GROWTH STOCK FUND THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT The undersigned appoints _______________________________, ____________________________, and _______________________________________, and each of them, with power to act without the other and with the right of substitution in each, the proxies of the undersigned to vote all shares of Voyageur Growth Stock Fund (the "Fund"), held by the undersigned at a special meeting of shareholders of the Fund to be held on April 11, 1997, and at any adjournments thereof, with all the powers the undersigned would possess if present in person. All previous proxies given with respect to the meeting are revoked. THE PROXIES ARE INSTRUCTED: 1. To vote: ______FOR all nominees listed below (except as marked to the contrary below) ______WITHHOLD AUTHORITY to vote for all nominees listed below NOMINEES: Walter P. Babich, Anthony D. Knerr, Ann R. Leven, W. Thacher Longstreth, Thomas F. Madison, Jeffrey J. Nick, Charles E. Peck and Wayne A. Stork (Instruction: To withhold authority to vote for any individual nominee, write that nominee's name on the line provided below.) _______________________________________________________________________________ 2. To vote: FOR __________ AGAINST __________ approval of a new Investment Advisory Agreement. 3. To vote: FOR __________ AGAINST __________ approval of a Sub-Advisory Agreement. 6. To vote: FOR __________ AGAINST __________ ABSTAIN __________ ratification of the selection of _______________________ as independent public accountants for the Fund. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the annual meeting or any adjournments or postponements thereof. THIS PROXY WILL BE VOTED AS INSTRUCTED ON THE ABOVE MATTERS. IT IS UNDERSTOOD THAT, IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED "FOR" ALL ITEMS. UPON ALL OTHER MATTERS THE PROXIES SHALL VOTE AS THEY DEEM IN THE BEST INTERESTS OF THE FUND. RECEIPT OF NOTICE OF MEETING AND PROXY STATEMENT IS ACKNOWLEDGED BY YOUR EXECUTION OF THIS PROXY. SIGN, DATE, AND RETURN IN THE ADDRESSED ENVELOPE--NO POSTAGE REQUIRED. PLEASE MAIL PROMPTLY TO SAVE THE FUND FURTHER SOLICITATION EXPENSE. Dated:_______________________________, 1997 ___________________________________________ ___________________________________________ IMPORTANT: Please date and sign this Proxy. If the stock is held jointly, signature should include both names. Executors, administrators, trustees, guardians, and others signing in a representative capacity should give their full title as such. FOR VOYAGEUR FUNDS VOTING ON PROPOSALS 1, 4 AND 6: [INTERNATIONAL EQUITY FUND, NATIONAL INSURED TAX FREE FUND, NATIONAL LIMITED TERM TAX FREE FUND AND NATIONAL TAX FREE FUND] THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT The undersigned appoints _______________________________, ____________________________, and _______________________________________, and each of them, with power to act without the other and with the right of substitution in each, the proxies of the undersigned to vote all shares of ________________ [name of Voyageur Fund] (the "Fund"), held by the undersigned at a special meeting of shareholders of the Fund to be held on April 11, 1997, and at any adjournments thereof, with all the powers the undersigned would possess if present in person. All previous proxies given with respect to the meeting are revoked. THE PROXIES ARE INSTRUCTED: 1. To vote: ______FOR all nominees listed below (except as marked to the contrary below) ______WITHHOLD AUTHORITY to vote for all nominees listed below NOMINEES: Walter P. Babich, Anthony D. Knerr, Ann R. Leven, W. Thacher Longstreth, Thomas F. Madison, Jeffrey J. Nick, Charles E. Peck and Wayne A. Stork (Instruction: To withhold authority to vote for any individual nominee, write that nominee's name on the line provided below.) _______________________________________________________________________________ 4. To vote: FOR __________ AGAINST __________ approval of the liquidation of the Fund and the distribution of the Fund's net assets to shareholders. 6. To vote: FOR __________ AGAINST __________ ABSTAIN __________ ratification of the selection of _______________________ as independent public accountants for the Fund. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the annual meeting or any adjournments or postponements thereof. THIS PROXY WILL BE VOTED AS INSTRUCTED ON THE ABOVE MATTERS. IT IS UNDERSTOOD THAT, IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED "FOR" ALL ITEMS. UPON ALL OTHER MATTERS THE PROXIES SHALL VOTE AS THEY DEEM IN THE BEST INTERESTS OF THE FUND. RECEIPT OF NOTICE OF MEETING AND PROXY STATEMENT IS ACKNOWLEDGED BY YOUR EXECUTION OF THIS PROXY. SIGN, DATE, AND RETURN IN THE ADDRESSED ENVELOPE--NO POSTAGE REQUIRED. PLEASE MAIL PROMPTLY TO SAVE THE FUND FURTHER SOLICITATION EXPENSE. Dated: ______________________________, 1997 ___________________________________________ ___________________________________________ IMPORTANT: Please date and sign this Proxy. If the stock is held jointly, signature should include both names. Executors, administrators, trustees, guardians, and others signing in a representative capacity should give their full title as such.DATED.
Vote On Directors For Withhold For All 1. To elect the following nominees as Directors or Trustees of the Company All All Except 01) JEFFREY J. NICK 06) ANN R. LEVEN 02 WAYNE A. STORK 07) JAN R. YOEMANS _______________________________________________ 03) WALTER P. BABICH 08) THOMAS F. MADISON To withhold authority to vote, "For All Except" 04) ANTHONY D. KNERR 09) CHARLES E. PECK and write the nominee's number on the line above. Vote On Proposals For Against Abstain 2. To approve the redesignation of the Fund's 4G. To redesignate all current fundamental investment objective from fundamental to non- investment restrictions as non-fundamental fundamental 3. To approve a change in the Fund's fundamental policy concerning diversification of investments. 4. To approve standardized fundamental investment 5. To approve a new investment management restrictions for the Fund (proposal involves agreement for the Fund separate votes on sub-proposals 3A-3G) 4A. To adopt a new fundamental investment 6. To approve a new sub-advisory agreement restriction concerning concentration of the for the Fund Fund's investments in the same industry 4B. To adopt a new fundamental investment 7. To ratify the selection of Ernst & Young LLP, as restriction concerning borrowing money and independent auditors for the Company issuing senior securities 4C. To adopt a new fundamental investment 8. To approve the restructuring of the Company restriction concerning underwriting from a Minnesota Corporation into a Delaware 4D. To adopt a new fundamental investment Business Trust restriction concerning investments in real estate PLEASE DATE AND SIGN NAME OR NAMES BELOW AS 4E. To adopt a new fundamental investment PRINTED ABOVE TO AUTHORIZE THE VOTING OF YOUR restriction concerning investments in SHARES AS INDICATED ABOVE, WHER SHARES ARE commodities REGISTERED WITH JOINT OWNERS SHOULD SIGN. 4F. To adopt a new fundamental investment PERSONS SIGNING AS EXECUTOR, ADMINISTRATOR, restriction concerning lending by the Fund TRUSTEE OR OTHER REPRESENTATIVE SHOULD GIVE FULL TITLE AS SUCH. ----------------------------------------------- ------------------------------------------------- Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date