<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 2-57791
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 34 /X/
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AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 34
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DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
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(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 751-2923
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George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
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(Name and Address of Agent for Service)
Approximate Date of Public Offering: April 29, 1995
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
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X on April 29, 1995 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)
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on (date) pursuant to paragraph (a) of Rule 485.
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Registrant has registered an indefinite amount of securities
under the Securities Act of 1933 pursuant to Section 24(f)
of the Investment Company Act of 1940. The Rule 24f-2 Notice
for Registrant's most recent fiscal year was filed on April 27, 1995.
<PAGE> 2
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
--- C O N T E N T S ---
This Post-Effective Amendment No. 34 to Registration File No. 2-57791
includes the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectus
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE> 3
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
CROSS-REFERENCE SHEET
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PART A
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Item No. Description Page No.
- -------- ----------- --------
1 Cover Page............................................ 5
2 Synopsis.............................................. 7
3 Condensed Financial Information....................... 11
4 General Description of Registrant..................... 36, 14
5 Management of the Trust............................... 33
6 Capital Stock and Other Securities.................... 36
7 Purchase of Securities Being Offered.................. 19
8 Redemption or Repurchase.............................. 27
9 Legal Proceedings..................................... None
PART B
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10 Cover Page............................................ 38
11 Table of Contents..................................... 39
12 General Information and History....................... 90
13 Investment Objectives and Policies.................... 41
14 Management of the Registrant.......................... 79
15 Control Persons and Principal Holders of Securities... 81
16 Investment Advisory and Other Services................62, 79, 90
<PAGE> 4
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
CROSS-REFERENCE SHEET
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PART B
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(Continued)
Item No. Description Page No.
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17 Brokerage Allocation.................................. 56
18 Capital Stock and Other Securities.................... 92
19 Purchase, Redemption and Pricing of Securities
Being Offered.........................................58, 71, 70
20 Tax Status............................................ 78
21 Underwriters.......................................... 90
22 Calculation of Performance Data....................... 48
23 Financial Statements.................................. 95
PART C
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24 Financial Statements and Exhibits..................... 96
25 Persons Controlled by or under Common
Control with Registrant............................. 98
26 Number of Holders of Securities....................... 98
27 Indemnification....................................... 98
28 Business and Other Connections of Investment Adviser.. 98
29 Principal Underwriters................................ 103
30 Location of Accounts and Records...................... 108
31 Management Services................................... 108
32 Undertakings.......................................... 108
<PAGE> 5
TAX-FREE PENNSYLVANIA FUND PROSPECTUS
A CLASS SHARES April 29, 1995
B CLASS SHARES
1818 Market Street, Philadelphia, Pa 19103
For Prospectus and Performance: Nationwide 800-523-4640
Philadelphia 215-988-1333
Information on Existing Accounts: (Shareholders Only) Nationwide 800-523-1918
Philadelphia 215-988-1241
Dealer Services: (BROKER/DEALERS ONLY) Nationwide 800-362-7500
Philadelphia 215-988-1050
DMC Tax-Free Income Trust-Pennsylvania (which is known and does business as
Tax-Free Pennsylvania Fund) (the "Trust") is a professionally-managed mutual
fund. The Trust currently offers two classes of shares (collectively, the
"Classes"): Tax-Free Pennsylvania Fund A Class ("Class A Shares") and Tax-Free
Pennsylvania Fund B Class ("Class B Chares"). The Trust's objective is to seek
a high level of current interest income exempt from federal income tax and
Pennsylvania state and local taxes, consistent with preservation of capital.
Class A Shares may be purchased at the public offering price, which is
equal to the next determined net asset value per share, plus a front-end
sales charge, and Class B Shares may be purchased at a price equal to the
next determined net asset value per share. The Class A Shares are subject to
a maximum front-end sales charge of 4.75% and annual 12b-1 Plan expenses. The
Class B Shares are subject to a contingent deferred sales charge ("CDSC")
which may be imposed on redemptions made within six years of purchase and
12b-1 Plan expenses which are higher than those to which Class A Shares are
subject and are assessed against the Class B Shares for no longer than
approximately eight years after purchase. See Summary of Expenses, and
Automatic Conversion of Class B Shares under Buying Shares. These
alternatives permit an investor to choose the method of purchasing shares
that is most beneficial given the amount of the purchase, the length of time
the investor expects to hold the shares and other circumstances. See Buying
Shares.
The minimum initial investment for each of the Classes is $1,000.
Subsequent investments must be at least $25 with respect to the Class A
Shares and $100 with respect to the Class B Shares. Class B Shares are also
subject to a maximum purchase limitation of $250,000. The Trust will
therefore reject any order for purchase of more than $250,000 of Class B
Shares. See Buying Shares.
<PAGE> 6
This Prospectus sets forth information that you should read and consider
before you invest. Please retain it for future reference. Part B of the
Trust's registration statement, dated April 29, 1995, as it may be amended
from time to time, contains additional information about the Trust and has
been filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is available, without
charge, by writing to Delaware Distributors, L.P. at the above address or by
calling the above numbers. The Trust's financial statements appear in its
Annual Report, which will accompany any response to requests for Part B.
TABLE OF CONTENTS
Cover Page................................ 1
Synopsis.................................. 2
Summary of Expenses....................... 3
Financial Highlights...................... 4
Investment Objective and Policies
Suitability............................. 6
Investment Strategy..................... 6
The Delaware Difference
Plans and Services...................... 9
Buying Shares.............................. 11
Redemption and Exchange.................... 18
Dividends and Distributions................ 21
Taxes...................................... 22
Calculation of Offering Price and
Net Asset Value Per Share............... 24
Management of the Trust.................... 24
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL
FUNDS CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE
TRUST ARE NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY
CREDIT UNION, ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND
INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF
THE TRUST ARE NOT BANK OR CREDIT UNION DEPOSITS.
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1
<PAGE> 7
SYNOPSIS
Capitalization
The Trust has an unlimited authorized number of shares of beneficial
interest with no par value allocated to each Class.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") is the investment manager
for the Trust. The Manager or its affiliate, Delaware International Advisers
Ltd., manages the other funds in the Delaware Group. Delaware Distributors,
L.P. (the "Distributor") is the national distributor for the Trust and for
all of the other mutual funds in the Delaware Group. Delaware Service
Company, Inc. (the "Transfer Agent") is the shareholder servicing, dividend
disbursing and transfer agent for the Trust and for all of the other mutual
funds in the Delaware Group. See Management of the Trust.
Sales Charge
The price of the Class A Shares offered by this Prospectus includes a
maximum front-end sales charge of 4.75% of the offering price, which is
equivalent to 5.01% of the amount invested, reduced on certain transactions
of at least $100,000 but under $1,000,000. For purchases of $1,000,000 or
more, the front-end sales charge is eliminated. Such shares are also subject
to annual 12b-1 Plan expenses.
The price of the Class B Shares is equal to the net asset value per share.
Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed within
two years of purchase; (ii) 3% if shares are redeemed during the third or
fourth year following purchase; (iii) 2% if shares are redeemed during
the fifth year following purchase; and (iv) 1% if shares are redeemed during
the sixth year following purchase. Class B Shares are also subject to annual
12b-1 Plan expenses which are higher than those to which Class A Shares are
subject and which are assessed against the Class B Shares for no longer than
approximately eight years after purchase. See Buying Shares and Automatic
Conversion of Class B Shares thereunder; and Distribution (12b-1) and Service
under Management of the Trust.
Minimum Investment
The minimum initial investment for each of the Classes is $1,000 and
subsequent investments must be at least $25 for the Class A Shares and $100
for the Class B Shares. Class B Shares are also subject to a maximum purchase
limitation of $250,000. See Buying Shares.
Investment Objective
The objective of the Trust is to seek a high level of current interest
income exempt from federal income tax and Pennsylvania state and local taxes,
consistent with preservation of capital. Although exempt from regular federal
income tax, interest paid on certain types of municipal obligations is deemed
to be a preference item under federal tax law and is subject to the federal
alternative minimum tax. Up to 20% of the Trust's net assets may be invested
in bonds, the income from which is subject to the federal alternative minimum
tax. See Investment Objective and Policies.
<PAGE> 8
Open-End Investment Company
The Trust, a Pennsylvania business trust organized on November 23, 1976, is
an open-end management investment company, commonly known as a mutual fund.
The Trust's portfolio of assets is nondiversified for purposes of the
Investment Company Act of 1940. See Shares under Management of the Trust.
Special Considerations
The Trust is a nondiversified investment company under the Investment
Company Act of 1940 and may be subject to greater risks than if the Trust
were diversified. See Diversification and Special Considerations Relating to
Pennsylvania Tax-Exempt Securities under Investment Strategy.
Investment Management Fees
The Manager furnishes investment management services to the Trust, subject
to the supervision and direction of the Board of Trustees. Under the
Investment Management Agreement, the annual compensation is equal to
.60% on the first $500 million of average daily net assets of the Trust,
.575% on the next $250 million and .55% on the average daily net
assets in excess of $750 million, less a proportionate share of all trustees'
fees paid to the unaffiliated trustees by the Trust. See Management of the
Trust.
Redemption and Exchange
The Class A Shares of the Trust are redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request. Neither
the Trust nor the Distributor assesses a charge for redemptions or exchanges
of Class A Shares, except for certain redemptions of such shares purchased at
net asset value, which may be subject to a contingent deferred sales charge
if such purchase triggered the payment of a dealer's commission. The Class B
Shares of the Trust are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request, less, in the
case of redemptions, any applicable CDSC. Neither the Trust nor the
Distributor assesses any additional charges for redemptions or exchanges of
the Class B Shares. See Redemption and Exchange.
2
<PAGE> 9
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to Class A and Class B Shares follows:
Class A Class B
Shareholder Transaction Expenses Shares Shares
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Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................ 4.75% None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)................ None None
Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, whichever is lower).. None* 4.00%*
Redemption Fees...................................... None** None**
Annual Operating Expenses Class A Class B
(as a percentage of average daily net assets) Shares Shares
- --------------------------------------------------------------------------
Management Fees...................................... 0.58% 0.58%
12b-1 Plan Expenses
(including service fees)........................... 0.17%***+ 1.00%++
Other Operating Expenses............................. 0.15% 0.15%++
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Total Operating Expenses........................... 0.90%*** 1.73%
====== ======
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in each Class will bear directly
or indirectly. *With respect to the Class A Shares, purchases of $1 million
or more may be made at net asset value; however, if in connection with any
such purchase, certain dealer commissions are paid to financial advisers
through whom such purchases are effected, a contingent deferred sales charge
of 1% will be imposed in the event of certain redemptions wthin 12 months of
purchase ("Limited CDSC"). The Class B Shares are subject to a CDSC of: (i)
4% if shares are redeemed within two years of purchase; (ii) 3% if shares are
redeemed during the third or fourth year following purchase; (iii) 2% if
shares are redeemed during the fifth year following purchase; (iv) 1% if
shares are redeemed during the ixth year following purchase; and (v) 0%
thereafter. See Contingent Deferred Sales Charge for Certain Purchases of
Class A Shares Made at Net Asset Value under Redemption and Exchange and
Deferred Sales Charge Alternative--Class B Shares under Buying Shares.
**CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire. ***The actual 12b-1 Plan expenses to be paid
and, consequently, the Total Operating Expenses of the Class A Shares, may be
somewhat more (but the 12b-1 Plan expenses may be no more than .30%) or
somewhat less (but the 12b-1 Plan expenses may be no less than .10%) because
of the formula adopted by the Board of Trustees for use in calculating the
12b-1 Plan expenses beginning June 1, 1992. See Distribution (12b-1) and
Service. +Class A Shares and Class B Shares are subject to separate 12b-1
Plans. Long-term shareholders may pay more than the economic equivalent of
the maximum front-end sales charges permitted by rules of the National
Association of Securities Dealers, Inc. (the "NASD"). See Distribution
(12b-1) and Service. ++"Other Operating Expenses" for Class B Shares are
estimates based upon the actual expenses incurred by the Class A Shares for
its fiscal year ended February 28, 1995.
<PAGE> 10
The following example illustrates the expenses that an investor would pay
on a $1,000 investment over various time periods assuming (1) a 5% annual
rate of return and (2) redemption at the end of each time period. As noted in
the table above, the Trust charges no redemption fees with respect to the
Class A Shares and, if shares are redeemed within six years after purchase,
the Trust charges a CDSC with respect to the Class B Shares.
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $56(1) $75 $95 $153 Class B Shares $58 $84 $114 $182(2)
</TABLE>
An investor would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $56 $75 $95 $153 Class B Shares $18 $54 $94 $182(2)
</TABLE>
(1) Under certain circumstances, a Limited CDSC, which has not been reflected
in this calculation, may be imposed in the event of certain redemptions
within 12 months of purchase. See Contingent Deferred Sales Charge for
Certain Purchases of Class A Shares Made at Net Asset Value under
Redemption and Exchange.
(2) At the end of no more than approximately eight years after purchase,
Class B Shares will be automatically converted into Class A Shares. The
example above assumes conversion of Class B Shares at the end of year
eight. However, the conversion may occur as late as three months after
the eighth anniversary of purchase, during which time the higher 12b-1
Plan fees payable by Class B Shares will continue to be assessed. See
Automatic Conversion of Class B Shares under Buying Shares for a
description of the automatic conversion feature. Years nine and ten
reflect expenses of the Class A Shares. The conversion will constitute
a tax-free exchange for federal income tax purposes. See Taxes.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
3
<PAGE> 11
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements
of DMC Tax-Free Income Trust-Pennsylvania and have been audited by Ernst &
Young LLP, independent auditors. The data should be read in conjunction with
the financial statements, related notes, and the report of Ernst & Young LLP
covering such financial information and highlights, all of which are
incorporated by reference into Part B. Further information about the Trust's
performance is contained in the Annual Report to shareholders. A copy of the
Trust's Annual Report (including the report of Ernst & Young LLP) may be
obtained from the Trust upon request at no charge.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Class A Shares
------------------------------------------------------------------------
Year Ended
2/28/95 2/28/94 2/28/93(1) 2/29/92 2/28/91 2/28/90
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $8.610 $8.630 $8.110 $7.800 $7.800 $7.700
Income From Investment Operations
- ---------------------------------
Net Investment Income............................. 0.494 0.496 0.514 0.532 0.542 0.554
Net Gains or Losses on Securities
(both realized and unrealized).................. (0.430) (0.020) 0.520 0.310 -- 0.100
------ ------ ------ ------ ------ ------
Total From Investment Operations................ 0.064 0.476 1.034 0.842 0.542 0.654
------ ------ ------ ------ ------ ------
Less Distributions
- ------------------
Dividends (from net investment income)............ (0.494) (0.496) (0.514) (0.532) (0.542) (0.554)
Distributions (from capital gains)................ -- -- -- -- -- --
Returns of Capital................................ -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total Distributions............................. (0.494) (0.496) (0.514) (0.532) (0.542) (0.554)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period.................... $8.180 $8.610 $8.630 $8.110 $7.800 $7.800
====== ====== ====== ====== ====== ======
- -------------------------------------------------------------------------------------------------------------------------------
Total Return(2)................................... 0.91% 5.64% 13.20% 11.11% 7.24% 8.67%
- ---------------
- -------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)......... $976,313 $1,026,903 $940,616 $766,625 $668,345 $613,223
Ratio of Expenses to Average Daily Net Assets..... 0.90% 0.88% 0.83% 0.72% 0.72% 0.73%
Ratio of Net Investment Income to Average Daily
Net Assets...................................... 6.03% 5.70% 6.18% 6.65% 7.00% 7.03%
Portfolio Turnover Rate........................... 18% 14% 11% 7% 31% 22%
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
------------------------------------------------
Class A Shares
------------------------------------------------
Year Ended
2/28/89 2/29/88 2/28/87 2/28/86
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $7.730 $8.210 $7.850 $6.960
Income From Investment Operations
- ---------------------------------
Net Investment Income............................. 0.554 0.559 0.584 0.593
Net Gains or Losses on Securities
(both realized and unrealized).................. (0.030) (0.480) 0.360 1.013
------ ------ ------ ------
Total From Investment Operations................ 0.524 0.079 0.944 1.606
------ ------ ------ ------
Less Distributions
- ------------------
Dividends (from net investment income)............ (0.554) (0.559) (0.584) (0.716)
Distributions (from capital gains)................ -- -- -- --
Returns of Capital................................ -- -- -- --
------ ------ ------ ------
Total Distributions............................. (0.554) (0.559) (0.584) (0.716)
------ ------ ------ ------
Net Asset Value, End of Period.................... $7.700 $7.730 $8.210 $7.850
====== ====== ====== ======
- ---------------------------------------------------------------------------------------------------------
Total Return(2)................................... 7.08% 1.39% 12.57% 24.57%
- ---------------
- ---------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)......... $534,287 $472,648 $419,768 $186,394
Ratio of Expenses to Average Daily Net Assets..... 0.77% 0.78% 0.75% 0.77%
Ratio of Net Investment Income to Average Daily
Net Assets...................................... 7.24% 7.38% 7.20% 8.55%
Portfolio Turnover Rate........................... 8% 31% 36% 52%
</TABLE>
- ------------
(1)Reflects 12b-1 distribution expenses beginning June 1, 1992.
(2)Does not reflect the maximum sales charge of 4.75% nor the 1% Limited CDSC
that would apply in the event of certain redemptions within 12 months of
purchase. See Contingent Deferred Sales Charge for Certain Purchases of
Class A Shares at Net Asset Value.
4
<PAGE> 13
FINANCIAL HIGHLIGHTS
(Continued)
<TABLE>
<CAPTION>
Class B Shares
--------------
Period
5/2/94(1)
through
2/28/95
<S> <C>
Net Asset Value, Beginning of Period. . . . . . . . $8.310
Income From Investment Operations
- ---------------------------------
Net Investment Income . . . . . . . . . . . . . . . 0.353
Net Gains or Losses on Securities
(both realized and unrealized). . . . . . . . . . (0.130)
------
Total From Investment Operations. . . . . . . . . 0.223
------
Less Distributions
- ------------------
Dividends (from net investment income). . . . . . . (0.353)
Distributions (from capital gains). . . . . . . . . --
Returns of Capital. . . . . . . . . . . . . . . . . --
------
Total Distributions . . . . . . . . . . . . . . . (0.353)
------
Net Asset Value, End of Period. . . . . . . . . . . $8.180
======
- ------------------------------------------------------------------------
Total Return(2) . . . . . . . . . . . . . . . . . . 2.79%(1)
- --------------
- ------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted) . . . . . $10,239
Ratio of Expenses to Average Daily Net Assets . . . 1.73%(1)
Ratio of Net Investment Income to Average Daily
Net Assets . . . . . . . . . . . . . . . . . . . . 5.20%(1)
Portfolio Turnover Rate. . . . . . . . . . . . . . . 18%
</TABLE>
- ------------
(1)Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2)Does not reflect the contingent deferred sales charge which varies from
1%-4% depending upon the holding period.
5
<PAGE> 14
INVESTMENT OBJECTIVE
AND POLICIES
The objective of the Trust is to seek as high a level of current interest
income exempt from federal income tax and certain Pennsylvania state and
local taxes as is available from municipal bonds and as is consistent with
preservation of capital. This objective cannot be changed without shareholder
approval.
The Trust will invest primarily in municipal bonds and notes that are
exempt from federal and Pennsylvania income taxes. Municipal securities are
debt obligations issued by state and local governments to raise funds from
various public purposes such as hospitals, schools and general operating
expenses.
The Trust will invest its assets in securities of varying maturities,
without limitation, depending on market conditions. Typically, the remaining
maturity of municipal bonds will range between five and 30 years. The Manager
will attempt to adjust the maturity structure of the portfolio to provide a
high level of tax-exempt income consistent with preservation of capital.
SUITABILITY
The Trust may be suitable for the longer-term investor who is a resident
subject to Pennsylvania income tax. The investor should be willing to accept
the risks of investment in municipal bonds in general and Pennsylvania bonds
in particular. The net asset value of the Trust's shares can generally be
expected to fluctuate inversely to changes in interest rates.
INVESTMENT STRATEGY
Tax-Exempt Investments
The Trust invests primarily in municipal securities paying interest income
which, in the opinion of the bond issuer's counsel, is exempt from federal
and Pennsylvania income taxes. These securities include debt obligations of
the Commonwealth of Pennsylvania and its political subdivisions, agencies,
authorities and instrumentalities and also other qualifying issuers such as
Puerto Rico and the Virgin Islands.
The Trust will, as a fundamental policy, invest at least 80% of its net
assets in the types of tax-exempt securities listed above. Many of the
securities in which the Trust invests generate income which is exempt from
Pennsylvania state or local income taxes. In order to obtain the tax benefit
of these securities for pass-through to shareholders, the Trust will invest
in securities for income rather than trading for profit. However, the Trust
may sell securities held in its portfolio and, as a result, realize capital
gain or loss, in order to eliminate unsafe investments and investments not
consistent with the preservation of the capital or the tax status of the
Trust; honor redemption orders, meet anticipated redemption requirements, and
negate gains from discount purchases; reinvest the earnings from portfolio
securities in like securities; or defray normal administrative expenses. The
Trust will generally not exceed a portfolio turnover rate of 100%.
The Trust may invest up to 20% of its net assets in bonds the income from
which is subject to the federal alternative minimum tax. Although exempt from
regular federal income tax, interest paid on certain types of municipal
obligations (commonly referred to as "private activity" or "private purpose"
bonds) is deemed to be a preference item under federal tax law and is subject
to the federal alternative minimum tax. See Other Considerations.
Quality Restrictions
The Trust intends to invest at least 80% of its portfolio in debt
obligations that are rated in the top four grades by Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") at the
time of purchase. The Trust may include in the 80% securities that have not
been rated, but which in the opinion of the Manager are comparable in quality
to the top four grades. The fourth grade is considered medium grade and may
have speculative characteristics. The Trust may invest up to 20% of its
assets in securities with a rating lower than the top four grades and in
comparable unrated securities. These securities are speculative and may
involve greater risks and have higher yields. Part B sets forth descriptions
of Moody's and S&P ratings.
Some municipal bonds are backed by the issuer's full faith and credit while
others are secured by a specific revenue source and are not backed by any
general taxing power. The Trust will invest in both types.
6
<PAGE> 15
Diversification
The Trust is a nondiversified investment company. This means that the
Manager has the flexibility to invest as much as 50% of the Trust's assets in
as few as two issuers provided no single issuer accounts for more than 25% of
the portfolio. The remaining 50% of the portfolio must be diversified so that
no more than 5% of it is invested in the securities of a single issuer. The
Trust may invest without limitation in U.S. Government and government agency
securities backed by the U.S. Government, its agencies or instrumentalities.
Because the Trust my invest its assets in fewer issuers, the value of Trust
shares may increase or decrease more rapidly than if the Trust were fully
diversified. In the event the Trust invests more than 5% of its assets in a
single issuer, it would be affected more than a fully-diversified fund if
that issuer encounters difficulties in satisfying its financial obligations.
Various municipal issuers may obtain insurance for their obligations. At
different times a substantial portion of the Trust's portfolio may consist of
municipal bonds that are insured by a single insurance company. In the event
of a default, the insurer is required to make payments of interest and
principal when due to the bondholders. There is no assurance that the
insurance company will meet its obligations. The Manager does not look to the
creditworthiness of a private insurer. Instead the Manager reviews the
creditworthiness of the actual issuer and its ability to pay interest and
principal. However, because insured obligations are typically rated in the
top grades by Moody's and S&P, they will usually qualify for investment under
the ratings standards of the Trust described above.
Other Considerations
The Trust may invest without limit in short-term, tax-free instruments such
as tax-exempt commercial paper and general obligation, revenue and project
notes, as well as variable and floating rate demand obligations.
Under abnormal conditions, the Trust may invest in taxable instruments for
temporary defensive purposes. These would include instruments of the U.S.
Government, its agencies and instrumentalities.
The Trust may invest in "when-issued securities." When-issued securities
involve commitments to buy a new issue with settlement up to 45 days later.
During the time between the commitment and settlement the Trust does not
accrue interest, but the market value may fluctuate. This can result in the
Trust's share value increasing or decreasing. If the Trust invests in
securities of this type, it will maintain a segregated account to pay for
them and mark them to market daily.
The Tax Reform Act of 1986 limits the amount of new "private purpose" bonds
that each state can issue and subjects interest income from these bonds to
the federal alternative minimum tax. "Private purpose" bonds are issues whose
proceeds are used to finance certain nongovernment activities, and could
include some types of industrial revenue bonds such as privately-owned sports
and convention facilities. The Act also makes the tax-exempt status of
certain bonds depend on the issuer's compliance with specific requirements
after the bonds are issued.
The Trust intends to seek to achieve a high level of tax-exempt income.
However, if the Trust invests in newly-issued "private purpose" bonds, a
portion of the Trust's distributions would be subject to the federal
alternative minimum tax applicable to certain shareholders. The Trust may
invest up to 20% of its assets in bonds the income from which is subject to
the federal alternative minimum tax.
While the Trust is permitted, it normally does not borrow money or invest
in repurchase agreements. The Trust will not normally purchase investment
securities while it has an outstanding borrowing.
The Trust may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A permits many
privately placed and legally restricted securities to be freely traded among
certain institutional buyers such as the Trust. The Trust may invest no more
than 10% of the value of it net assets illiquid securities.
7
<PAGE> 16
While maintaining oversight, the Board of Trustees has delegated to the
Manager the day-to-day functions of determining whether or not individual
Rule 144A Securities are liquid for purposes of the Trust's 10% limitation on
h*vestments in illiquid assets. The Board has instructed the Manager to
consider the fllowing factors in determining the liquidity of a Rule 144A
Security: (i) the frequency of trades and trading volume for the security;
(ii) whether at least three dealers are willing to purchase or sell the
security and the number of potential purchasers; (iii) whether at least two
dealers are making a market in the security; (iv) the nature of the security
and the nature of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was previously
determined to be liquid is no longer liquid and, as a result, the Trust's
holdings of illiquid securities exceed the Trust's 10% limit on investments
in such securities, the Manager will determine what action shall be taken to
ensure that the Trust continues to adhere to such limitation.
Part B sets forth other more specific investment restrictions and
descriptions of Moody's and S&P ratings. A brief discussion of those factors
that materially affected the Trust's performance during its most recently
completed fiscal year appears in the Trust's Annual Report.
Municipal Leases
The Trust may also invest in municipal lease obligations primarily through
certificates of participation ("COPs"). As with its other investments, the
Trust expects that its investments in municipal lease obligations will
consist of such obligations which are exempt from regular federal income
taxes. COPs, which are widely used by state and local governments to finance
the purchase of property, function much like installment purchase agreements.
For example, a COP may be created when long-term lease revenue bonds are
issued by a governmental corporation to pay for the acquisition of property
or facilities which are then leased to a municipality. The payments made by
the municipality under the lease are used to repay interest and principal on
the bonds issued to purchase the property. Once these lease payments are
completed, the municipality gains ownership of the property for a nominal
sum. The lessor is, in effect, a lender secured by the property being leased.
This lease format is generally not subject to constitutional limitations on
the issuance of state debt and COPs enable a governmental issuer to increase
government liabilities beyond constitutional debt limits.
A feature which distinguishes COPs from municipal debt is that the lease
which is the subject of the transaction typically contains a
"nonappropriation" or "abatement" clause. A nonappropriation clause provides
that, while the municipality will use its best efforts to make lease
payments, the municipality may terminate the lease without penalty if the
municipality's appropriating body does not allocate the necessary funds.
Substantially all of the COPs purchased by the Trust are expected to contain a
"nonappropriation" or "abatement" clause. Local administrations, being faced
with increasingly tight budgets, therefore, have more discretion to curtail
payments on traditionally funded debt obligations. If the government lessee
does not appropriate sufficient monies to make lease payments, the lessor, or
its agent, is typically entitled to repossess the property. In most cases,
however, the private sector value of the property will be less than the
amount the government lessee was paying.
While the risk of nonappropriation is inherent to COP financing, the Trust
believes that this risk is mitigated by its policy of investing only in COPs
rated within the four highest rating categories of Moody's, S&P or Fitch
Investors Service, Inc., or in unrated COPs believed to be of comparable
quality. Criteria considered by the rating agencies and the Manager in
assessing such risk include the issuing municipality's credit rating, the
importance of the leased property to the municipality and the term of the
lease compared to the useful life of the leased property.
Special Considerations Relating to Pensylvania Tax-Exempt Securities
The Trust concentrates its investments in the Commonwealth of Pennsylvania.
Therefore, there are risks associated with the Trust that would not be
present if the Trust were diversified nationally. These risks include any new
legislation that would adversely affect Pennsylvania tax-exempt obligations,
regional or local economic conditions that could adversely affect these
obligations, and differing levels of supply and demand for municipal bonds
particular to the Commonwealth of Pennsylvania.
See Part B for a more detailed discussion of the risks attendant to
Pennsylvania obligations.
8
<PAGE> 17
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
(Philadelphia 215-988-1333)
Trust Information; Literature;
Price, Yield and Performance Figures
Shareholder Service Center
800-523-1918
(Philadelphia 215-988-1241)
Information on Existing Regular Investment
Accounts and Retirement Plan Accounts;
Wire Investments; Wire Liquidations;
Telephone Liquidations; Telephone Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Shareholder Services
During business hours, you can call the Trust's Shareholder Service Center.
The representatives can answer any of your questions about your account, the
Trust, the various service features and other funds in the Delaware Group.
Performance Information
During business hours, you can call the Investor Information Center to get
current yield information. Current yield and total return information may
also be included in advertisements and information given to shareholders.
Yields are computed on an annual basis over a 30-day period.
Delaphone Service
Delaphone is an account inquiry service for investors with Touch-Tone(R)
phone service. It enables you to get information on your account faster than
the mailed statements and confirmations seven days a week, 24 hours a day.
Statements and Confirmations
You will receive quarterly statements of your account as well as
confirmations of all investments and redemptions. You should examine
statements and confirmations immediately and promptly report any discrepancy
by calling the Shareholder Service Center.
Duplicate Confirmations
If your investment dealer is noted on your investment application, we will
send your dealer a duplicate confirmation. This makes it easier for your
investment dealer to help you manage your investments.
Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your account. Also, you may be
permitted to invest your distributions in certain other funds in the Delaware
Group, subject to the exceptions noted below as well as the eligibility and
minimum purchase requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of the Trust or other
Delaware Group funds may be effected without a front-end sales charge. Class
B Shares of the Trust or other Delaware Group funds acquired through
reinvestments of distributions will not be subject to a contingent deferred
sales charge if those shares are later redeemed. See Automatic Conversion of
Class B Shares under Buying Shares for information concerning the automatic
conversion of Class B Shares acquired by reinvesting dividends.
Holders of Class A Shares of the Trust may not reinvest their distribtions
in the Class B Shares of any fund in the Delaware Group, including the Trust.
Holders of Class B Shares of the Trust may reinvest their distributions only
in the Class B Shares of the funds in the Delaware Group which offer that
class of shares (the "Class B Funds"). See Class B Funds under Buying Shares
for a list of the funds offerng Class B Shares. For more information about
reinvestments, please call the Shareholder Service Center.
9
<PAGE> 18
Exchange Privilege
The Exchange Privilege permits shareholders to exchange all or part of
their shares into shares of the other funds in the Delaware Group, subject to
the exceptions noted below as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus. Shareholders of Class B
Shares of the Trust are permitted to exchange all or part of their
Class B Shares only into the corresponding class of shares of the Class B
Funds, subject to the minimum purchase and other requirements set forth in
each Fund's prospectus. Exchanges are not permitted between Class A Shares and
Class B Shares of any of the funds of the Delaware Group. See Redemption and
Exchange.
Except as noted below, permissible exchanges can be made without payment of
a front-end sales charge or the imposition of a contingent deferred sales
charge at the time of the exchange, as applicable. Persons exchanging into
the Class A Shares from a fund in the Delaware Group offered without a
front-end sales charge may be required to pay the applicable front-end sales
charge. See Investing by Exchange under How to Buy Shares and Redemption and
Exchange.
See Redemption and Exchange for additional information on exchanges.
Wealth Builder Option
You may be permitted to elect to have amounts in your account automatically
invested in shares of other funds in the Delaware Group. Investments under
this feature are exchanges and are therefore subject to the same conditions
and limitations as other exchanges of Class A and Class B Shares.
See Redemption and Exchange.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature allows
the combining of Class A Shares and Class B Shares of the Trust that are
currently owned with the dollar amount of new purchases of Class A Shares for
a reduced front-end sales charge. Under the Combined Purchases Privilege,
this includes certain shares owned in certain other funds in the Delaware
Group. See Buying Shares.
Letter of Intention
With respect to Class A Shares, the Letter of Intention feature permits the
aggregation of purchases over a 13-month period to obtain a reduced front-end
sales charge. See Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits shareholders to reinvest
proceeds of Class A Shares redeemed, within one year from the redemption,
without a front-end sales charge. See Part B.
Financial Information about the Trust
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information
about the Trust's investments and performance. The Trust's fiscal year ends
on the last day of February.
10
<PAGE> 19
BUYING SHARES
Purchase Amounts
The minimum initial purchase for each of the Classes is $1,000. Subsequent
purchases must be $25 or more with respect to the Class A Shares and $100 or
more with respect to the Class B Shares. Class B Shares are also subject to a
maximum purchase limitation of $250,000.
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net asset
value per share, plus a sales charge which may be imposed, at the election of
the purchaser, at the time of the purchase with respect to Class A Shares
("front-end sales charge alternative") or on a contingent deferred basis with
respect to Class B Shares ("deferred sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares. Although Class A Shares incur a sales
charge when they are purchased, generally they are not subject to any sales
charge when they are redeemed, but are subject to annual 12b-1 Plan expenses
of up to a maximum of .30% of average daily net asset" of such shares. See Con-
tingent Deferred Sales Charge for Certain Purchases of Class A Shares Made at
Net Asset Value and Distribution (12b-1) and Service. Certain purchases of
Class A Shares qualify for reduced front-end sales charges. See Front-End
Sales Charge Alternative--Class A Shares, below.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares. Class B Shares do not incur a front-end
sales charge when they are purchased, but they are subject to a sales charge if
they are redeemed within six years of purchase and are subject to annual
12b-1 Plan expenses of up to a maximum of 1% (.25% of which are service fees
to be paid by the Trust to the Distributor, dealers or others for providing
personal service and/or maintaining shareholder accounts) of average daily net
assets of such shares for no longer than approximately eight years after
purchase. Class B Shares permit all of the investor's dollars to work from
the time the investment is made. The higher 12b-1 Plan expenses paid by Class
B Shares will cause such shares to have a higher expense ratio and to pay
lower dividends than those related to the Class A Shares. At the end of no
more than approximately eight years after purchase, the Class B Shares are
automatically converted into Class A Shares of the Trust. See Automatic
Conversion of Class B Shares. Such conversion will constitute a tax-free
exchange for federal income tax purposes. See Taxes.
The alternative purchase arrangements permit investors in the Trust to
choose the method of purchasing shares that is most beneficial given the
amount of their purchase, the length of time they expect to hold their shares
and other relevant circumstances. Investors should determine whether under
their particular circumstances it is more advantageous to incur a front-end
sales charge by purchasing Class A Shares or to have the entire initial
purchase price invested in the Trust with the investment thereafter being
subject to a CDSC, if shares are redeemed within six years of purchase, by
purchasing Class B Shares.
As an illustration, investors who qualify for significantly reduced
front-end sales charges on purchases of Class A Shares, as described below,
might elect the front-end sales charge alternative because similar sales
charge reductions are not available for purchases under the deferred sales
charge alternative. Moreover, shares acquired under the front-end sales
charge alternative are subject to annual 12b-1 Plan expenses of up to .30%,
whereas shares acquired under the deferred sales charge alternative are
subject to higher annual 12b-1 Plan expenses of 1% for no more than
approximately eight years after purchase. See Automatic Conversion of Class B
Shares. However, because front-end sales charges are deducted at the time of
purchase, such investors would not have all their funds invested initially.
Certain other investors might determine it to be more advantageous to have
all their funds invested initially, although they would be subject to a CDSC
for up to six years after purchase as well as annual 12b-1 Plan expenses of
1% until the shares are automatically converted into Class A Shares. The
12b-1 Plan distribution expenses with respect to the Class B Shares will be
offset to the extent any return is realized on the additional funds initially
invested under the deferred sales charge alternative. However, there can be
no assurance as to the return, if any, that will be realized on such
additional funds.
11
<PAGE> 20
For the distribution and related services provided to, and the expenses
borne on behalf of, the Trust, the Distributor and others will be paid, in
the case of the Class A Shares, from the proceeds of the front-end sales charge
and 12b-1 Plan fees and, in the case of the Class B Shares, from the proceeds
of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon redemption
within six years of purchase. Sales personnel may receive different
compensation for selling Class A or Class B Shares. INVESTORS SHOULD
UNDERSTAND THAT THE PURPOSE AND FUNCTION OF THE 12B-1 PLAN AND THE CDSC WITH
RESPECT TO THE CLASS B SHARES ARE THE SAME AS THOSE OF THE 12B-1 PLAN AND THE
FRONT-END SALES CHARGE WITH RESPECT TO THE CLASS A SHARES IN THAT THE FEES
AND CHARGES PROVIDE FOR THE FINANCING OF THE DISTRIBUTION OF THE RESPECTIVE
CLASSES. See 12b-1 Distribution Plans--Class A and Class B Shares.
Dividends paid by the Trust with respect to the Class A and Class B Shares,
to the extent any dividends are paid, will be calculated in the same manner
at the same time, on the same day and will be in the same amount, except that
the additional amount of 12b-1 Plan expenses relating to the Class B Shares
will be borne exclusively by such shares. See Calculation of Offering Price
and Net Asset Value Per Share. The shareholders of the Class A and Class B
Shares each have an exchange privilege by which they may exchange their Class
A Shares or Class B Shares for the Class A Shares or Class B Shares,
respectively,of certain other Delaware Group funds. See Exchange Privilege
under The Delaware Difference and Redemption and Exchange.
The NASD has adopted amendments to its Rules of Fair Practice relating to
investment company sales charges. The Fund and the Distributor intend to
operate in compliance with these rules with respect to both Class A and Class
B Shares.
Front-End Sales Charge Alternative--Class A Shares
The Class A Shares may be purchased at the offering price which reflects a
maximum front-end sales charge of 4.75%. See Calculation of Offering Price
and Net Asset Value Per Share. Lower front-end sales charges apply for larger
purchases. See the table below. The Class A Shares represent a proportionate
interest in the Trust's assets and are subject to annual 12b-1 Plan expenses.
See Distribution (12b-1) and Service under Management of the Trust.
Reduced Front-End Sales Charge
Purchases of $100,000 or more at the offering price carry a reduced
front-end sales charge as shown in the following table.
- ------------------------------------------------------------------------------
Front-End Sales Dealer's
Charge as % of Concession**
Amount of Purchase Offering Amount as % of
Price Invested Offering Price
- ------------------------------------------------------------------------------
Less than $100,000 4.75% 5.01% 4.00%
$100,000 but under $250,000 3.75 3.90 3.00
$250,000 but under $500,000 2.50 2.56 2.00
$500,000 but under $1,000,000* 2.00 2.04 1.60
*There is no front-end sales charge on purchases of $1 million or
more but, under certain limited circumstances, a 1% Limited
CDSC may apply with respect to Class A Shares.
- ------------------------------------------------------------------------------
<PAGE> 21
The Trust must be notified when a sale takes place which would qualify for the
reduced front-end sales charge on the basis of previous purchases and current
purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by the Trust. Such reduced
front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the
Distributor may reallow dealers up to the full front-end sales charge shown
above. In addition, certain dealers who enter into an agreement to provide
extra training and information on Delaware Group products and services and
who increase sales of Delaware Group funds may receive an additional
concession of up to .15% of the offering price. Dealers who receive 90% or
more of the sales charge may be deemed to be underwriters under the Securties
Act of 1933.
**Financial institutions or their affiliated brokers may receive an
agency transaction fee in the percentages set forth above.
- ------------------------------------------------------------------------------
For initial purchases of Class A Shares of $1,000,000 or more made on or
after June 1, 1993, a dealer's commission may be paid by the Distributor to
financial advisers through whom such purchases are effected in accordance with
the following schedule:
Dealer's Commission
-------------------
Amount of Purchase (as a percentage of amount purchased)
- ------------------
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
12
<PAGE> 22
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies may be aggregated with those of the Class A
Shares of the Trust. Financial advisers should contact the Distributor
concerning the applicability and calculation of the dealer's commission in
the case of combined purchases. Financial advisers also may be eligible for a
dealer's commission in connection with certain purchases made under a Letter
of Intention or pursuant to an investor's Right of Accumulation. The
Distributor also should be consulted concerning the availability of and
program for these payments.
An exchange from other Delaware Group funds will not qualify for payment of
the dealer's commission, unless such exchange is from a Delaware Group fund
with assets as to which a dealer's commission or similar payment has not been
previously paid. The schedule and program for payment of the dealer's
commission are subject to change or termination at any time by the
Distributor in its discretion.
Redemptions of Class A Shares purchased at net asset value may result in
the imposition of a Limited CDSC if the dealer's commission described above
was paid in connection with the purchase of those shares. See Contingent
Deferred Sales Charge for Certain Purchases of Class A Shares Made at Net
Asset Value under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings in the Class A Shares with your holdings in the
Class B Shares of the Trust and, except as noted below, shares of the other
funds in the Delaware Group, you can reduce the front-end sales charges of
any additional purchases of Class A Shares. Except for shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with ownership of
variable insurance products, shares of other funds which do not carry a
front-end sales charge or CDSC may not be included unless they were acquired
through an exchange from one of the other Delaware Group funds which carried
a front-end sales charge or CDSC.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.
It also permits you to use these combinations under a Letter of Intention.
This allows you to make purchases over a 13-month period and qualify the
entire purchase for a reduction in front-end sales charges on Class A Shares.
Combined purchases of $1,000,000 or more, including certain purchases made
pursuant to a Right of Accumulation or under a Letter of Intention, may
trigger the payment of a dealer's commission and the applicability of a
Limited CDSC. Investors should consult their financial advisers or the
Transfer Agent about the operation of these features. See Reduced Front-End
Sales Charge under Buying Shares.
Buying at Net Asset Value
Class A Shares of the Trust may be purchased at net asset value under the
Delaware Group Dividend Reinvestment Plan and, under certain circumstances,
the 12-Month Reinvestment Privilege and the Exchange Privilege. See The
Delaware Difference and Redemption and Exchange for additional informaion.
Purchases of Class A Shares may be made at net asset value by current and
former officers, trustees and employees and members of their immediate
families of the Manager, any affiliate, any of the funds in the Delaware
Group, certain of their agents and ref(stered representatives and employees
of authorized investment dealers and by employe benefit plans for such
entities. Individual purchases include retirement accounts and must be for
accounts in the name of the individual or a qualifying family member.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within
six months of a change of the registered representative's employment, if the
purchase is funded by proceeds from an investment where a front-end sales
charge has been assessed and the redemption of the investment did not result in
the imposition of a contingent deferred sales charge or other redemption
charge. Purchases of Class A Shares also may be made at net asset value by bank
employees that provide services in connection with agreements between the
bank and unaffiliated brokers or dealers concerning sales of Class A Shares.
Also, officers, directors and key employees of institutional clients of the
Manager or any of its affiliates may purchase Class A Shares at net asset
value. Moreover, purchases may be effected at net asset value for the benefit
of the clients of brokers, dealers and registered investment advisers
affiliated with a broker or dealer, if such broker, dealer or investment
adviser has entered into an agreement with the Distributor providing
specifically for the purchase of Class A Shares in connection with special
investment products, such as wrap accounts or similar fee based programs.
13
<PAGE> 23
Beginning December 1, 1994, Class A Shares of the Trust may be purchased at
net asset value within 90 days after a redemption of shares from a fund
outside the Delaware Group of funds provided that: 1) the redeemed shares
were purchased no more than five years before the proposed purchase of Class
A Shares of the Trust; and 2) a front-end sales charge was paid in connection
with the purchase of the redeemed shares or a contingent deferred sales
charge was paid upon their redemption.
The Trust must be notified in advance that an investment qualifies for
purchase at net asset value.
Deferred Sales Charge Alternative--Class B Shares
Class B Shares may be purchased at net asset value without the imposition
of a front-end sales charge. The Class B Shares are being sold without a
front-end sales charge so that the Trust will invest the full amount of the
investor's purchase payment. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own funds in an amount equal to no more than 4% of the
dollar amount purchased. As discussed below, however, Class B Shares are
subject to annual 12b-1 Plan expenses and, if shares are redeemed within six
years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for the distribution and related services provided to,
and the related expenses borne on behalf of, the Trust for the benefit of the
Class B Shares in connection with the sale of the Class B Shares, including
the compensation paid to dealers or brokers for selling Class B Shares.
Payments to the Distributor and others under the 12b-1 Plan relating to the
Class B Shares may be in an amount equal to no more than 1%. The combination
of the CDSC and the proceeds of the 12b-1 Plan fees facilitates the ability
of the Trust to sell the Class B Shares without a front-end sales charge
being deducted at the time of purchase.
Shareholders of the Class B Shares exercising the exchange privilege
described below will continue to be subject to the CDSC schedule of the Class
B Shares described in this Prospectus. Such schedule may be higher than the
CDSC shedule relating to the Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Except for shares acquired through a reinvestment of dividends, Class B
Shares held for eight years af er purchase are eligible for automatic
conversion into Class A Shares. The Trust wil effect conversions of Class B
Shares into Class A Shares only four times in any calendar year, on the last
business day of the second full week of March, June, September and December
(each, a "Conversion Date"). If the eighth anniversary after a purchase of
Class B Shares falls on a Conversion Date, an investor's Class B Shares will
be converted on that date. If the eighth anniversary occurs between
Conversion Dates, an investor's Class B Shares will be converted on the next
Conversion Date after such anniversary. Consequently, if a shareholder's
eighth anniversary falls on the day after a Conversion Date, that shareholder
will have to hold Class B Shares for as long as an additional three months
after the eighth anniversary after purchase before the shares will
automatically convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends will
convert to the corresponding Class A Shares of that fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B Shares of that fund not acquired through
dividend reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.
Contingent Deferred Sales Charge
Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below, charged as a percentage of the dollar
amount subject thereto. The charge will be assessed on an amount equal to the
lesser of the net asset value at the time of purchase of the shares being
redeemed or the net asset value of the shares at the time of redemption. For
purposes of this formula, the "net asset value at the time of purchase" will
be the net asset value at purchase of the Class B Shares of the Trust even if
those shares are later exchanged for Class B Shares of another Delaware Group
fund and, in the event of an exchange of the shares, the "net asset value of
such shares at the time of redemption" will be the net asset value of the
shares into which the shares have been exchanged. Accordingly, no CDSC will
be imposed on increases in net asset value above the initial purchase price.
In addition, no CDSC will be assessed on redemption of shares received upon
reinvestment of dividends or capital gains distributions.
14
<PAGE> 24
The following table sets forth the rates of the CDSC for the Class B Shares
of the Trust:
Contingent Deferred
Sales Charge
(as a Percentage of
Year After Dollar Amount
Purchase Made Subject to Charge)
------------- --------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares of the Trust, the Class B Shares will
continue to be subject to annual 12b-1 Plan expenses of 1% of average daily
net assets representing those shares. See Automatic Conversion of Class B
Shares above. Investors are reminded that the Class A Shares into which the
Class B Shares will convert are subject to ongoing annual 12b-1 Plan expenses
of up to a maximum of .30% of average daily net assets representing such
shares.
In determining whether a CDSC is applicable to a redemption, the calculation
will be determined in a manner that results in the lowest possible rate being
charged. Therefore, with respect to the Class B Shares, it will be assumed that
the redemption is first for shares held over six years or shares acquired
pursuant to reinvestment of dividends or distributions and then of shares held
longest during the six-year period. The charge will not be applied to
dollar amounts representing an increase in the net asset value since the time of
purchase. All investments made during a calendar month regardless of when during
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
The CDSC relating to the Class B Shares of the Trust is waived on
redemptions of Class B Shares in connection with redemptions effected
pursuant to the Trust's right to liquidate a shareholder's account if the
aggregate net asset value of the shares held in the account is less than the
then-effective minimum account size.
12b-1 Distribution Plans--Class A and Class B Shares
Pursuant to the distribution plans adopted by the Trust pursuant to Rule
12b-1 under the Investment Company Act of 1940, the Trust is permitted to pay
the Distributor annual distribution fees payable monthly up to a maximum of
.30% of the average daily net assets of the Class A Shares and 1% of the
average daily net assets of the Class B Shares in order to compensate the
Distributor for providing distribution and related services and bearing
certain expenses of each Class. The Class B Shares' 12b-1 Plan is designed to
permit an investor to purchase Class B Shares through dealers or brokers
without the assessment of a front-end sales charge and at the same time
permit the Distributor to compensate dealers and brokers in connection with
the sale of the Class B Shares. In this regard, the purpose and function of
the 12b-1 Plan and the CDSC with respect to the Class B Shares are the same
as those of the front-end sales charge and 12b-1 Plan with respect to the
Class A Shares in that the fees and charges provide for the financing of the
distribution of the respective Classes. For more detailed discussion of the
12b-1 Plans relating to the Class A and Class B Shares, see Distribution
(12b-1) and Service.
Other Payments to Dealers--Class A and Class B Shares
In addition, from time to time at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of the Classes exceed certain
limits as set by the Distributor, may receive from the Distributor an
additional payment of up to .25% of the dollar amount of such sales. The
Distributor may also provide additional promotional incentives or payments to
dealers that sell shares of the Delaware Group of funds. In some instances,
these incentives or payments may be offered only to certain dealers who
maintain, have sold or may sell certain amounts of shares.
In connection with the promotion of Delaware Group fund shares, the
Distributor may, from time to time, pay to participate in dealer-sponsored
seminars and conferences, reimburse dealers for expenses incurred in
connection with preapproved seminars, conferences and advertising and may,
from time to time, pay or allow additional promotional incentives to dealers,
which shall include non-cash concessions, such as certain luxury merchandise
or a trip to or attendance at a business or investment seminar at a luxury
resort, as part of preapproved sales contests.
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Class B Funds
The following funds currently offer Class B Shares: Delaware Group
Delchester High-Yield Bond Fund, Inc., Delaware Group Government Fund, Inc.,
Delaware Group Cash Reserve, Inc., Treasury Reserves Intermediate Series of
Delaware Group Treasury Reserves, Inc., Tax-Free USA Fund, Tax-Free Insured
Fund and Tax-Free USA Intermediate Fund of Delaware Group Tax-Free Fund,
Inc., Delaware Group DelCap Fund, Inc., Delaware Fund and Dividend Growth
Fund of Delaware Group Delaware Fund, Inc., Delaware Group Value Fund, Inc.,
Decatur Income Fund and Decatur Total Return Fund of Delaware Group Decatur
Fund, Inc., Delaware Group Trend Fund, Inc., International Equity Series,
Global Bond Series and Global Assets Series of Delaware Group Global &
International Funds, Inc., and the Trust.
Dividend Orders
Some shareholders want the dividends earned in one fund automatically
invested in another Delaware Group fund with a different investment objective.
For more information on the requirements of the other funds, see Dividend
Reinvestment Plan under The Delaware Difference or call the Shareholder
Service Center.
HOW TO BUY SHARES
The Trust makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer.
Investing through Your Investment Dealer
You can make a purchase of shares of the Classes through most investment
dealers who, as part of the service they provide, must transmit orders
promptly. They may charge for this service. If you want a dealer but do not
have one, we can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application must be completed, signed and
sent with a check payable to Tax-Free Pennsylvania Fund A Class or B Class,
depending upon which Class is being purchased, to 1818 Market Street,
Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by
mailing a check payable to Tax-Free Pennsylvania Fund A Class or B Class,
depending upon which Class is being purchased. Your check should be
identified with your name(s) and account number. An investment slip (similar
to a deposit slip) is provided at the bottom of transaction confirmations and
dividend statements that you will receive from the Trust, and should be used
when you are making additional purchases. You can expedite processing by
including an investment slip with your check when making additional
purchases. Your investment may be delayed if you send additional purchases by
certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by wire
to CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include
your name(s) and your Trust account number in the wire).
1. Initial Purchases--Before you invest, telephone the Trust's Shareholder
Service Center to get an account number. If you do not call first, it may
delay processing your investment. In addition, you must promptly send your
Investment Application to Tax-Free Pennsylvania Fund A Class or B Class,
depending upon which Class is being purchased, to 1818 Market Street,
Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by
wiring funds to CoreStates Bank, N.A., as described above. You should advise
the Trust's Shareholder Service Center by telephone of each wire you send.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group, you
may write and authorize an exchange of part or all of your investment into
shares of the Trust. If you wish to open an account by exchange, call the
Shareholder Service Center for more information.
Exchanges will not be permitted between Class A Shares and Class B Shares
of the Trust or between the Class A Shares and Class B Shares of any other
funds in the Delaware Group. Class B Shares of any of the Class B Funds may
be exchanged for Class B Shares of the Trust. Class B Shares of the Trust
acquired by exchange will continue to carry the contingent deferred sales
charge and automatic conversion schedules of the fund from which the exchange
is made. The holding period of the Class B Shares of the Trust will be added
to that of the exchanged shares for purposes of determining the time of the
automatic conversion into Class A Shares of the Trust.
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Permissible exchanges into the Classes of the Trust will be made without a
front-end sales charge imposed by the Trust or, at the time of the exchange,
a contingent deferred sales charge imposed by the fund from which the exchange
is being made, except for exchanges into Class A Shares from funds not
subject to a front-end sales charge (unless such shares were acquired in an
exchange from a fund subject to such a charge or such shares were acquired
through the reinvestment of dividends).
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to use
the following services:
1. Direct Deposit
You may wish your employer or bank to make regular investments directly to
your account for you (for example: payroll deduction, pay by phone, annuity
payments). The Trust also accepts preauthorized recurring government and
private payments by Electronic Fund Transfer, which avoids mail time and
check clearing holds on payments such as social security, federal salaries,
Railroad Retirement benefits, etc.
2. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize the Trust to
transfer a designated amount monthly from your checking account to your Class
account. Shareholders should allow a reasonable amount of time for initial
purchases and changes to these plans to become effective.
* * *
Should investments by these two methods be reclaimed or returned for some
reason, the Trust has the right to liquidate your shares to reimburse the
government or transmitting bank. If there are insufficient funds in your
Class account, you are obligated to reimburse the Trust.
Purchase Price and Effective Date
The offering price and net asset value of the Class A and Class B Shares
are determined as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when such exchange is
open.
The effective date of a purchase made through an investment dealer is the
date the order is received by the Trust. The effective date of a direct
purchase is the day your wire, electronic transfer or check is received
unless it is received after the time the offering price of shares is
determined, as noted above. Those received after such time will be effective
the next business day.
The Conditions of Your Purchase
The Trust reserves the right to reject any purchase or exchange. If a
purchase is cancelled because your check is returned unpaid, you are
responsible for any loss incurred. The Trust can redeem shares from your
account(s) to reimburse itself for any loss, and you may be restricted from
making future purchases in any of the funds in the Delaware Group. The Trust
reserves the right, upon 60 days' written notice, to redeem accounts that
remain under $1,000 as a result of redemptions. An investor making the
minimum initial investment will be subject to involuntary redemption without
the imposition of a CDSC or Limited CDSC if he or she redeems any portion of
his or her account.
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REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways. The
exchange service is useful if your investment requirements change and you
want an easy way to invest in other tax-advantaged funds, equity funds, bond
funds or money market funds. This service is also useful if you are
anticipating a major expenditure and want to move a portion of your
investment into a fund that has the checkwriting feature. Exchanges are
subject to the requirements of each fund and all exchanges of shares from one
fund or class to another pursuant to this privilege constitute taxable
events. See Taxes. You may want to call us for more information or consult
your financial adviser or investment dealer to discuss which funds in the
Delaware Group will best meet your changing objectives and the consequences
of any exchange transaction.
Your shares will be redeemed or exchanged based on the net asset value next
determined after we receive your request in good order subject, in the case
of a redemption, to any applicable CDSC or Limited CDSC. Redemption or exchange
requests received in good order after the time the offering price of shares
is determined, as noted above, will be processed on the next business day.
See Purchase Price and Effective Date under Buying Shares. Except as
otherwise noted below, for redemption request to be in "good order," you
must provide your Class account number, account registration, and the total
number of shares or dollar amount of the transaction. If a holder of Class B
Shares submits a redemption request for a specific dollar amount, the Trust
will redeem that number of shares necessary to deduct the applicable CDSC and
tender to the shareholder the requested amount to the extent enough shares
are then held in the shareholder account. With regard to exchanges, you must
also provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Trust at 800-523-1918 (in Philadelphia, 215-988-1241).
The Trust reserves the right to reject exchange requests at any time. The
Trust may suspend or terminate, or amend the terms of, the exchange privilege
upon 60 days' written notice to shareholders.
The Trust will honor written redemption requests of shareholders who
recently purchased shares by check, but will not mail the proceeds until it
is reasonably satisfied the purchase check has cleared, which may take up to
15 days from the purchase date. The Trust will not honor telephone
redemptions for Class shares recently purchased by check unless it is
reasonably satisfied that the purchase check has cleared. You can avoid this
potential delay if you purchase shares by wiring Federal Funds. The Trust
reserves the right to reject a written or telephone redemption request or
delay payment of redemption proceeds if there has been a recent change to the
shareholder's address of record.
Class A Shares may be exchanged for certain of the shares of the other
funds in the Delaware Group, including other Class A Shares, subject to the
eligibility and minimum purchase requirements set forth in each fund's
prospectus. All Delaware Group funds offer Class A Shares. Class A Shares may
not be exchanged for Class B Shares of the funds offering such shares. Class
B Shares of the Trust may be exchanged only for the Class B Shares of any of
the Class B Funds. See Exchange Privilege under The Delaware Difference. In
each instance, permissible exchanges are subject to the minimum purchase and
other requirements set forth in each prospectus.
Permissible exchanges may be made at net asset value provided: (1) the
investment satisfies the eligibility and minimum purchase requirements set
forth in the prospectus of the fund being acquired; and (2) the shares of the
fund being acquired are in a state where that fund is registered.
There is no front-end sales charge or fee for exchanges made between shares
of funds which both carry a front-end sales charge. Any applicable front-end
sales charge will apply to exchanges from shares of funds not subject to a
front-end sales charge, except for transfers involving assets that were
previously invested in a fund with a front-end sales charge and/or transfers
involving the reinvestment of dividends.
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Holders of the Class B Shares that exchange their shares ("outstanding Class
B Shares") for the Class B Shares of other Class B Funds ("new Class B
Shares") will not be subject to a CDSC that might otherwise be due upon
redemption of the outstanding Class B Shares. However, such shareholders will
continue to be subject to the CDSC and automatic conversion schedules of the
outstanding Class B Shares described in this Prospectus and any CDSC assessed
upon redemption will be charged by the Trust. The Trust's schedule may be
higher than the CDSC schedule relating to the new Class B Shares acquired as
a result of the exchange. For purposes of computing the CDSC that may be
payable upon a disposition of the new Class B Shares, the holding period for
the outstanding Class B Shares is added to the holding period of the new Class
B Shares. The automatic conversion schedule of the outstanding Class B Shares
may be longer than that of the new Class B Shares. Consequently, an
investment in new Class B Shares by exchange may subject an investor to the
higher 12b-1 fees applicable to Class B Shares for a longer time than if the
investment in new Class B Shares were made directly.
Different redemption and exchange methods are outlined below. Except for
the CDSC with respect to the redemption of Class B Shares and the Limited
CDSC with respect to certain redemptions of Class A Shares purchased at net
asset value, there is no fee charged by the Trust or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may also have your investment dealer arrange to have your shares
redeemed or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders with respect to an account,
including selection of any of the features described below, shall continue in
effect until revoked or modified in writing and until such time as such
written revocation or modification has been received by the Trust or its
agent.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and
carefully read that fund's prospectus before buying shares in an exchange.
The prospectus contains more complete information about the fund, including
charges and expenses.
Written Redemption
You can write to the Trust at 1818 Market Street, Philadelphia, PA 19103 to
redeem some or all of your Class A or Class B Shares. The request must be
signed by all owners of the account or your investment dealer of record. For
redemptions of more than $50,000, or when the proceeds are not sent to the
shareholder(s) at the address of record, the Trust requires a signature by
all owners of the account and a signature guarantee for each owner. Each
signature guarantee must be supplied by an eligible guarantor institution.
The Trust reserves the right to reject a signature guarantee supplied by an
eligible institution based on its creditworthiness. The Trust may require
further documentation from corporations, executors, retirement plans,
administrators, trustees or guardians.
The redemption request is effective at the net asset value next determined
after it is received in good order. Class B Shares may be subject to a CDSC
and Class A Shares may be subject to a Limited CDSC with respect to certain
shares purchased at net asset value. Payment is normally mailed the next
business day, but no later than seven days, after receipt of your request. If
your Class A Shares are in certificate form, the certificate must accompany
your request and also be in good order. The Trust only issues certificates
for Class A Shares if a shareholder submits a specific request. The Trust
does not issue certificates for Class B Shares.
Written Exchange
You can also write to the Trust (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your Class A or Class B Shares
into another mutual fund in the Delaware Group subject to the same conditions
and limitations as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge)
for you. If you choose to have your Class A Shares in certificate form, you
can only redeem or exchange by written request and you must return your
certificates.
The Telephone Redemption service enabling you to have redemption proceeds
mailed to your address of record and the Telephone Exchange service, both of
which are described below, are automatically provided unless the Trust
receives written otice from the shareholder to the contrary. The Trust
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Trust
by telephone during periods when market or economic conditions lead to an
unusually large volume of telephone requests.
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Neither the Trust nor the Transfer Agent is responsible for any shareholder
loss incurred acting upon written or telephone instructions for redemption or
exchange of Trust shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Trust will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Trust or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone
are generally tape recorded, and a written confirmation will be provided for
all purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, the shareholder is acknowledging prior
receipt of a prospectus for the fund into which shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds
of $50,000 or less mailed to you at your record address. Checks will be
payable to the shareholder(s) of record. Payment is normally mailed the next
business day, but no more than seven days, after receipt of the request. This
service is only available to individual, joint and individual fiduciary-type
accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, the Trust requires an Authorization Form with your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption. If you ask for a check, it will normally be mailed the next
business day, but no later than seven days, after receipt of your request to
your predesignated bank account. Except for any CDSC which may be applicable
to the Class B Shares and the Limited CDSC which may be applicable to
purchases made at net asset value with respect to the Class A Shares, there
are no fees for this method, but the mail time may delay getting funds into
your bank account. Simply call the Trust's Shareholder Service Center prior
to the time the offering price and net asset value are determined, as noted
above.
If expedited payment by check or wire could adversely affect the Trust, the
Trust may take up to seven days to pay.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to adjust
your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
Class A or Class B Shares into other funds in the Delaware Group under the
same registration, subject to the same conditions and limitations as other
exchanges noted above. As with the written exchange service, telephone
exchanges are subject to the requirements of each fund, as described above.
Telephone exchanges may be subject to limitations as to amounts or frequency.
Systematic Withdrawal Plan for Class A Shares
This plan provides holders of the Class A Shares with a consistent monthly (or
quarterly) payment. This is particularly useful to shareholders living on fixed
incomes, since it provides them with a stable supplemental amount. With accounts
of at least $5,000, you may elect monthly wthdrawals of $25 (quarterly $75) or
more. The Trust does not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred from your Trust
account to your predesignated bank account through the Delaware Group's
MoneyLine service. Your funds will normally be credited to your bank account
after two business days. Except with respect to the Limited CDSC which may be
applicable to Class A Shares as noted below, there are no fees for this method.
You can initiate this service by completing an Authorization Agreement. If the
name and address on your bank account are not identical to the name and address
on your Trust account, you must have your signature guaranteed. Please call the
Shareholder Service Center for additional information.
* * *
Shareholders should not purchase Class A Shares while participating in a
Systematic Withdrawal Plan. Also, redemptions of Class A Shares pursuant to a
Systematic Withdrawal Plan may be subject to a Limited CDSC if the original
purchase was made within the 12 months prior to the withdrawal at net asset
value and a dealer's commission has been paid on that purchase. See Contingent
Deferred Sales Charge for Certain Purchases of Class A Shares Made at Net
Asset Value. For more information, call the Shareholder Service Center.
The Systematic Withdrawal Plan is not available with respect to the Class B
Shares.
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Wealth Builder Option
Shareholders may elect to invest in other mutual funds in the Delaware
Group through our Wealth Builder Option. Under this automatic exchange
program, shareholders can authorize regular monthly investments (minimum of
$100 per fund) to be liquidated from their Trust account and invested
automatically into one or more Delaware Group funds. Investments under this
option are exchanges and are therefore subject to the same conditions and
limitations as other exchanges of Class A and Class B Shares noted above.
Shareholders can also use the Wealth Builder Option to invest in the Trust
through regular liquidations of shares in their accounts in other funds in
the Delaware Group, subject to the same conditions and limitations as other
exchanges noted above. Shareholders can terminate their participation at any
time by written notice to the Trust. See Redemption and Exchange.
Contingent Deferred Sales Charge for Certain Purchases of Class A Shares Made
at Net Asset Value
For purchases of Class A Shares, a Limited CDSC will be imposed by the
Trust upon certain redemptions of Class A Shares (or shares into which such
Class A Shares are exchanged) made within 12 months of purchase, if such
purchases were made at net asset value and triggered the payment by the
Distributor of the dealer's commission described above. See Buying Shares.
The Limited CDSC will be paid to the Distributor and will be equal to the
lesser of 1% of: (1) the net asset value at the time of purchase of the Class
A Shares being redeemed; or (2) the net asset value of such Class A Shares at
the time of redemption. For purposes of this formula, the "net asset value at
the time of purchase" will be the net asset value at purchase of the Class A
Shares even if those shares are later exchanged for shares of another
Delaware Group fund and, in the event of an exchange of Class A Shares, the
"net asset value of such shares at the time of redemption will be the net
asset value of the shares into which the Class A Shares have been exchanged.
Redemptions of such Class A Shares held for more than 12 months will not be
subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited
CDSC at the time of such exchange. The period a shareholder owns shares into
which Class A Shares are exchanged will count towards satisfying the 12-month
holding period. The Trust assesses the Limited CDSC if such 12-month period
is not satisfied irrespective of whether the redemption triggering its
payment is of the Class A Shares of the Trust or the Class A Shares into
which the Class A Shares have been exchanged.
In determining whether a Limited CDSC is payable, it will be assumed that
shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not
be imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All
investment s made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that
month and each subsequent month.
The Limited CDSC will be waived in the following instances: (i) redemptions
effected pursuant to the Trust's right to liquidate a shareholder's account
if the aggregate net asset value of the shares held in the account is less
than the then-effective minimum account size; and (ii) redemptions by the
classes of shareholders who are permitted to purchase shares at net asset
value, regardless of the size of the purchase (see Buying at Net Asset Value).
DIVIDENDS AND DISTRIBUTIONS
The Trust declares a dividend to all shareholders of record of the Classes
at the time the offering price of shares is determined. See Purchase Price
and Effective Date under Buying Shares. Thus, when redeeming shares,
dividends continue to be credited up to and including the date of redemption.
Purchases of shares of each of the Classes by wire begin earning dividends
when converted into Federal Funds and available for investment, normally the
next business day after receipt. However, if the Trust is given prior notice
of Federal Funds wire and an acceptable written guarantee of timely receipt
from an investor satisfying the Trust's credit policies, the purchase will
start earning dividends on the date the wire is received. Purchases by check
earn dividends upon conversion to Federal Funds, normally one business day
after receipt.
Each of the Classes will share proportionately in the investment income and
expenses of the Trust, except that the per share dividends and distributions
on the Class B Shares will be lower than the per share dividends and
distributions on the Class A Shares as a result of the higher expenses under
the 12b-1 Plan relating to the Class B Shares. See Distribution (12b-1) and
Service under Management of the Trust.
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Dividends are declared daily and paid monthly on the first business day
following the end of each month. Payment by check of cash dividends will
ordinarily be mailed within three business days after the payable date. Any
distributions from net realized securities profits will be distributed
annually in the quarter following the close of the fiscal year.
Both dividends and distributions, if any, are automatically reinvested in
your account at net asset value unless you elect otherwise. Any check in
payment of dividends or other distributions which cannot be delivered by the
Post Office or which remains uncashed for a period of more than one year may
be reinvested in the shareholder's account at the then-current net asset
value and the dividend option may be changed from cash to reinvest. If you
elect to take your dividends and distributions in cash and such dividends and
distributions are in an amount of $25 or more you may elect the Delaware
Group's MoneyLine service to enable such payments to be transferred from your
Trust account to your predesignated bank account. Your funds will normally be
credited to your bank account two business days after the payment date. There
ar no fees for this method. See Systematic Withdrawal Plan for Class A Shares
under Redemption and Exchange for information regarding authorization of this
service. (See The Delaware Difference for more information on reinvestment
options.)
The Trust anticipates that substantially all of its dividends paid to
shareholders will be exempt from federal income tax. For the fiscal year
ended February 28, 1995, the Trust had a capital loss of $2,686,994. For
federal income tax purposes, the Trust had accumulated capital losses at
February 28, 1995 of $2,859,869 which may be carried forward and applied
against future capital gains. The capital loss carryforward expires as
follows: 1997--$172,875 and 2003--$2,686,994.
For the fiscal year ended February 28, 1995, dividends totaling $0.494 and
$0.353 per share of the Class A Shares and the Class B Shares, respectively,
were paid from net investment income. The Class B Shares of the Trust were
first offered to the public on May 2, 1994.
TAXES
The Trust has qualified, and intends to continue to qualify, as a regulated
investment company under Subchapter M of the Internal Revenue Code (the
"Code"). As such, the Trust will not be subject to federal income tax, or to
any excise tax, to the extent its earnings are distributed as provided in the
Code. The Trust intends to distribute substantially all of its net
investment income and net capital gains, if any.
The Trust intends to invest a sufficient portion of its assets in municipal
bonds and notes so that it will qualify to pay "exempt-interest dividends" to
shareholders. Such exempt-interest dividends distributed to shareholders are
excluded from a shareholder's gross income for federal tax purposes. A
portion of the Trust's dividends may, however, be derived from income on
"private activity" municipal bonds and therefore may be a preference item
under federal tax law and subject to the federal alternative minimum tax.
To the extent dividends are derived from taxable income on temporary
investments or short-term capital gains, they are treated as ordinary income,
whether received in cash or in additional shares. In addition, gain from the
disposition of a tax-exempt bond that was acquired after April 30, 1993 for a
price less than the principal amount of the bond is taxable to shareholders
as ordinary income to the extent of the accrued market discount. No portion
of the Trust's distributions will be eligible for the dividends-received
deduction for corporations.
Distributions paid by the Trust from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who
are subject to income taxes as long-term capital gains, regardless of the
length of time an investor has owned shares in the Trust. The Trust does not
seek to realize any particular amount of capital gains during a year; rather,
realized gains are a byproduct of Trust management activities. Consequently,
capital gains distributions may be expected to vary considerably from year to
year. Also, for those investors subject to tax, if purchases of shares in the
Trust are made shortly before the record date for a capital gains
distribution, a portion of the investment will be returned as taxable
distribution.
Dividends which are declared in October, November or December to
shareholders of record in such a month but which, for operational reasons,
may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Trust and received by the
shareholder on December 31 of the calendar year in which they are declared.
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<PAGE> 32
The sale of shares of the Trust is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may
be realized from an ordinary redemption of shares or an exchange of shares
between two mutual funds (or two series or portfolios of a mutual fund). Any
loss incurred on sale or exchange of the Trust's shares held for six months
or less will be treated as a long-term capital loss to the extent of capital
gain dividends received with respect to such shares and will be disallowed to
the extent of exempt-interest dividends paid with respect to such shares. All
or a portion of the sales charge incurred in purchasing Trust shares will be
excluded from the federal tax basis of any of such shares sold or exchanged
within ninety (90) days of their purchase (for purposes of determining gain
or loss upon sale of such shares) if the sale proceeds are reinvested in the
Trust or in another fund in the Delaware Group of funds and a sales charge
that would otherwise apply to the reinvestment is reduced or eliminated. Any
portion of such sales age excluded from the tax basis of the shares sold will
be added to the tax basis of the shares acquired in the reinvestment.
Exempt-interest dividends paid by the Trust, although exempt from regular
federal income tax in the hands of a shareholder, are includable in the tax
base for determining the extent to which a shareholder's Social Security
benefits would be subject to federal income tax. Shareholders are required to
disclose their receipt of tax-exempt interest on their federal income tax
returns.
The automatic conversion of Class B Shares into Class A Shares at the end
of no longer than approximately eight years after purchase will be tax-free
for federal tax purposes. Shareholders should consult their own tax advisers
regarding specific questions as to federal, state, local or foreign taxes.
See Automatic Conversion of Class B Shares under Buying Shares.
Interest income derived from Pennsylvania state and municipal obligations
and other qualifying obligations, and U.S. Government obligations, if any,
that are distributed to shareholders will be exempt from Pennsylvania
personal income tax. Should the Trust invest in municipal bonds other than
those issued by Pennsylvania or other exempt issuers, the income distributed
from these investments may be subject to Pennsylvania personal income tax.
Shareholders of the Trust will receive notification from the Trust annually
as to the taxability of such distributions in Pennsylvania. For shareholders
who are residents of Philadelphia, distributions that are derived from
interest on Pennsylvania state and municipal obligations and other qualifying
obligations, and U.S. Government obligations, if any, will be exempt from
Philadelphia School District Income Tax. Distributions designated as capital
gain dividends for federal income tax purposes will also be exempt from the
Philadelphia School District Income Tax. Shares of the Trust will be exempt
from Pennsylvania county personal property tax.
Each year, the Trust will mail you information on the tax status of the
Trust's dividends and distributions.
The Trust is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied
with IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Account Registration Form your proper
Taxpayer Identification Number and by certifying that you are not subject to
backup withholding.
The tax discussion set forth above is included for general information
only. Prospective investors should consult their own tax advisers concerning
the federal, state, local or foreign tax consequences of an investment in the
Trust.
See Taxes in Part B for additional information on tax matters relating to
the Trust and its shareholders.
23
<PAGE> 33
CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
Class A Shares are purchased at the offering price and Class B Shares are
purchased at the net asset value ("NAV") per share. The offering price of the
Class A Shares consists of the NAV per share next determined after the order
is received, plus any applicable front-end sales charges. The offering price
and NAV are computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when such exchange is
open.
The NAV per share is computed by adding the value of all securities and
other assets in the portfolio, deducting any liabilities (expenses and fees
are accrued daily) and dividing by the number of shares outstanding. Debt
securities are priced at fair value by an independent pricing service using
methods approved by the Board of Trustees. Short-term investments having a
maturity of less than 60 days are valued at amortized cost, which approximates
market value. All other securities are valued at their fair value as
determined in good faith and in a method approved by the Board of Trustees.
Each of the Trust's two classes will bear, pro-rata, all of the common
expenses of the Trust. The net asset values of all outstanding shares of each
class of the Trust will be computed on a pro-rata basis for each outstanding
share based on the proportionate participation in the Trust represented by
the value of shares of that class. All income earned and expenses incurred by
the Trust will be borne on a pro-rata basis by each outstanding share of a
class, based on each class' percentage in the Trust represented by the value
of shares of such classes, except that shares of the Classes will bear only
those 12b-1 Plan expenses payable under their respective Plans. Due to the
specific distribution expenses and other costs that will be allocable to each
class, the dividends paid to each class of the Trust may vary. However, the
NAV per share of each class is expected to be equivalent.
MANAGEMENT OF THE TRUST
Trustees
The business and affairs of the Trust are managed under the direction of
its Board of Trustees. Part B contains additional information regarding the
trustees and officers.
Investment Manager
The Manager furnishes investment management services to the Trust.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On February 28, 1995, the Manager and its
affiliate, Delaware International Advisers Ltd., were supervising in the
aggregate more than $25 billion in assets in the various institutional
(approximately $16,036,192,541) and investment company (approximately
$9,495,845,162) accounts.
The Manager is an indirect, wholly-owned subsidiary of Delaware Management
Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly-owned subsidiary of Lincoln National Corporation ("Lincoln National")
was completed. In connection with the merger, a new Investment Management
Agreement between the Trust and the Manager was executed following
shareholder approval. As a result of the merger, DMH and the Manager became
indirect, wholly-owned subsidiaries of and are thus subject to the ultimate
control of Lincoln National. Lincoln National, with headquarters in Fort
Wayne, Indiana, is a diversified organization with operations in many
aspects of the financial services industry, including insurance and
investment management.
The Manager manages the Trust's portfolio and makes investment decisions
which are implemented by the Trust's Trading Department. The Manager also
pays the salaries of all the trustees, officers and employees of the Trust
who are affiliated with the Manager. The annual compensation paid by the
Trust for investment management services is equal to .60% on the first $500
million of average daily net assets of the Trust, .575% on the next $250
million and .55% on the average daily net assets in excess of $750 million,
less all trustees' fees paid to the unaffiliated trustees. Investment
management fees paid by the Trust for the fiscal year ended February 28, 1995
were 0.5% of average daily net assets.
J. Michael Pokorny has primary responsibility for making day-to-day
investment decisions for Tax-Free Pennsylvania Fund. He has been the Trust's
senior portfolio manager since 1980. A graduate of William and Mary, Mr.
Pokorn( joined Delaware Group in 1978 and has over 29 years of fixed income
experience.
24
<PAGE> 34
In making investment decisions for the Trust, Mr. Pokorny regularly consults
with Patrick P. Coyne, Paul E. Suckow and other members of Delaware's fixed
income department. Mr. Coyne has worked closely with Mr. Pokorny since 1990
when he joined Delaware Group's fixed income department. He is a graduate of
Harvard University with an MBA from the University of Pennsylvania's Wharton
School. Mr. Suckow is Delaware's Chief Investment Officer for fixed income. He
is a graduate of Bradley University with an MBA from Western Illinois
University. Mr. Suckow was a fixed income portfolio manager at Delaware Group
from 1981 to 1985. He returned to Delaware in 1993 after eight years with
Oppenheimer Management Corporation.
Portfolio Trading Practices
The Trust may sell securities without regard to the length of time they
have been held. Trading will be undertaken principally to achieve the Trust's
objective in light of expected changes in interest rates. The degree of
trading activity will affect brokerage costs of the Trust and may affect
taxes payable by the Trust's shareholders. Given the Trust's investment
objective, its annual portfolio turnover rate is not expected to exceed 100%.
During the past two fiscal years, the Trust's portfolio turnover rates were
approximately 14% for 1994 and 18% for 1995.
The Trust uses its best efforts to obtain the best available price and most
favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager
or its advisory clients. These services may be used by the Manager in
servicing any of its accounts. Subject to best price and execution, the Trust
may consider a broker/dealer's sales of Trust shares in placing portfolio
orders and may place orders with broker/dealers that have agreed to defray
certain Trust expenses such as custodian fees.
Performance Information
From time to time, the Trust may quote yield or total return performance of
the Classes in advertising and other types of literature. The current yield
for each of the Classes is calculated by dividing the annualized net
investment income earned by that Class during a recent 30-day period by the
maximum offering price per share on the last day of the period. The yield
formula provides for semi-annual compounding which assumes that net investment
income is earned and reinvested at a constant rate and annualized at the end
of a six-month period. Total return will be based on a hypothetical $1,000
investment, reflecting the reinvestment of all distributions at net asset
value and: (i) in the case of Class A Shares, the impact of the maximum
front-end sales charge at the beginning of each specified period; and (ii) in
the case of Class B Shares, the deduction of any applicable CDSC at the end
of the relevant period. Each presentation will include the average annual
total return for one-, five- and ten year periods, as relevant. The Trust may
also advertise aggregate and average total return information concerning a
Class over additional periods of time. In addition, the Trust may present
total return information that does not reflect the deduction of the maximum
front-end sales charge or any applicable CDSC. In this case, such total
return would be more favorable than total return information which includes
deductions of the maximum front-end sales charge or any applicable CDSC. The
Trust may also publish a tax-equivalent yield concerning a Class based on
federal and, if applicable, state tax rates, which demonstrates the taxable
yield necessary to produce an after-tax yield equivalent to such Class' yield.
Yield and net asset value fluctuate and are not guaranteed. Past
performance is not an indication of future results.
25
<PAGE> 35
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor
for the Trust under a Distribution Agreement dated April 3, 1995.
The Trust has adopted a distribution plan under Rule 12b-1 for the Class A
Shares and a separate distribution plan under Rule 12b-1 for the Class B
Shares (the "Plans") which permit the Trust to pay the Distributor from the
assets of the respective Classes a monthly fee for its services and expenses
in distributing and promoting sales of shares. These expenses include, among
other things, preparing and distributing advertisements, sales
literature, and prospectuses and reports used for sales purposes,
compensating sales and marketing personnel, holding special promotions for
specified periods of time, and paying distribution and maintenance fees to
brokers, dealers and others. In connection with the promotion of Class A
and Class B Shares, the Distributor may, from time to time, pay to
participate in dealer-sponsored seminars and conferences, and reimburse
dealers for expenses incurred in connection with preapproved seminars,
conferences and advertising. The Distributor may pay or allow additional
promotional incentives to dealers as part of preapproved sales contests
and/or to dealers who provide extra training and information concerning each
Class and increase sales of each Class. In addition, the Trust may make
payments from the assets of the respective Class directly to others, such as
banks, who aid in the distribution of Class shares or provide services in
respect of a Class, pursuant to service agreements with the Trust.
The 12b-1 Plan expenses relating to the Class B Shares of the Trust are
also used to pay the Distributor for advancing the commission costs to
dealers with respect to the initial sale of such shares.
The aggregate fees paid by the Trust from the assets of the respective
Classes to the Distributor and others under the Plans may not exceed .30% of
the Class A Shares' average daily net assets in any year, and 1% (.25% of
which are service fees to be paid by the Trust to the Distributor, dealers
and others, for providing personal service and/or maintaining shareholder
accounts) of the Class B Shares' average daily net assets in any year. The
Class A and Class B Shares will not incur any distribution expenses beyond
these limits, which may not be increased without shareholder approval. The
Distributor may, however, incur additional expenses and make additional
payments to dealers from its own resources to promote the distribution of
shares of the Classes.
Effective June 1, 1992, the Board of Trustees has determined that the
annual fee, payable on a monthly basis, under the Plan relating to the Class
A Shares will be equal to the sum of: (i) the amount obtained by multiplying
.30% by the average daily net assets represented by the Class A Shares that
were acquired by shareholders on or after June 1, 1992, and (ii) the amount
obtained by multiplying .10% by the average daily net assets represented by
the Class A Shares that were acquired before June 1, 1992. While this is the
method for calculating the Class A Shares' 12b-1 expense, such expense is a
Class A Shares' expense so that all shareholders of the Class A Shares, regard
less of when they purchased their shares, will bear 12b-1 expenses at the
same per share rate. As Class A Shares are sold on or after June 1, 1992, the
initial rate of at least .10% will increase over time. Thus, as the
proportion of Class A Shares purchased on or after June 1, 1992 to Class A
Shares outstanding prior to June 1, 1992 increases, the expenses attributable
to payments under such Plan will also increase (but will not exceed .30% of
average daily net assets). While this describes the current formula for
calculating the expenses which will be payable under the Plan relating to the
Class A Shares, such Plan permits the Class A Shares to pay a full .30% on
all assets at any time following Board approval.
26
<PAGE> 36
While payments pursuant to the Plans may not exceed .30% annually with
respect to the Class A Shares and 1% annually with respect to the Class B
Shares, the Plans do not limit fees to amounts actually expended by the
Distributor. It is therefore possible that the Distributor may realize a
proit in any particular year. However, the Distributor currently expects that
its distribution expenses will likely equal or exceed payments to it under
the Plans. The monthly fees paid to the Distributor are subject to the review
and approval of the Trust's unaffiliated trustees who may reduce the fees or
terminate the Plans at any time.
The staff of the Securities and Exchange Commission ("SEC") has proposed
amendments to Rule 12b-1 and other related regulations that could impact Rule
12b-1 Distribution Plans. The Trust intends to amend the Plans, if necessary,
to comply with any new rules or regulations the SEC may adopt with respect to
Rule 12b-1.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Trust
under an Agreement dated June 29, 1988. The unaffiliated trustees annually
review service fees paid to the Transfer Agent.
The Distributor and the Transfer Agent are also indirect, wholly-owned
subsidiaries of DMH.
Expenses
The Trust is responsible for all of its own expenses other than those borne
by the Manager under the Investment Management Agreement and those borne by
the Distributor under the Distribution Agreement. The ratio of expenses to
average daily net assets of the Class A Shares for the fiscal year ended
February 28, 1995 was 0.90%. Based on expenses incurred by the Class A Shares
during its fiscal year ended February 28, 1995, the expenses of the Class B
Shares are expected to be 1.73% for the fiscal year ending February 29, 1996.
The ratio of each Class reflects the impact of its respective 12b-1 Plan.
Shares
DMC Tax-Free Income Trust-Pennsylvania (which is known and does business as
Tax-Free Pennsylvania Fund) is an open-end management investment company. The
Trust's portfolio of assets is nondiversified for purposes of the Investment
Company Act of 1940. Commonly known as a mutual fund, the Trust is a
Pennsylvania business trust organized on November 23, 1976. The Trust has an
unlimited authorized number of shares of beneficial interest with no par
value per share allocated to each Class. All shares have equal voting rights
and are equal in all other respects.
Shares of each Class represent a proportionate interest in the assets of
the Trust and have the same voting and other rights and preferences, except
that the shareholders of the Class A Shares may not vote on matters affecting
the Plan under Rule 12b-1 relating to the Class B Shares, and the shareholders
of the Class B Shares may not vote on matters affecting the Plan under Rule
12b-1 relating to the Class A Shares. However, the Class B Shares may vote on
a proposal to increase materially the fees to be paid by the Trust under the
Rule 12b-1 Plan relating to the Class A Shares.
All Trust shares have noncumulative voting rights which means that the
holders of more than 50% of the Trust's shares voting for the election of
trustees can elect 100% of the trustees if they choose to do so.
Prior to May 2, 1994, Tax-Free Pennsylvania Fund A Class was known as
Tax-Free Pennsylvania Fund.
27
<PAGE> 37
The Delaware Group includes 22 different Tax-Free
funds with a wide range of investment Pennsylvania
objectives. Stock funds, income funds, Fund
tax-free funds, money market funds, ------------
global funds and closed-end equity A Class
funds give investors the ability to B Class
create a portfolio that fits their
personal financial goals. For more
information contact your financial
adviser or call Delaware Group at
800-523-4640, in Philadelphia PROSPECTUS
215-988-1333.
APRIL 29, 1995
Investment Manager
Delaware Management Company, Inc. (Photo of George
One Commerce Square Washington Crossing
Philadelphia, PA 19103 the Delaware River)
National Distributor
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
Shareholder Servicing,
Dividend Disbursing
and Transfer Agent
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
Legal Counsel
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
Independent Auditors
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
Custodian
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
DELAWARE
P-007/P-057-4/95-BP GROUP
Printed in the U.S.A. ========
<PAGE> 38
------------------------
TAX-FREE
------------------------
PENNSYLVANIA FUND
------------------------
A CLASS
------------------------
B CLASS
------------------------
CLASSES OF TAX-FREE
------------------------
PENNSYLVANIA FUND
------------------------
The Delaware Group includes 22 different
funds with a wide range of investment
objectives. Stock funds, income funds,
tax-free funds, money market funds, global funds
and closed-end equity funds give investors the PART B
ability to create a portfolio that fits their Statement of
personal financial goals. For more information Additional Information
contact your financial adviser or call the ------------------------
Delaware Group at 800-523-4640, in Philadelphia 215-988-1333.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260 DELAWARE
GROUP
AI-007/AI-057-4/95-U =========
<PAGE> 39
- -----------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
APRIL 29, 1995
- -----------------------------------------------------------------------------
TAX-FREE
PENNSYLVANIA FUND
- -----------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- -----------------------------------------------------------------------------
For Prospectus and Performance:
Nationwide 800-523-4640
Philadelphia 215-988-1333
Information on Existing Accounts:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Philadelphia 215-988-1241
Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Philadelphia 215-988-1050
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
Cover Page 1
- -----------------------------------------------------------------------------
Investment Objective and Policy 2
- -----------------------------------------------------------------------------
Performance Information 5
- -----------------------------------------------------------------------------
Trading Practices and Brokerage 9
- -----------------------------------------------------------------------------
Purchasing Shares 10
- -----------------------------------------------------------------------------
Investment Plans 15
- -----------------------------------------------------------------------------
Determining Offering Price and
Net Asset Value 16
- -----------------------------------------------------------------------------
Redemption and Repurchase 16
- -----------------------------------------------------------------------------
Dividends and Distributions 19
- -----------------------------------------------------------------------------
Taxes 20
- -----------------------------------------------------------------------------
Investment Management Agreement 20
- -----------------------------------------------------------------------------
Officers and Trustees 21
- -----------------------------------------------------------------------------
Exchange Privilege 24
- -----------------------------------------------------------------------------
General Information 26
- -----------------------------------------------------------------------------
Appendix A--Description of Ratings 28
- -----------------------------------------------------------------------------
Appendix B--Tax Exempt vs Taxable Yields 29
- -----------------------------------------------------------------------------
Financial Statements 30
- -----------------------------------------------------------------------------
<PAGE> 40
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectus of
DMC Tax-Free Income Trust-Pennsylvania (which is known and does business as
Tax-Free Pennsylvania Fund) (the "Trust") dated April 29, 1995, as may be
amended from time to time. It should be read in conjunction with the Trust's
Prospectus. Part B is not itself a prospectus but is, in its entirety,
incorporated by reference into the Prospectus. The Trust's Prospectus may be
obtained by writing or calling your investment dealer or by contacting the
Trust's national distributor, Delaware Distributors, L.P. (the "Distributor"),
1818 Market Street, Philadelphia, PA 19103.
The Trust offers two classes of shares (individually, a "Class" and
collectively, the "Classes"): Tax-Free Pennsylvania Fund A Class ("Class A
Shares") and Tax-Free Pennsylvania Fund B Class ("Class B Shares"). Class B
Shares of the Trust may be purchased at a price equal to the next determined
net asset value per share. Class A Shares of the Trust may be purchased at
the public offering price, which is equal to the next determined net asset
value per share, plus a front-end sales charge. The Class A Shares are subject
to a maximum front-end sales charge of 4.75% and annual 12b-1 Plan expenses.
The Class B Shares are subject to a contingent deferred sales charge ("CDSC")
which may be imposed on redemptions made within six years of purchase and 12b-1
Plan expenses which are higher than those to which Class A Shares are subject
and are assessed against the Class B Shares for no longer than approximately
eight years after purchase. See Automatic Conversion of Class B Shares in the
Classes' Prospectus. All references to "shares" in this Part B refer to both
Classes of shares of the Trust, except where noted.
<PAGE> 41
INVESTMENT OBJECTIVE AND POLICY
The objective of the Trust is to seek as high a level of current interest
income exempt from federal income tax and certain Pennsylvania state and
local taxes as is available from municipal bonds and as is consistent with
preservation of capital. There is no assurance that this objective can be
achieved. This objective is a matter of fundamental policy and may not be
changed without shareholder approval.
The Trust seeks to achieve this objective by investing its assets in a
nondiversified portfolio of debt obligations issued by or on behalf of the
Commonwealth of Pennsylvania and its political subdivisions, agencies,
authorities and instrumentalities, certain interstate agencies, Puerto Rico,
the Virgin Islands and certain other territories and qualified obligations of
the United States that pay interest income which, in the opinion of counsel,
is exempt from federal income taxes and from certain Pennsylvania state and
local taxes. However, the Trust may invest not more than 20% of its assets in
debt obligations issued by other states.
The Trust intends to invest at least 80% of its net assets in Pennsylvania
tax-exempt debt obligations which are rated by Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's") at the time of
purchase as being within their top four grades, or which are unrated but
considered by Delaware Management Company, Inc. (the "Manager") to be
comparable in quality to the top four grades. The fourth grade is considered
medium grade and may have speculative characteristics. The Trust may also
invest up to 20% of its net assets in securities with grades lower than the
top four grades of S&P or Moody's, and in comparable unrated securities.
These securities are speculative and may involve greater risk and have higher
yields.
See Appendix A for a description of S&P and Moody's ratings.
The Trust may invest more than 25% of its assets in municipal obligations
relating to similar types of projects or with other similar economic,
business or political characteristics (such as bonds of housing finance
agencies or health care facilities). In addition, the Trust may invest more
than 25% of its assets in industrial development bonds or pollution control
bonds which may be backed only by the assets and revenues of a
nongovernmental user.
<PAGE> 42
The Trust may invest in restricted securities, including unregistered
securities eligible for resale without registration pursuant to Rule 144A
("Rule 144A Securities") under the Securities Act of 1933 (the "1933 Act").
Rule 144A Securities may be freely traded among qualified institutional
investors without registration under the 1933 Act.
Investing in Rule 144A Securities could have the effect of increasing the
level of the Trust's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities. After
the purchase of a Rule 144A Security, however, the Board of Trustees and the
Manager will continue to monitor the liquidity of that security to ensure
that the Trust has no more than 10% of its net assets in illiquid securities.
The Trust may also invest in "when-issued securities" for which the Trust
will maintain a segregated account containing cash or high-grade debt
obligations which it will mark to market daily. When-issued securities
involve commitments to purchase new issues of securities which are offered on
a when-issued basis which usually involve delivery and payment up to 45 days
after the date of transaction. During this period between the date of
commitment and the date of delivery, the Trust does not accrue interest on
the investment, but the market value of the bonds could fluctuate. This would
result in the Trust having unrealized appreciation or depreciation which
would affect the net asset value of its shares.
The Trust will invest its assets in securities of varying maturities,
without limitation, depending on market conditions. Typically, the remaining
maturity of municipal bonds will range between five and 30 years. From time
to time, the Trust may also invest in short-term, tax-free instruments such
as tax-exempt commercial paper and general obligation, revenue and project
notes. The Trust may also invest in variable and floating rate demand
obligations (longer-term instruments with an interest rate that fluctuates
and a demand feature that allows the holder to sell the instruments back to
the issuer from time to time) but does not intend to invest more than 5% of
its net assets in these instruments. The Manager will attempt to adjust the
maturity structure of the portfolio to provide a high level of tax-exempt
income consistent with preservation of capital.
Under abnormal conditions, the Trust may invest in taxable instruments for
temporary defensive purposes. These would include obligations of the U.S.
Government, its agencies and instrumentalities.
The principal risk to which the Trust is subject is price fluctuation due
to changes in interest rates caused by government policies and economic
factors which are beyond the control of the investment manager. In addition,
although some municipal bonds are government obligations backed by the
issuer's full faith and credit, others are only secured by a specific revenue
source and not by the general taxing power. The Trust will invest in both
types.
The Trust is registered as a nondiversified investment company. The Trust
has the ability to invest as much as 50% of its assets in as few as two
issuers provided that no single issuer accounts for more than 25% of the
portfolio. The remaining 50% must be diversified so that no more than 5% is
invested in the securities of a single issuer. Because the Trust may invest
its assets in fewer issuers, the value of Trust shares may fluctuate more
rapidly than if the Trust were fully diversified. In the event the Trust
invests more than 5% of its assets in a single issuer, it would be affected
more than a fully-diversified fund if that issuer encounters difficulties in
satisfying its financial obligations. The Trust may invest without limitation
in U.S. Government and government agency securities backed by the U.S.
Government or its agencies or instrumentalities.
<PAGE> 43
The Trust will invest in securities for income earnings rather than trading
for profit. The Trust will not vary portfolio investments, except to:
1. eliminate unsafe investments and investments not consistent with the
preservation of the capital or the tax status of the investments of the
Trust;
2. honor redemption orders, meet anticipated redemption requirements, and
negate gains from discount purchases;
3. reinvest the earnings from securities in like securities; or
4. defray normal administrative expenses.
Repurchase Agreements--While the Trust is permitted to do so, it normally
does not invest in repurchase agreements, except under some circumstances to
invest cash balances.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the Investment Company Act
of 1940 to allow the Delaware Group funds jointly to invest cash balances.
The Trust may invest cash balances in a joint repurchase agreement in
accordance with the terms of the Order and subject generally to the
conditions described below.
A repurchase agreement is a short-term investment by which the purchaser
acquires ownership of a debt security and the seller agrees to repurchase the
obligation at a future time and set price, thereby determining the yield
during the purchaser's holding period. Should an issuer of a repurchase
agreement fail to repurchase the underlying security, the loss to the Trust,
if any, would be the difference between the repurchase price and the market
value of the security. The Trust will limit its investments in repurchase
agreements to those which the Manager, under the guidelines of the Board of
Trustees, determines to present minimal credit risks and which are of high
quality. In addition, the Trust must have collateral of at least 100% of the
repurchase price, including the portion representing the Trust's yield under
such agreements which is monitored on a daily basis.
Municipal Bonds
The term "municipal bonds" is generally understood to include debt
obligations issued to obtain funds for various public purposes, including the
construction of a wide range of public facilities such as airports, bridges,
highways, housing, hospitals, mass transportation, schools, streets and water
and sewer works. Other public purposes for which municipal bonds may be
issued include the refunding of outstanding obligations, obtaining funds for
general operating expenses and the obtaining of funds to lend to other public
institutions and facilities. In addition, certain types of industrial
development bonds are issued by or on behalf of public authorities to obtain
funds to provide privately-operated housing facilities, sports facilities,
convention or trade show facilities, airport, mass transit, port or parking
facilities, air or water pollution control facilities and certain local
facilities for water supply, gas, electricity or sewage or solid waste
disposals. Such obligations are included within the term "municipal bonds"
provided that the interest paid thereon qualifies as exempt from federal
income tax in the opinion of bond counsel to the issuer. In addition, the
interest paid on industrial development bonds, the proceeds from which are
used for the construction, equipment, repair or improvement of
privately-operated industrial or commercial facilities, may be exempt from
federal income tax, although current federal tax laws place substantial
limitations on the size of such issues.
<PAGE> 44
The practice has developed among municipal issuers of having their issues
insured by various companies. In particular, the Municipal Bond Insurance
Association ("MBIA") and its affiliate, Municipal Bond Investors Assurance
Corporation ("MBIA Corp."), Financial Guaranty Insurance Company ("FGIC") and
the AMBAC Indemnity Corporation ("AMBAC") are presently insuring a great many
issues. It is expected that other insurance associations or companies will
enter this field, and that a substantial portion of municipal bond issues
available for investment by companies such as the Trust will be insured.
Accordingly, from time to time a substantial portion of the Trust's assets
may be invested in municipal bonds insured as to payment of principal and
interest when due by a single insurance company. The Manager will review the
creditworthiness of the issuer and its ability to meet its obligations to pay
interest and repay principal and not the creditworthiness of the private
insurer. However, since insured obligations are typically rated in the top
grades by Moody's and S&P, most insured obligations will qualify for
investment under the Trust's ratings standards discussed above. If the issuer
defaults on payment of interest or principal, the trustee and/or payment
agent of the issuer will notify the insurer who will make payment to the
bondholders. There is no assurance that any insurance company will meet its
obligations. The Trust believes such investments are consistent with its
fundamental investment policies and restrictions.
The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise tax or other specific revenue source,
but not from the general taxing power. Tax-exempt industrial development
bonds are in most cases revenue bonds and do not generally carry the pledge
of the credit of the issuer of such bonds. There are, of course, variations
in the security of municipal bonds, both within a particular classification
and between classifications.
The yields on municipal bonds are dependent on a variety of factors,
including general money market conditions, general conditions of the
municipal bond market, size of a particular offering, maturity of the
obligations and rating of the issue. The imposition of the Trust's management
fee, as well as other operating expenses, will have the effect of reducing
the yield to investors.
<PAGE> 45
The Tax Reform Act of 1986 (the "Act") limits the amount of new "private
purpose" bonds that each state can issue and subjects interest income from
these bonds to the federal alternative minimum tax. "Private purpose" bonds
are issues whose proceeds are used to finance certain nongovernment
activities, and could include some types of industrial revenue bonds such as
privately-owned sports and convention facilities. The Act also makes the
tax-exempt status of certain bonds depend upon the issuer's compliance with
specific requirements after the bonds are issued.
The Trust intends to seek to achieve a high level of tax-exempt income.
However, if the Trust invests in newly-issued private purpose bonds, a
portion of Trust distributions would be subject to the federal alternative
minimum tax applicable to certain shareholders.
Municipal Leases
As stated in the Prospectus, a portion of the Trust's assets may be
invested in municipal lease obligations, primarily through certificates of
participation ("COPs"). COPs function much like installment purchase
agreements and are widely used by state and local governments to finance the
purchase of property. The lease format is generally not subject to
constitutional limitations on the issuance of state debt, and COPs enable a
governmental issuer to increase government liabilities beyond constitutional
debt limits. A principal distinguishing feature separating COPs from
municipal debt is the lease, which contains a "nonappropriation" or
"abatement" clause. This clause provides that, although the municipality will
use its best efforts to make lease payments, it may terminate the lease
without penalty if its appropriating body does not allocate the necessary
funds. The Trust will invest only in COPs rated within the four highest
rating categories of Moody's, S&P or Fitch Investors Service, Inc., or in
unrated COPs believed to be of comparable quality.
The Trust follows certain guidelines to determine whether the COPs held in
the Trust's portfolio constitute liquid investments. These guidelines set
forth various factors to be reviewed by the Manager and which will be
monitored by the Board. Such factors include (a) the credit quality of such
securities and the extent to which they are rated; (b) the size of the
municipal securities market for the Trust both in general and with respect to
COPs; and (c) the extent to which the type of COPs held by the Trust trade on
the same basis and with the same degree of dealer participation as other
municipal bonds of comparable credit rating or quality.
<PAGE> 46
Investment Restrictions--The Trust has adopted the following restrictions
which, along with its investment objective, cannot be changed without
approval by the holders of a "majority of the outstanding voting shares" of
the Trust, which is a vote by the holders of the lesser of a) 67% or more of
the voting securities present in person or by proxy at a meeting, if the
holders of more than 50% of the outstanding voting securities are present or
represented by proxy; or b) more than 50% of the outstanding voting
securities. The percentage limitations contained in the restrictions and
policies set forth herein apply at the time of purchase of securities.
The Trust shall not:
1. Purchase securities other than municipal bonds and taxable short-term
investments as defined above.
2. Borrow money in excess of 10% of the value of its assets and then only
as a temporary measure for extraordinary purposes. Any borrowing will be done
from a bank and to the extent that such borrowing exceeds 5% of the value of
the Trust's assets, asset coverage of at least 300% is required. In the event
that such asset coverage shall at any time fall below 300%, the Trust shall,
within three days thereafter (not including Sunday or holidays) or such
longer period as the Securities and Exchange Commission may prescribe by
rules and regulations, reduce the amount of its borrowings to such an extent
that the asset coverage of such borrowings shall be at least 300%. The Trust
will not issue senior securities as defined in the Investment Company Act of
1940, except for notes to banks. Investment securities will not normally be
purchased while there is an outstanding borrowing.
3. Sell securities short.
4. Write or purchase put or call options.
5. Underwrite the securities of other issuers or purchase securities
subject to restrictions on disposition under the Securities Act of 1933
(so-called "restricted securities"), except that the Trust may participate as
part of a group in bidding for the purchase of municipal bonds directly from
an issuer for its own portfolio in order to take advantage of the lower
purchase price available to members of such a group; nor invest more than 10%
of the value of the Trust's net assets in illiquid assets.
6. Purchase or sell commodities or commodity contracts.
7. Purchase or sell real estate, but this shall not prevent the Trust from
investing in municipal bonds secured by real estate or interests therein.
8. Make loans to other persons except through the use of repurchase
agreements or the purchase of commercial paper. For these purposes the
purchase of a portion of debt securities which is part of an issue to the
public shall not be considered the making of a loan. Not more than 10% of the
Trust's total assets will be invested in repurchase agreements and other
assets maturing in more than seven days.
<PAGE> 47
9. With respect to 50% of the value of the assets of the Trust, invest more
than 5% of its assets in the securities of any one issuer or invest in more
than 10% of the outstanding voting securities of any one issuer, except that
U.S. Government and government agency securities backed by the U.S.
Government or its agencies or instrumentalities may be purchased without
limitation. For the purposes of this limitation, the Trust will regard the
state and each political subdivision, agency or instrumentality of the state,
and each multistate agency of which the state is a member as a separate
issuer.
10. Invest in companies for the purpose of exercising control.
11. Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.
12. Invest more than 25% of its total assets in any particular industry or
industries, except that the Trust may invest more than 25% of the value of
its total assets in municipal bonds, including industrial development and
pollution control bonds, and in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
Although not a fundamental investment restriction, the Trust currently does
not invest its assets in real estate limited partnerships or oil, gas and
other mineral leases.
From time to time, more than 10% of the Trust's assets may be invested in
municipal bonds insured as to payment of principal and interest by a single
insurance company. The Trust believes such investments are consistent with
the foregoing restrictions. If a percentage restriction is adhered to at the
time of investment, a later increase or decrease in percentages resulting
from change in value of net assets will not result in a violation of the
restrictions.
Special Considerations Relating to Pennsylvania Tax-Exempt Securities
The Trust concentrates its investments in the Commonwealth of Pennsylvania.
Therefore, there are risks associated with the Trust that would not be
present if the Trust were diversified nationally. These risks include any new
legislation that would adversely affect Pennsylvania tax-exempt obligations,
regional or local economic conditions that could adversely affect these
obligations, and differing levels of supply and demand for municipal bonds
particular to the Commonwealth of Pennsylvania.
<PAGE> 48
PERFORMANCE INFORMATION
From time to time, the Trust may state total return for each Class in
advertisements and other types of literature. Any statements of total return
performance data will be accompanied by information on the Trust's average
annual compounded total rate of return for that Class over, as relevant, the
most recent one-, five- and ten-year (or life of fund, if applicable)
periods. The Trust may also advertise aggregate and average total return
information for each Class over additional periods of time.
The average annual total rate of return for a Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used
for the actual computations:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of
$1,000 from which the maximum
front-end sales charge with respect to
Class A Shares, if any, is deducted;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical
$1,000 purchase at the end of the period
after the deduction of the applicable
CDSC, if any, with respect to Class B
Shares.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the
maximum front-end sales charge, if any, is deducted from the initial $1,000
investment at the time it is made with respect to the Class A Shares and that
all distributions are reinvested at net asset value and, with respect to the
Class B Shares, includes the CDSC that would be applicable upon complete
redemption of such shares. In addition, the Trust may present total return
information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC.
The performance of the Class A Shares, as shown below, is the average
annual total return quotations for the one-, three-, five-, ten- and
fifteen-year periods ending February 28, 1995, and for the life of the Trust.
The average annual total return for the Class A Shares at offer reflects the
maximum front-end sales charges paid on the purchase of shares. The average
annual total return for Class A Shares at net asset value (NAV) does not
reflect the payment of the maximum front-end sales charge of 4.75%.
Securities prices fluctuated during the periods covered and past results
should not be considered as representative of future performance.
<PAGE> 49
Average Annual Total Return
Class A Shares* Class A Shares*
(at Offer) (at NAV)
1 year ended
2/28/95 (3.89%) 0.91%
3 years ended
2/28/95 4.76% 6.46%
5 years ended
2/28/95 6.48% 7.53%
10 years ended
2/28/95 8.52% 9.05%
15 years ended
2/28/95 8.30% 8.65%
Period 3/23/77**
through 2/28/95 6.30% 6.59%
*Performance figures for periods after May 31, 1992 reflect applicable Rule
12b-1 distribution expenses. Future performance will be affected by such
expenses.
**Date of initial public offering.
The performance of the Class B Shares, as shown below, is the aggregate
total return quotation for the period May 2, 1994 (date of initial public
offering) through February 28, 1995. The aggregate total return for Class B
Shares (including deferred sales charge) reflects the deduction of the
applicable CDSC that would be paid if the shares were redeemed at February
28, 1995. The aggregate total return for Class B Shares (excluding deferred
sales charge) assumes the shares were not redeemed at February 28, 1995 and
therefore does not reflect the deduction of a CDSC.
Aggregate Total Return
Class B Shares Class B Shares
(Including (Excluding
Deferred Sales Deferred Sales
Charge) Charge)
Period 5/2/94*
through 2/28/95 (1.15%) 2.79%
*Date of initial public offering of Class B Shares; total return for this
short of a time period may not be representative of longer-term results.
As stated in the Prospectus, the Trust may also quote its current yield for
each Class in advertisements and investor communications.
<PAGE> 50
The yield computation is determined by dividing the net investment income
per share earned during the period by the maximum offering price per share on
the last day of the period and annualizing the resulting figure, according to
the following formula:
a-b
--- 6
YIELD = 2[( cd +1) -1]
Where: a = dividends and interest earned during the
period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends;
d = the maximum offering price per share on
the last day of the period.
The above formula will be used in calculating quotations of yield of each
Class, based on specified 30-day periods identified in advertising by the
Trust. The yields of the Class A Shares and the Class B Shares as of February
28, 1995 using this formula were 5.18% and 4.62%, respectively. Yield
calculations assume the maximum front-end sales charge, if any, and does not
reflect to deduction of any contingent deferred sales charge. Actual yield
may be affected by variations in sales charges on investments.
Past performance, such as is reflected in quoted yields, should not be
considered as a representation of the results which may be realized from an
investment in either Class of the Trust in the future.
The Trust may also publish a tax-equivalent yield concerning a Class based
on federal and, if applicable, state tax rates, which demonstrates the
taxable yield necessary to produce an after-tax yield equivalent to such
Class' yield. For the 30-day period ended February 28, 1995, the
tax-equivalent yield of the Class A Shares and the Class B Shares was 7.51%
and 6.70%, respectively, assuming a federal income tax rate of 31%. These
yields were computed by dividing that portion of a Class' yield which is
tax-exempt by one minus a stated income tax rate (in this case, a federal
income tax rate of 31%) and adding the product to that portion, if any, of
the yield that is not tax-exempt. In addition, the Trust may advertise a
tax-equivalent yield assuming other income tax rates, when applicable.
Investors should note that the income earned and dividends paid by the
Trust will vary with the fluctuation of interest rates and performance of the
portfolio. The net asset value of the Trust may change. Unlike money market
funds, the Trust invests in longer-term securities that fluctuate in value
and do so in a manner inversely correlated with changing interest rates. The
Trust's net asset value will tend to rise when interest rates fall.
Conversely, the Trust's net asset value will tend to fall as interest rates
rise. Normally, fluctuations in interest rates have a greater effect on the
prices of longer-term bonds. The value of the securities held in the Trust
will vary from day to day and investors should consider the volatility of the
Trust's net asset value as well as its yield before making a decision to
invest.
<PAGE> 51
See Appendix B for additional yield information.
Statistical and performance information and various indices compiled and
maintained by organizations such as the following may also be used in
preparing exhibits comparing certain industry trends and competitive mutual
fund performance to comparable Trust activity and performance and in
illustrating general financial planning principles. From time to time,
certain mutual fund performance ranking information, calculated and provided
by these organizations, may also be used in the promotion of sales in the
Trust. Any indices used are not managed for any investment goal.
CDA Technologies, Inc., Lipper Analytical Services, Inc. and Morningstar,
Inc. are performance evaluation services that maintain statistical
performance databases, as reported by a diverse universe of
independently-managed mutual funds.
Ibbotson Associates, Inc. is a consulting firm that provides a variety of
historical data including total return, capital appreciation and income on
the stock market as well as other investment asset classes, and inflation.
With their permission, this information will be used primarily for
comparative purposes and to illustrate general financial planning principles.
Interactive Data Corporation is a statistical access service that maintains a
database of various international industry indicators, such as historical and
current price/earning information, individual equity and fixed income price
and return information.
Compustat Industrial Databases, a service of Standard & Poor's, may also be
used in preparing performance and historical stock and bond market exhibits.
This firm maintains fundamental databases that provide financial, statistical
and market information covering more than 7,000 industrial and non-industrial
companies.
Salomon Brothers and Lehman Brothers are statistical research firms that
maintain databases of international market, bond market, corporate and
government-issued securities of various maturities. This information, as well
as unmanaged indices compiled and maintained by these firms, will be used in
preparing comparative illustrations.
Current interest rate and yield information on government debt obligations
of various durations, as reported weekly by the Federal Reserve
(Bulletin H.15), may also be used. Also, current rate information on municipal
debt obligations of various durations, as reported daily by the Bond Buyer,
may also be used. The Bond Buyer is published daily and is an industry-
accepted source for current municipal bond market information.
<PAGE> 52
From time to time, the Trust may also quote actual yield and/or total
return performance for each Class in advertising and other types of
literature compared to indices or averages of alternative financial products
available to prospective investors. For example, the performance comparisons
may include the average return of various bank instruments, some of which may
carry certain return guarantees offered by leading banks and thrifts as
monitored by Bank Rate Monitor, and those of corporate bond and government
security price indices of various durations prepared by Lehman Brothers and
Salomon Brothers, Inc. These indices are not managed for any investment goal.
Comparative information on the Consumer Price Index and the CDA Municipal
Bond Index may also be included. The Consumer Price Index, as prepared by the
U.S. Bureau of Labor Statistics, is the most commonly used measure of
inflation. It indicates the cost fluctuations of a representative group of
consumer goods. It does not represent a return from an investment. The CDA
Municipal Bond Index was developed and is maintained by CDA Technologies,
Inc. The Index is comprised of 115 separately-managed municipal bond mutual
funds and tracks the performance of each fund, reflecting the reinvestment of
any dividend and capital gains distributions paid during a specified period.
The total return performance for a Class will reflect the appreciation or
depreciation of principal, reinvestment of income and any capital gains
distributions paid during any indicated period and the impact of the maximum
front-end sales charge or contingent deferred sales charge, if any, paid on
the illustrated investment amount, annualized. The results will not reflect
any income taxes, if applicable, payable by shareholders on the reinvested
distributions included in the calculations. The net asset value of the Trust
fluctuates so shares, when redeemed, may be worth more or less than the
original investment and past Trust performance should not be considered as
representative of future results.
The following table, for purposes of illustration only, reflects the
cumulative total return performance of the Class A Shares for the three-,
six- and nine-month periods ended February 28, 1995, for the one-, three-,
five-, ten- and fifteen-year periods ended February 28, 1995 and for the life
of the Trust. Cumulative total return for the Class B Shares for the three-,
six- and nine-month periods ended February 28, 1995, and the period May 2,
1994 (date of initial public offering) through February 28, 1995 is also
provided below. Comparative information on the Consumer Price Index is also
included.
<PAGE> 53
Cumulative Total Return
Class A Shares* Consumer
(at Offer) Price Index**
3 months ended
2/28/95 0.80% 0.80%
6 months ended
2/28/95 (3.40%) 1.28%
9 months ended
2/28/95 (1.85%) 2.31%
1 year ended
2/28/95 (3.89%) 2.86%
3 years ended
2/28/95 14.97% 8.87%
5 years ended
2/28/95 36.90% 17.89%
10 years ended
2/28/95 126.48% 42.42%
15 years ended
2/28/95 230.65% 91.22%
3/23/77*** through
2/28/95 199.14% 153.67%
*Performance figures for periods after May 31, 1992 reflect applicable Rule
12b-1 distribution expenses. Future performance will be affected by such
expenses.
**Source--Department of Labor.
***Date of initial public offering.
Cumulative Total Return
Class B Shares Class B Shares
(Including (Excluding
Deferred Sales Deferred Sales Consumer
Charge) Charge) Price Index*
3 months ended
2/28/95 1.60% 5.60% 0.80%
6 months ended
2/28/95 (2.98%) 0.95% 1.28%
9 months ended
2/28/95 (1.57%) 2.37% 2.31%
Period 5/2/94**
through 2/28/95 (1.15%) 2.79% 2.37%
*Source--Department of Labor.
**Date of initial public offering of Class B Shares; total return for this
short of a time period may not be representative of longer-term results.
<PAGE> 54
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Trust and other mutual funds in the
Delaware Group, will provide general information about investment
alternatives and scenarios that will allow investors to assess their personal
goals. This information will include general material about investing as well
as materials reinforcing various industry-accepted principles of prudent and
responsible personal financial planning. One typical way of addressing these
issues is to compare an individual's goals and the length of time the
individual has to attain these goals to his or her risk threshold. In
addition, the Distributor will provide information that discusses the
Manager's overriding investment philosophy and how that philosophy impacts
the Trust's, and other Delaware Group funds', investment disciplines employed
in meeting their objectives. The Distributor may also from time to time cite
general or specific information about the institutional clients of the
Manager, including the number of such clients serviced by the Manager.
<PAGE> 55
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Trust shares,
your investment is given yet another opportunity to grow. It's called the
Power of Compounding and the following chart illustrates just how powerful it
can be.
COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a $10,000 investment
compounded monthly tax-free for 10 years:
Thousands
$30-|-----------------------------------------------|
28-| |
26-| |
24-| $22,196 |
22-| $20,097 |---------|
20-| $18,194 |--------| | |
18-|$16,470 |--------| | | | |
16-|-------| | | | | | |
14-| | | | | | | |
12-| | | | | | | |
10-| | | | | | | |
8-| | | | | | | |
6-| | | | | | | |
4-| | | | | | | |
2-| | | | | | | |
0-|-------|--|--------|---|--------|----|---------|
5% 6% 7% 8%
These figures are calculated on a fixed interest rate and assume no
fluctuation in the value of principal. These figures are not intended to be a
projection of investment results and do not reflect the actual performance
results of either of the Classes.
<PAGE> 56
TRADING PRACTICES AND BROKERAGE
The Trust selects brokers, dealers and banks to execute transactions for the
purchase or sale of portfolio securities on the basis of its judgment of
their professional capability to provide the service. The primary
consideration is to have brokers, dealers or banks execute transactions at
best price and execution. Best price and execution refers to many factors,
including the price paid or received for a security, the commission charged,
the promptness and reliability of execution, the confidentiality and
placement accorded the order and other factors affecting the overall benefit
obtained by the account on the transaction. The Trust pays reasonably
competitive brokerage commission rates based upon the professional knowledge
of its trading department as to rates paid and charged for similar
transactions throughout the securities industry. In some instances, the Trust
pays a minimal share transaction cost when the transaction presents no
difficulty. In nearly all instances, trades are made on a net basis where the
Trust either buys the securities directly from the dealer or sells them to
the dealer. In these instances, there is no direct commission charged, but
there is a spread (the difference between the buy and sell price) which is
the equivalent of a commission.
During the fiscal years ended February 28, 1993, February 28, 1994 and
February 28, 1995, no brokerage commissions were paid.
The Manager may allocate out of all commission business generated by all of
the funds and accounts under its management, brokerage business to brokers
or dealers who provide brokerage and research services. These services
include advice, either directly or through publications or writings, as to
the value of securities, the advisability of investing in, purchasing or
selling securities, and the availability of securities or purchasers or
sellers of securities; furnishing of analyses and reports concerning issuers,
securities or industries; providing information on economic factors and
trends; assisting in determining portfolio strategy; providing computer
software and hardware used in security analyses; and providing portfolio
performance evaluation and technical market analyses. Such services are used
by the Manager in connection with its investment decision-making process with
respect to one or more funds and accounts managed by it, and may not be used,
or used exclusively, with respect to the fund or account generating the
brokerage.
As provided in the Securities Exchange Act of 1934 and the Investment
Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services, if such higher commissions
are deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Trust believes that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services
and that such commissions are reasonable in relation to the value of the
brokerage and research services provided. In some instances, services may be
provided to the Manager which constitute in some part brokerage and research
services used by the Manager in connection with its investment
decision-making process and constitute in some part services used by the
Manager in connection with administrative or other functions not related to
its investment decision-making process. In such cases, the Manager will make
a good faith allocation of brokerage and research services and will pay out
of its own resources for services used by the Manager in connection with
administrative or other functions not related to its investment
decision-making process. In addition, so long as no fund is disadvantaged,
portfolio transactions which generate commissions or their equivalent are
allocated to broker/dealers who provide daily portfolio pricing services to
the Trust and to other funds in the Delaware Group. Subject to best price and
execution, commissions allocated to brokers providing such pricing services
may or may not be generated by the funds receiving the pricing service.
<PAGE> 57
The Manager may place a combined order for two or more accounts or funds
engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result
in best price and execution. Transactions involving commingled orders are
allocated in a manner deemed equitable to each account or fund. When a
combined order is executed in a series of transactions at different prices,
each account participating in the order may be allocated an average price
obtained from the executing broker. It is believed that the ability of the
accounts to participate in volume transactions will generally be beneficial
to the accounts and funds. Although it is recognized that, in some cases, the
joint execution of orders could adversely affect the price or volume of the
security that a particular account or fund may obtain, it is the opinion of
the Manager and the Board of Trustees that the advantages of combined orders
outweigh the possible disadvantages of separate transactions.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Trust may place orders with broker/dealers that have agreed to
defray certain Trust expenses such as custodian fees, and may, at the request
of the Distributor, give consideration to sales of its shares as a factor in
the selection of brokers and dealers to execute Trust portfolio transactions.
Portfolio Turnover
Portfolio trading will be undertaken principally to accomplish the Trust's
objective in relation to anticipated movements in the general level of
interest rates. The Trust is free to dispose of portfolio securities at any
time, subject to complying with the Internal Revenue Code and the Investment
Company Act of 1940, when changes in circumstances or conditions make such a
move desirable in light of the investment objective. The Trust will not
attempt to achieve or be limited to a predetermined rate of portfolio
turnover, such a turnover always being incidental to transactions undertaken
with a view to achieving the Trust's investment objective. Portfolio
transactions will be undertaken only to accomplish the Trust's objectives and
not for the purpose of realizing capital gains, although capital gains may be
realized on certain portfolio transactions. For example, capital gains may be
realized when a security is sold: (1) so that, provided capital is preserved
or enhanced, another security can be purchased to obtain a higher yield; (2)
to take advantage of what the Manager believes to be a temporary disparity in
the normal yield relationship between the two securities to increase income
or improve the quality of the portfolio; (3) to purchase a security which the
Manager believes is of higher quality than its rating or current market value
would indicate; or (4) when the Manager anticipates a decline in value due to
market risk or credit risk. The Trust anticipates the portfolio turnover rate
will ordinarily be less than 100%.
<PAGE> 58
During the past two fiscal years, the Trust's portfolio turnover rates were
14% for 1994 and 18% for 1995. The Trust's portfolio turnover rate is
calculated by dividing the lesser of purchases or sales of portfolio
securities for the particular fiscal year by the monthly average of the value
of the portfolio securities owned by the Trust during the particular fiscal
year, exclusive of securities whose maturities at the time of acquisition are
one year or less.
PURCHASING SHARES
The Distributor serves as the national distributor for the Trust's shares,
and has agreed to use its best efforts to sell shares of the Trust. See the
Prospectus for additional information on how to invest. Shares of the Trust
are offered on a continuous basis, and may be purchased through authorized
investment dealers or directly by contacting the Trust or its agent. The
minimum initial purchase for each of the Classes is $1,000. Subsequent
purchases must be at least $25 with respect to the Class A Shares and $100
with respect to the Class B Shares. Class B Shares are also subject to a
maximum purchase limitation of $250,000. The Trust will therefore reject any
order for purchase of more than $250,000 of Class B Shares. Selling dealers
have the responsibility of transmitting orders promptly. The Trust reserves
the right to reject any order for the purchase of its shares if in the
opinion of management such rejection is in the Trust's best interest.
Certificates representing shares purchased are not ordinarily issued unless
a shareholder submits a specific request. Certificates are not issued in the
case of the Class B Shares. However, purchases not involving the issuance of
certificates are confirmed to the investor and credited to the shareholder's
account on the books maintained by Delaware Service Company, Inc. (the
"Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that
is permitted to obtain a certificate may receive a certificate representing
shares purchased by sending a letter to the Transfer Agent requesting the
certificate. No charge is made for any certificate issued. Investors who hold
certificates representing any of their shares may only redeem those shares by
written request. The investor's certificate(s) must accompany such request.
<PAGE> 59
The NASD has adopted amendments to its Rules of Fair Practice relating to
investment company sales charges. The Trust and the Distributor intend to
operate in compliance with these rules.
Class A Shares are purchased at the offering price, which reflects a
maximum front-end sales charge of 4.75%; however, lower front-end sales
charges apply for larger purchases. See the following table. Class A Shares
are also subject to annual 12b-1 Plan expenses.
Class B Shares are purchased at net asset value and are subject to a CDSC
of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii)
2% if shares are redeemed during the fifth year following purchase; and (iv)
1% if shares are redeemed during the sixth year following purchase. Class B
Shares are also subject to 12b-1 Plan expenses which are higher than those to
which Class A Shares are subject and are assessed against the Class B Shares
for no longer than approximately eight years after purchase. See Automatic
Conversion of Class B Shares in the Prospectus, and Determining Offering
Price and Net Asset Value and Plans Under Rule 12b-1 in this Part B.
Alternative Purchase Arrangements
The alternative purchase arrangements of the Class A and Class B Shares
permit investors to choose the method of purchasing shares that is most
beneficial given the amount of their purchase, the length of time they expect
to hold their shares and other relevant circumstances. Investors should
determine whether, under their particular circumstances, it is more
advantageous to purchase the Class A Shares and incur a front-end sales
charge and annual 12b-1 Plan expenses of up to a maximum of .30% of the average
daily net assets of the Class A Shares or to purchase the Class B Shares
and have the entire initial purchase price invested in the Trust with the
investment thereafter subject to a CDSC if shares are redeemed within six
years of purchase and annual 12b-1 Plan expenses of 1% (.25% of which are
service fees to be paid by the Trust to the Distributor, dealers or others
for providing personal service and/or maintaining shareholder accounts) of
the average daily net assets of the Class B Shares for no longer than
approximately eight years after purchase.
Class A Shares
Purchases of $100,000 or more of the Class A Shares at the offering price
currently carry reduced front-end sales charges as shown in the accompanying
table, and may include a series of purchases over a 13-month period under a
Letter of Intention signed by the purchaser. See Special Purchase
Features--Class A Shares for more information on ways in which investors can
avail themselves of reduced front-end sales charges and other purchase
features.
<PAGE> 60
Tax-Free Pennsylvania Fund A Class
- -----------------------------------------------------------------------------
Front-End Sales Dealer's
Charge as % of Concession**
Offering Amount as % of
Amount of Purchase Price Invested Offering Price
- -----------------------------------------------------------------------------
Less than $100,000 4.75% 5.01% 4.00%
$100,000 but under $250,000 3.75 3.90 3.00
$250,000 but under $500,000 2.50 2.56 2.00
$500,000 but under $1,000,000* 2.00 2.04 1.60
*There is no front-end sales charge on purchases of $1 million or more but,
under certain limited circumstances, a 1% contingent deferred sales charge
may apply. The contingent deferred sales charge ("Limited CDSC") that may be
applicable to purchases of Class A Shares arises only in the case of certain
net asset value purchases which have triggered the payment of a dealer's
commission.
- ------------------------------------------------------------------------------
The Trust must be notified when a sale takes place which would qualify for
the reduced front-end sales charge on the basis of previous purchases and
current purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by the Trust. Such reduced
front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the
Distributor may reallow dealers up to the full front-end sales charge shown
above. Dealers who receive 90% or more of the sales charge may be deemed to
be underwriters under the 1933 Act.
**Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- ------------------------------------------------------------------------------
Certain dealers who enter into an agreement to provide extra training and
information on Delaware Group products and services and to increase sales of
Delaware Group funds may receive an additional concession of up to .15% of
the offering price in connection with sales of Class A Shares. Such dealers
must meet certain requirements in terms of organization and distribution
capabilities and their ability to increase sales. The Distributor should be
contacted for further information on these requirements as well as the basis
and circumstances upon which the additional concession will be paid.
Participating dealers may be deemed to have additional responsibilities under
the securities laws.
Dealer's Commission--Class A Shares
For initial purchases of Class A Shares of $1,000,000 or more made on or
after June 1, 1993, a dealer's commission may be paid by the Distributor to
financial advisers through whom such purchases are effected in accordance
with the following schedule:
Dealer's Commission
-------------------
Amount of Purchase (as a percentage of
------------------ amount purchased)
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
<PAGE> 61
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds, as to
which a Limited CDSC applies (see Redemption and Repurchase) may be
aggregated with those of the Class A Shares of the Trust. Financial advisers
should contact the Distributor concerning the applicability and calculation
of the dealer's commission in the case of combined purchases. Financial
advisers also may be eligible for a dealer's commission in connection with
certain purchases made under a Letter of Intention or pursuant to an
investor's Right of Accumulation. The Distributor also should be consulted
concerning the availability of and program for these payments.
An exchange from other Delaware Group funds will not qualify for payment of
the dealer's commission, unless such exchange is from a Delaware Group fund
with assets as to which a dealer's commission or similar payment has not been
previously paid. The schedule and program for payment of the dealer's
commission are subject to change or termination at any time by the
Distributor in its discretion.
Class B Shares
Class B Shares are purchased without the imposition of a front-end sales
charge at the time of purchase. Class B Shares redeemed within six years of
purchase may be subject to a CDSC at the rates set forth below, charged as a
percentage of the dollar amount subject thereto. The charge will be assessed
on an amount equal to the lesser of the net asset value at the time of
purchase of the shares being redeemed or the net asset value of the shares at
the time of redemption. Accordingly, no CDSC will be imposed on increases in
net asset value above the initial purchase price. In addition, no CDSC will
be assessed on redemption of shares received upon reinvestment of dividends
or capital gains. See the Prospectus under Buying Shares--Contingent Deferred
Sales Charge for a list of the instances in which the CDSC is waived.
The following table sets forth the rates of the CDSC for the Class B Shares
of the Trust:
Contingent Deferred
Sales Charge
(as a Percentage of
Year After Dollar Amount
Purchase Made Subject to Charge)
------------- --------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase, and thereafter, until converted
automatically into Class A Shares of the Trust, the Class B Shares will
continue to be subject to annual 12b-1 Plan expenses of 1% of average daily
net assets representing such shares. At the end of no more than approximately
eight years after purchase, the investor's Class B Shares will be
automatically converted into Class A Shares of the Trust. See Automatic
Conversion of Class B Shares in the Prospectus. Such conversion will constitut
e a tax-free exchange for federal income tax purposes. See Taxes in the
Prospectus for Class A and Class B Shares.
<PAGE> 62
Plans Under Rule 12b-1
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Trust
has adopted a separate plan for each of the Class A Shares and the Class B
Shares of the Trust (the "Plans"). The Plan relating to the Class A Shares
permits the Trust to pay for certain distribution, promotional and related
expenses involved in the marketing of only the Class A Shares. Similarly, the
Plan relating to the Class B Shares permits the Trust to pay for certain
distribution, promotional and related expenses involved in the marketing of
only the Class B Shares.
The Plans permit the Trust, pursuant to a Distribution Agreement, to pay
out of the respective assets of the Class A Shares and Class B Shares monthly
fees to the Distributor for its services and expenses in distributing and
promoting sales of the shares of the Classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to
securities brokers and dealers who enter into agreements with the
Distributor. The 12b-1 Plan expenses relating to the Class B Shares are also
used to pay the Distributor for advancing the commission costs to dealers
with respect to the initial sale of such shares.
In addition, the Trust may make payments out of the respective assets of
the Class A Shares and the Class B Shares directly to other unaffiliated
parties, such as banks, who either aid in the distribution of their shares or
provide services to the Classes.
The maximum aggregate fee payable by the Trust under the Plans, and the
agreements relating to distribution, is on an annual basis .30% of the Class
A Shares' average daily net assets for the year, and 1% (.25% of which are
service fees to be paid by the Trust to the Distributor, dealers and others
for providing personal service and/or maintaining shareholder accounts) of
the Class B Shares' average daily net assets for the year. The Trust's Board
of Trustees may reduce these amounts at any time. The Distributor has agreed
to waive this distribution fee to the extent such fee for any day exceeds the
net investment income realized by the Classes for such day.
Effective June 1, 1992, the Board of Trustees has determined that the
annual fee payable on a monthly basis for the Class A Shares, pursuant to its
Plan, will be equal to the sum of: (i) the amount obtained by multiplying
.30% by the average daily net assets represented by the Class A Shares that
were acquired by shareholders on or after June 1, 1992, and (ii) the amount
obtained by multiplying .10% by the average daily net assets represented by
the Class A Shares that were acquired before June 1, 1992. While this is the
method for calculating the Class A Shares' 12b-1 expense, such expense is a
Class expense so that all such shareholders of the Class, regardless of when
they purchased their shares, will bear 12b-1 expenses at the same rate per
share. As Class A Shares are sold on or after June 1, 1992, the initial rate
of at least .10% will increase over time. Thus, as the proportion of Class A
Shares purchased on or after June 1, 1992 to Class A Shares outstanding prior
to June 1, 1992 increases, the expenses attributable to payments under the
Plan relating to the Class A Shares will also increase (but will not exceed
.30% of average daily net assets). While this describes the current formula
for calculating the fees which will be payable under the Plan relating to the
Class A Shares, such Plan permits the Trust to pay a full .30% on all assets
of the Class A Shares at any time.
<PAGE> 63
All of the distribution expenses incurred by the Distributor and others,
such as broker/dealers, in excess of the amount paid on behalf of the Class A
Shares and the Class B Shares will be borne by such persons without any
reimbursement from the Classes. Subject to seeking best price and execution,
the Classes may, from time to time, buy or sell portfolio securities from or
to firms which receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans, the Distribution Agreement and the form of dealer's and services
agreements relating thereto have all been approved by the Board of Trustees,
including a majority of the trustees who are not "interested persons" (as
defined in the Investment Company Act of 1940) of the Trust and who have no
direct or indirect financial interest in the Plans or any related agreements,
by vote cast in person at a meeting duly called for the purpose of voting on
the Plans and such Agreements. Continuation of the Plans, the Distribution
Agreement and form of dealer's and services agreements must be approved
annually by the Board of Trustees in the same manner, as specified above.
Each year, the trustees must determine whether continuation of the Plans is
in the best interest of shareholders of, respectively, the Class A Shares and
Class B Shares and that there is a reasonable likelihood of the Plan relating
to a Class providing a benefit to that Class. The Plans, the Distribution
Agreement and the dealer's and services agreements with any broker/dealers or
others may be terminated at any time without penalty by a majority of those
trustees who are not "interested persons" or by a majority vote of the
outstanding voting securities of the relevant Class. Any amendment materially
increasing the percentage payable under the Plans must likewise be approved
by a majority vote of the outstanding voting securities of the relevant
Class, as well as by a majority vote of those trustees who are not
"interested persons." Also, any other material amendment to the Plans must be
approved by a majority vote of the trustees including a majority of the
noninterested trustees having no interest in the Plans. In addition, in order
for the Plans to remain effective, the selection and nomination of trustees
who are not "interested persons" of the Trust must be effected by the
trustees who themselves are not "interested persons" and who have no direct
or indirect financial interest in the Plans. Persons authorized to make
payments under the Plans must provide written reports at least quarterly to
the Board of Trustees for their review.
<PAGE> 64
During the fiscal year ended February 28, 1995, payments from the Class A
Shares pursuant to its Plan amounted to $1,734,143 and such payments were
used for the following purposes: Annual and Semi-Annual Reports--$15,650;
Broker Trails--$1,437,250; Commissions to Wholesalers--$154,526; Dealer
Service Expenses--$9,862; Promotional-Broker Meetings--$33,301; Promotional-
Other--$13,392; Prospectus Printing--$2,109; and Wholesaler Expenses--$68,053.
For the period May 2, 1994 (date of initial public offering) through
February 28, 1995, payments from the Class B Shares pursuant to its Plan
amounted to $43,258 and such payments were used for the following purposes:
Broker Sales Charge--$15,011; Broker Trails--$10,684; Commissions to
Wholesalers--$2,264; Interest on Broker Sales Charge--$15,271; and Telephone
$28.
Other Payments to Dealers--Class A and Class B Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional
payment of up to .25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to dealers that
sell shares of the Delaware Group of funds. In some instances, these
incentives or payments may be offered only to certain dealers who maintain,
have sold or may sell certain amounts of shares.
In connection with the sale of Delaware Group fund shares, the Distributor
may, at its own expense, pay to participate in or reimburse dealers with whom
it has a selling agreement for expenses incurred in connection with seminars
and conferences sponsored by such dealers and may pay or allow additional
promotional incentives, which shall include non-cash concessions, such as
certain luxury merchandise or a trip to or attendance at a business or
investment seminar at a luxury resort, in the form of sales contests to
dealers who sell shares of the funds. Such seminars and conferences and the
terms of such sales contests must be preapproved by the Distributor. Payment
may be up to 100% of the expenses incurred or awards made in connection with
seminars, conferences or contests relating to the promotion of fund shares.
The Distributor may also pay a portion of the expense of preapproved dealer
advertisements promoting the sale of Delaware Group fund shares.
Special Purchase Features--Class A Shares
Buying at Net Asset Value
The Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the 12-Month
Reinvestment Privilege and the Exchange Privilege.
Current and former officers, trustees and employees of the Trust, any other
fund in the Delaware Group, the Manager, any affiliate, and any fund or
<PAGE> 65
affiliate that may in the future be created, legal counsel to the funds and
registered representatives and employees of broker/dealers who have entered
into Dealer's Agreements with the Distributor may purchase Class A Shares and
any such class of shares of any of the funds in the Delaware Group, including
any fund that may be created, at net asset value per share. Spouses, parents,
brothers, sisters and children (regardless of age) of such persons at their
direction, and any employee benefit plan established by any of the foregoing
funds, corporations, counsel or broker/dealers may also purchase Class A Shares
at net asset value. Purchases of Class A Shares may also be made by clients
of registered representatives of an authorized investment dealer at net asset
value within six months of a change of the registered representative's
employment, if the purchase is funded by proceeds from an investment where a
front-end sales charge has been assessed and the redemption of the investment
did not result in the imposition of a contingent deferred sales charge or
other redemption charges. Purchase of Class A Shares also may be made at net
asset value by bank employees that provide services in connection with
agreements between the bank and unaffiliated brokers or dealers concerning
sales of Class A Shares. Also, officers, directors and key employees of
institutional clients of the Manager, or any of its affiliates, may purchase
Class A Shares at net asset value. Moreover, purchases may be effected at net
asset value for the benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such broker,
dealer or investment adviser has entered into an agreement with the
Distributor providing specifically for the purchase of Class A Shares in
connection with special investment products, such as wrap accounts or similar
fee based programs. Such purchasers are required to sign a letter stating that
the purchase is for investment only and that the securities may not be resold
except to the issuer. Such purchasers may also be required to sign or deliver
such other documents as the Trust may reasonably require to establish
eligibility for purchase at net asset value. The Trust must be notified in
advance that the trade qualifies for purchase at net asset value.
Beginning December 1, 1994, Class A Shares of the Trust may be purchased at
net asset value within 90 days after a redemption of shares from a fund
outside the Delaware Group of funds provided that: 1) the redeemed shares
were purchased no more than five years before the proposed purchase of Class
A Shares of the Trust; and 2) a front-end sales charge was paid in connection
with the purchase of the redeemed shares or a contingent deferred sales
charge was paid upon their redemption.
Letter of Intention
The reduced front-end sales charges described above with respect to the
Class A Shares are also applicable to the aggregate amount of purchases made
by any such purchaser previously enumerated within a 13-month period pursuant
to a written Letter of Intention provided by the Distributor and signed by
the purchaser, and not legally binding on the signer or the Trust, which
<PAGE> 66
provides for the holding in escrow by the Transfer Agent of 5% of the total
amount of Class A Shares intended to be purchased until such purchase is
completed within the 13-month period. A Letter of Intention may be dated to
include shares purchased up to 90 days prior to the date the Letter is
signed. The 13-month period begins on the date of the earliest purchase. If
the intended investment is not completed, except as noted below, the
purchaser will be asked to pay an amount equal to the difference between the
front-end sales charge on the Class A Shares purchased at the reduced rate
and the front-end sales charge otherwise applicable to the total shares
purchased. If such payment is not made within 20 days following the
expiration of the 13-month period, the Transfer Agent will surrender an
appropriate number of the escrowed shares for redemption in order to realize
the difference. Such purchasers may include the value (at offering price at
the level designated in their Letter of Intention) of all their shares of the
Trust and of any class of any of the other mutual funds in the Delaware Group
(except shares of any Delaware Group fund which do not carry a front-end
sales charge or contingent deferred sales charge, other than shares of
Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through
an exchange from shares which do) previously purchased and still held as of
the date of their Letter of Intention toward the completion of such Letter.
For purposes of satisfying an investor's obligation under a Letter of
Intention, Class B Shares of the Trust and the corresponding class of shares
of other Delaware Group funds which offer such shares may be aggregated with
the Class A Shares of the Trust and the corresponding class of shares of the
other Delaware Group funds.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to the Class A Shares, purchasers may
combine the total amount of any combination of the Classes of the Trust as
well as any other class of any of the other Delaware Group funds (except
shares of any Delaware Group fund which do not carry a front-end sales charge
or contingent deferred sales charge, other than shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange
from shares which do).
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under the
age 21; or a trustee or other fiduciary of trust estates or fiduciary
accounts for the benefit of such family members (including certain employee
benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge with
respect to the Class A Shares, purchasers may also combine any subsequent
purchases of the Classes of the Trust as well as any other class of any of
the other Delaware Group funds which offer such classes (except shares of any
<PAGE> 67
Delaware Group fund which do not carry a front-end sales charge or contingent
deferred sales charge, other than shares of Delaware Group Premium Fund, Inc.
beneficially owned in connection with the ownership of variable insurance
products, unless they were acquired through an exchange from shares which
do). If, for example, any such purchaser has previously purchased and still
holds Class A Shares and/or shares of any other of the classes described in
the previous sentence with a value of $40,000 and subsequently purchases
$60,000 at offering price of additional shares of the Class A Shares, the
charge applicable to the $60,000 purchase would currently be 3.75%. For the
purpose of this calculation, the shares presently held shall be valued at the
public offering price that would have been in effect were the shares
purchased simultaneously with the current purchase. Investors should refer
to the table of sales charges for Class A Shares to determine the
applicability of the Right of Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Shareholders of the Class A Shares who redeem such shares of the Trust have
one year from the date of redemption to reinvest all or part of their
redemption proceeds in Class A Shares of the Trust or in Class A Shares of
any of the other funds in the Delaware Group, subject to applicable
eligibility and minimum purchase requirements, in states where their shares
may be sold, at net asset value without the payment of a front-end sales
charge. This privilege does not extend to Class A Shares where the redemption
of the shares triggered the payment of a Limited CDSC. Persons investing
redemption proceeds from direct investments in mutual funds in the Delaware
Group offered without a front-end sales charge will be required to pay the
applicable sales charge when purchasing Class A Shares. The reinvestment
privilege does not extend to redemption of Class B Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at
the net asset value next determined after receipt of remittance. A redemption
and reinvestment could have income tax consequences. It is recommended that a
tax adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will
be treated like all other initial purchases of a fund's shares. Consequently,
an investor should obtain and read carefully the prospectus for the fund in
which the investment is proposed to be made before investing or sending
money. The prospectus contains more complete information about the fund,
including charges and expenses.
Investors should consult their financial advisers or the Transfer Agent,
which also serves as the Trust's shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Purchases of Class A Shares Made at Net Asset Value under Redemption
and Exchange in the Prospectus) in connection with the features described
above.
<PAGE> 68
INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from net
investment income and distributions from realized securities profits, if any,
will be automatically reinvested in additional shares of the respective Class
(based on the net asset value in effect on the payable date) and credited to
the shareholder's account on that date. Confirmations of each dividend
payment from net investment income and of any distributions from realized
securities profits will be mailed to shareholders in the first quarter of the
fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and add
full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the Trust
for $25 or more with respect to the Class A Shares and $100 or more with
respect to the Class B Shares. Such purchases are made for the Class A Shares
at the public offering price and for the Class B Shares at the net asset
value, at the end of the day of receipt. A reinvestment plan may be
terminated at any time. This plan does not assure a profit nor protect
against depreciation in a declining market.
Reinvestment of Dividends in Other
Delaware Group Funds
Subject to applicable eligibility and minimum purchase requirements of each
fund and the limitations set forth below, shareholders of the Class A Shares
and Class B Shares may automatically reinvest dividends and/or distributions
from the Trust in any of the other mutual funds in the Delaware Group,
including the Trust, in states where their shares may be sold. Such
investments will be at net asset value at the close of business on the
reinvestment date without any front-end sales charge or service fee. The
shareholder must notify the Transfer Agent in writing and must have
established an account in the fund into which the dividends and/or
distributions are to be invested. Any reinvestment directed to a fund in
which the investor does not then have an account, will be treated like all
other initial purchases of a fund's shares. Consequently, an investor should
obtain and read carefully the prospectus for the fund in which the investment
is proposed to be made before investing or sending money. The prospectus
contains more complete information about the fund, including charges and
expenses. See also Dividend Reinvestment Plan in the Prospectus.
Subject to the following limitations, dividends and/or distributions from
other funds in the Delaware Group may be invested in shares of the Trust at
net asset value, provided an account has been established. Dividends from the
Class A Shares may not be directed to the Class B Shares of another fund in
the Delaware Group. Dividends from the Class B Shares may only be directed to
the Class B Shares of another fund in the Delaware Group that offers such a
class of shares. See Class B Funds in the Prospectus for the funds in the
Delaware Group that are eligible for investment by holders of Trust shares.
<PAGE> 69
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors of the Class A Shares and the Class
B Shares may arrange for the Trust to accept for investment, through an agent
bank, preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends,
and disability or pension fund benefits. It also eliminates lost, stolen and
delayed checks.
Automatic Investing Plan--Shareholders of the Class A Shares and Class B
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into the Class.
This type of investment will be handled in either of the two ways noted
below. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month
at a specified date although no check is required to initiate the
transaction. (2) If the shareholder's bank is not a member of NACHA,
deductions will be made by preauthorized checks, known as Depository Transfer
Checks. Should the shareholder's bank become a member of NACHA in the future,
his or her investments would be handled electronically through EFT.
* * *
Investments under the Direct Deposit Purchase Plan and the Automatic
Investing Plan must be for $25 or more with respect to the Class A Shares and
$100 or more with respect to the Class B Shares. An investor wishing to take
advantage of either service must complete an authorization form. Either
service can be discontinued by the shareholder at any time without penalty by
giving written notice.
Payments to the Trust from the federal government or its agencies on behalf
of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any
such payments are subject to reclamation by the federal government or its
agencies. Similarly, under certain circumstances, investments from private
sources may be subject to reclamation by the transmitting bank. In the event
of a reclamation, the Trust may liquidate sufficient shares from a
shareholder's account to reimburse the government or the private source. In
the event there are insufficient shares in the shareholder's account, the
shareholder is expected to reimburse the Trust.
<PAGE> 70
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer, to
make investments directly to their Trust accounts. The Trust will accept
these investments, such as bank-by-phone, annuity payments and payroll
allotments, by mail directly from the third party. Investors should contact
their employers or financial institutions who in turn should contact the
Trust for proper instructions.
DETERMINING OFFERING
PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering price
next calculated by the Trust after receipt of the order by the Trust or its
agent. Orders for purchases of Class B Shares are effected at the net asset
value per share next calculated by the Trust after receipt of the order by
the Trust or its agent. Selling dealers have the responsibility of
transmitting orders promptly.
The offering price for the Class A Shares consists of the net asset value
per share plus any applicable front-end sales charges. Offering price and net
asset value are computed as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when such exchange
is open. The New York Stock Exchange is scheduled to be open Monday through
Friday throughout the year except for New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. When the New York Stock Exchange is closed, the Trust will
generally be closed, pricing calculations will not be made and purchase and
redemption orders will not be processed.
An example showing how to calculate the net asset value per share and, in
the case of the Class A Shares, the offering price per share, is included in
the Trust's financial statements which are incorporated by reference into
this Part B.
The Trust's net asset value per share is computed by adding the value of
all securities and other assets in the portfolio, deducting any liabilities
and dividing by the number of Trust shares outstanding. In determining the
Trust's total net assets, portfolio securities are valued at fair value,
using methods determined in good faith by the trustees. This method utilizes
the services of an independent pricing organization which employs a
combination of methods including, among others, the obtaining of market
valuations from dealers who make markets and deal in such securities, and by
comparing valuations with those of other comparable securities in a matrix of
such securities. A pricing service's activities and results are reviewed by
the officers of the Trust. In addition, money market instruments having a
maturity of less than 60 days are valued at amortized cost. Expenses and fees
are accrued daily.
Each Class of the Trust will bear, pro-rata, all of the common expenses of
the Trust. The net asset values of all outstanding shares of each Class of
the Trust will be computed on a pro-rata basis for each outstanding share
based on the proportionate participation in the Trust represented by the
value of shares of that Class. All income earned and expenses incurred by the
Trust will be borne on a pro-rata basis by each outstanding share of a Class,
based on each Class' percentage in the Trust represented by the value of
shares of such Classes, except that shares of the Classes alone will bear the
12b-1 Plan fees payable under their respective Plans. Due to the specific
distribution expenses and other costs that would be allocable to each Class,
the dividends paid to each Class of the Trust may vary. However, the net
asset value per share of each Class is expected to be equivalent.
<PAGE> 71
REDEMPTION AND
REPURCHASE
Any shareholder may require the Trust to redeem shares by sending a written
request, signed by the record owner or owners exactly as the shares are
registered, to the Trust, 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. The Trust does not issue
certificates for the Class A Shares, unless a shareholder specifically
requests them. The Trust does not issue certificates for Class B Shares. If
stock certificates have been issued for shares being redeemed, they must
accompany the written request. For redemptions of $50,000 or less paid to the
shareholder at the address of record, the Trust requires a request signed by
all owners of the shares or the investment dealer of record, but does not
require signature guarantees. When the redemption is for more than $50,000,
or if payment is made to someone else or to another address, signatures of
all record owners are required and a signature guarantee is required. Each
signature guarantee must be supplied by an eligible guarantor institution.
The Trust reserves the right to reject a signature guarantee supplied by an
eligible institution based on its creditworthiness. The Trust may request
further documentation from corporations, retirement plans, executors,
administrators, trustees or guardians.
In addition to redemption of shares by the Trust, the Distributor, acting
as agent of the Trust, offers to repurchase Trust shares from broker/dealers
acting on behalf of shareholders. The redemption or repurchase price, which
may be more or less than the shareholder's cost, is the net asset value per
share next determined after receipt of the request in good order by the Trust
or its agent, less any applicable contingent deferred sales charge. This is
computed and effective at the time the offering price and net asset value are
determined. See Determining Offering Price and Net Asset Value. The Trust and
the Distributor end their business day at 5 p.m., Eastern time. This offer is
discretionary and may be completely withdrawn without further notice by the
Distributor.
Orders for the repurchase of Trust shares which are submitted to the
Distributor prior to the close of its business day will be executed at the
net asset value per share computed that day (less any applicable contingent
deferred sales charge), if the repurchase order was received by the
broker/dealer from the shareholder prior to the time the offering price and
net asset value are determined on such day. The selling dealer has the
responsibility of transmitting orders to the Distributor promptly. Such
repurchase is then settled as an ordinary transaction with the broker/dealer
(who may make a charge to the shareholder for this service) delivering the
shares repurchased.
<PAGE> 72
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales
Charge for Certain Purchases of Class A Shares Made at Net Asset Value under
Redemption and Exchange in the Trust's Prospectus. Redemptions of Class B
Shares are subject to the following CDSC: (i) 4% if shares are redeemed
within two years of purchase; (ii) 3% if shares are redeemed during the third
or fourth year following purchase; (iii) 2% if shares are redeemed during the
fifth year following purchase; and (iv) 1% if shares are redeemed during the
sixth year following purchase. See Contingent Deferred Sales Charge under
Buying Shares in the Trust's Prospectus. Except for such contingent deferred
sales charges, and with respect to the expedited payment by wire described
below, for which there is currently a $7.50 bank wiring cost, neither the
Trust nor the Distributor charges a fee for redemptions or repurchases, but
such fees could be charged at any time in the future.
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption
request in good order.
If a shareholder who recently purchased shares by check seeks to redeem all
or a portion of those shares in a written request, the Trust will honor the
redemption request but will not mail the proceeds until it is reasonably
satisfied of the collection of the investment check. This potential delay can
be avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason,
the Trust will automatically redeem from the shareholder's account the Trust
shares purchased by the check plus any dividends earned thereon. Shareholders
may be responsible for any losses to the Trust or to the Distributor.
In case of a suspension of the determination of the net asset value because
the New York Stock Exchange is closed for other than weekends or holidays, or
trading thereon is restricted or an emergency exists as a result of which
disposal by the Trust of securities owned by it is not reasonably practical,
or it is not reasonably practical for the Trust fairly to value its assets,
or in the event that the Securities and Exchange Commission has provided for
such suspension for the protection of shareholders, the Trust may postpone
payment or suspend the right of redemption or repurchase. In such case, the
shareholder may withdraw the request for redemption or leave it standing as a
request for redemption at the net asset value next determined after the
suspension has been terminated.
<PAGE> 73
Payment for shares redeemed or repurchased may be made either in cash or
kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering
Price and Net Asset Value. Subsequent sale by an investor receiving a
distribution in kind could result in the payment of brokerage commissions.
However, the Trust has elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940 pursuant to which the Trust is obligated to
redeem its shares solely in cash up to the lesser of $250,000 or 1% of the
net asset value of the Trust during any 90-day period for any one
shareholder.
The value of the Trust's investments is subject to changing market prices.
Thus, a shareholder reselling shares to the Trust may sustain either a gain
or loss, depending upon the price paid and the price received for such
shares.
Small Accounts
Due to the relatively higher costs of maintaining small accounts, the Trust
reserves the right to redeem shares in any of its accounts at the
then-current net asset value if the total investment in the Trust has a value
of less than $1,000 as a result of redemptions. As a consequence, an investor
who makes only the minimum investment in a Class will be subject to
involuntary redemption if any portion of the investment is redeemed. Before
the Trust redeems such shares and sends the proceeds to the shareholder, the
shareholder will be notified in writing that the value of the shares in the
account is less than $1,000 and will be allowed 60 days from that date of
notice to make an additional investment to meet the required minimum of
$1,000. Any redemption in an inactive account established with a minimum
investment may trigger mandatory redemption. No contingent deferred sales
charge will apply to the redemptions described in this paragraph of the Class
A and Class B Shares.
Expedited Telephone Redemptions
The Trust has available certain redemption privileges, as described below.
The Trust reserves the right to suspend or terminate these expedited payment
procedures upon 60 days' written notice to shareholders.
Shareholders or their investment dealers of record wishing to redeem any
amount of shares of $50,000 or less for which certificates have not been
issued may call the Trust at 800-523-1918 (in Philadelphia, 215-988-1241)
prior to the time the offering price and net asset value are determined, as
noted above, and have the proceeds mailed to them at the record address.
Checks payable to the shareholder(s) of record will normally be mailed the
next business day, but no later than seven days, after the receipt of the
redemption request. This option is only available to individual, joint and
individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred to
your predesignated bank account by wire or by check by calling the Trust, as
described above. An authorization form must have been completed by the
<PAGE> 74
shareholder and filed with the Trust before the request is received. Payment
will be made by wire or check to the bank account designated on the
authorization form as follows:
1. Payment by Wire: Request that Federal Funds be wired to the bank account
designated on the authorization form. Redemption proceeds will normally be
wired on the next business day following receipt of the redemption request.
There is a $7.50 wiring fee (subject to change) charged by CoreStates Bank,
N.A. which will be deducted from the withdrawal proceeds each time the
shareholder requests a redemption. If the proceeds are wired to the
shareholder's account at a bank which is not a member of the Federal Reserve
System, there could be a delay in the crediting of the funds to the
shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally be
mailed the next business day, but no more than seven days, from the date of
the telephone request. This procedure will take longer than the Payment by
Wire option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and the
account number it will be necessary to send a written request to the Trust
and a signature guarantee may be required. Each signature guarantee must be
supplied by an eligible guarantor institution. The Trust reserves the right
to reject a signature guarantee supplied by an eligible institution based on
its creditworthiness.
To reduce the shareholder's risk of attempted fraudulent use of the
telephone redemption procedure, payment will be made only to the bank account
designated on the authorization form. The Trust will not honor telephone
redemptions for shares recently purchased by check unless it is reasonably
satisfied that the purchase check has cleared.
If expedited payment under these procedures could adversely affect the
Trust, the Trust may take up to seven days to pay the shareholder.
Neither the Trust nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption
or exchange of Trust shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Trust will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Trust or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by
Trust shareholders are generally tape recorded. A written confirmation will
be provided for all purchase, exchange and redemption transactions initiated
by telephone.
Systematic Withdrawal Plan
Shareholders of the Class A Shares who own or purchase $5,000 or more of
shares at the offering price for which certificates have not been issued may
establish a Systematic Withdrawal Plan for monthly withdrawals of $25 or
more, or quarterly withdrawals of $75 or more, although the Trust does not
recommend any specific amount of withdrawal. Shares purchased with the
initial investment and through reinvestment of cash dividends and realized
securities profits distributions will be credited to the shareholder's
account and sufficient full and fractional shares will be redeemed at the net
asset value calculated on the third business day preceding the mailing date.
<PAGE> 75
Checks are dated the 20th of the month (unless such date falls on a holiday
or a Sunday) and mailed on or about the 19th of every month. Both ordinary
income dividends and realized securities profits distributions will be
automatically reinvested in additional shares of the Class at net asset
value. This plan is not recommended for all investors and should be started
only after careful consideration of its operation and effect upon the
investor's savings and investment program. To the extent that withdrawal
payments from the plan exceed any dividends and/or realized securities
profits distributions paid on shares held under the plan, the withdrawal
payments will represent a return of capital and the share balance may in time
be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event and
a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated.
Withdrawals under this plan by the holders of Class A Shares or any similar
plan of any other investment company charging a front-end sales charge made
concurrently with the purchases of the Class A Shares of this or the shares
of any other investment company will ordinarily be disadvantageous to the
shareholder because of the payment of duplicative sales charges. Shareholders
should not purchase Class A Shares while participating in a Systematic
Withdrawal Plan and a periodic investment program in a fund managed by the
Manager must be terminated before a Systematic Withdrawal Plan can take
effect, except if the shareholder is a participant in one of our Retirement
Plans or is investing in Delaware Group funds which do not carry a sales
charge. Also, redemptions pursuant to a Systematic Withdrawal Plan may be
subject to a Limited CDSC if the purchase was made at net asset value and a
dealer's commission has been paid on that purchase.
An investor wishing to start a Systematic Withdrawal Plan must complete an
authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied
by an eligible guarantor institution. The Trust reserves the right to reject
a signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the
Transfer Agent at any time by giving written notice.
The Systematic Withdrawal Plan is not available with respect to the Class B
Shares.
Wealth Builder Option
Shareholders of the Trust may elect to invest in one or more of the other
mutual funds in the Delaware Group through our Wealth Builder Option. Under
this automatic exchange program, shareholders can authorize regular monthly
investments (minimum of $100 per fund) to be liquidated from their account
and invested automatically into other mutual funds in the Delaware Group,
subject to the conditions and limitations set forth in the Trust's
Prospectus. See Wealth Builder Option and Redemption and Exchange in that
Prospectus.
<PAGE> 76
The investment will be made on the 20th day of each month (or, if the fund
selected is not open that day, the next business day) at the public offering
price or net asset value, as applicable, of the fund selected on the date of
investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the
fund into which investments are made could fluctuate. Since this program
involves continuous investment regardless of such fluctuating value,
investors selecting this option should consider their financial ability to
continue to participate in the program through periods of low fund share
prices. This program involves automatic exchanges between two or more fund
accounts and is treated as a purchase of shares of the fund into which
investments are made through the program. See Exchange Privilege for a brief
summary of the tax consequences of exchanges.
Shareholders can also use the Wealth Builder Option to invest in the Trust
through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Group, subject to the conditions and limitations
described in the Trust's Prospectus. Shareholders can terminate their
participation at any time by written notice to the Trust.
DIVIDENDS AND
DISTRIBUTIONS
The Trust declares a dividend to shareholders of net investment income on a
daily basis. Dividends are declared each day the Trust is open and are paid
monthly on the first business day following the end of each month. Payment by
check of cash dividends will ordinarily be mailed within three business days
after the payable date. Net investment income earned on days when the Trust
is not open will be declared as a dividend on the next business day.
Purchases of Trust shares by wire begin earning dividends when converted into
Federal Funds and available for investment, normally the next business day
after receipt. However, if the Trust is given prior notice of Federal Funds
wire and an acceptable written guarantee of timely receipt from an investor
satisfying the Trust's credit policies, the purchase will start earning
dividends on the date the wire is received. Investors desiring to guarantee
wire payments must have an acceptable financial condition and credit history
in the sole discretion of the Trust. The Trust reserves the right to
terminate this option at any time. Purchases by check earn dividends upon
conversion to Federal Funds, normally one business day after receipt.
<PAGE> 77
Each Class of the Trust will share proportionately in the investment income
and expenses of the Trust, except that the Class A Shares and the Class B
Shares will alone incur distribution fees under their respective 12b-1 Plans.
See Plans Under Rule 12b-1.
Dividends are automatically reinvested in additional shares at net asset
value on the payable date, unless an election to receive dividends in cash
has been made. Dividend payments of $1.00 or less will be automatically
reinvested, notwithstanding a shareholder's election to receive dividends in
cash. If such a shareholder's dividends increase to greater than $1.00, the
shareholder would have to file a new election in order to begin receiving
dividends in cash again. If a shareholder redeems an entire account, all
dividends accrued to the time of the withdrawal will be paid by separate
check at the end of that particular monthly dividend period, consistent with
the payment and mailing schedule described above. Any check in payment of
dividends or other distributions which cannot be delivered by the Post Office
or which remains uncashed for a period of more than one year may be
reinvested in the shareholder's account at the then-current net asset value
and the dividend option may be changed from cash to reinvest. The Trust may
deduct from a shareholder's account the costs of the Trust's effort to locate
a shareholder if a shareholder's mail is returned by the Post Office or the
Trust is otherwise unable to locate the shareholder or verify the shareholder's
mailing address. These costs may include a percentage of the account when a
search company charges a percentage fee in exchange for their location
services.
Any distributions from net realized securities profits will be made
annually during the quarter following the close of the fiscal year. Such
distributions will be reinvested in shares at the net asset value in effect
on the first business day after month end, unless the shareholder elects to
receive them in cash. The Trust will mail a monthly statement showing
dividends paid and all the transactions made during the period.
The Trust anticipates that substantially all dividends paid to shareholders
will be exempt from federal and Pennsylvania income taxes and from certain
Pennsylvania state and local taxes. Information concerning the tax status of
dividends and distributions will be mailed to shareholders annually,
including what portion, if any, of the Trust's distribution is subject to the
federal alternative minimum tax should the Trust invest in "private purpose"
bonds.
For the fiscal year ended February 28, 1995, dividends totaling $0.494 and
$0.353 per share of the Class A Shares and the Class B Shares were paid from
net investment income. The Class B Shares were first offered to the public on
May 2, 1994.
<PAGE> 78
TAXES
Federal Income Tax Aspects
The Trust has qualified, and intends to continue to qualify, as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended, so as not to be liable for federal income tax to the extent its
earnings are distributed. The term "regulated investment company" does not
imply the supervision of management or investment practices or policies by
any government agency.
Distributions by the Trust representing net interest received on municipal
bonds are considered tax-exempt and are not includable by shareholders in
gross income for federal income tax purposes because the Trust intends to
meet the requirements of the Internal Revenue Code applicable to regulated
investment companies distributing exempt-interest dividends. Although exempt
from regular federal income tax, interest paid on certain types of municipal
obligations is deemed to be a preference item under federal tax law and is
subject to the federal alternative minimum tax.
The Trust had an accumulated capital loss carryforward of $2,859,869 as of
February 28, 1995, which for federal income tax purposes may be carried
forward and applied against future capital gains. The capital loss
carryforward expires as follows: 1997--$172,875 and 2003--$2,686,994.
For federal income tax purposes, the Trust's portfolio securities had an
unrealized appreciation at February 28, 1995 of $38,060,230 on the basis of
specific cost.
Distributions representing net interest income received by the Trust from
certain temporary investments (such as certificates of deposit, commercial
paper and obligations of the U.S. Government, its agencies and
instrumentalities) and net short-term capital gains realized by the Trust, if
any, will be taxable to shareholders as ordinary income and will not qualify
for the deduction for dividends-received by corporations. Distributions of
long-term capital gains realized by the Trust, if any, will be taxable to
shareholders as long-term capital gains regardless of the length of time an
investor has held such shares, and these gains are currently taxed at
long-term capital gain rates. The tax status of dividends and distributions
paid to shareholders will not be affected by whether they are paid in cash or
in additional shares. Statements as to the tax status of each investor's
dividends or distributions will be mailed annually. The percentage of taxable
income at the end of the year will not necessarily bear relationship to the
experience over a shorter period of time. Shareholders may incur a tax
liability for federal, state and local taxes upon the sale or redemption of
shares of the Trust.
Section 265 of the Internal Revenue Code provides that interest paid on
indebtedness incurred or continued to purchase or carry obligations the
interest on which is tax-exempt, and certain expenses associated with
tax-exempt income, are not deductible. It is probable that interest on
indebtedness incurred or continued to purchase or carry shares of the Trust
is not deductible.
The Trust may not be an appropriate investment for persons who are
"substantial users" of facilities financed by "industrial development bonds"
or for investors who are "related persons" thereof within the meaning of
Section 103 of the Internal Revenue Code. Persons who are or may be
considered "substantial users" should consult their tax advisers in this
matter before purchasing shares of the Trust.
<PAGE> 79
The Trust intends to use the "average annual" method of allocation in the
event the Trust realizes any taxable interest income. Under this approach,
the percentage of interest income earned that is deemed to be taxable in any
year will be the same for each shareholder who held shares of the Trust at
any time during the year.
State and Local Taxes
See Taxes in the Prospectus for a discussion of Pennsylvania taxation.
Shares of the Trust may be taxable for purposes of Pennsylvania inheritance
and estate tax.
Shareholders of the Trust who are residents of the City of Pittsburgh may
be required to pay Pittsburgh School District and City personal property tax
on their equitable interest of that portion of the assets of the Trust which
are not exempt from such tax. However, since the Trust's inception, none of
its assets have been liable for such tax.
Distributions by the Trust may not be exempt from state or local income tax
in states other than Pennsylvania. Shareholders of the Trust are advised to
consult their own tax adviser in this regard.
INVESTMENT MANAGEMENT
AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Trust, subject to the
supervision and direction of the Trust's Board of Trustees.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. The aggregate assets of these funds on February
28, 1995 were approximately $9,495,845,162. Investment advisory services are
also provided to institutional accounts with assets on February 28, 1995 of
approximately $16,036,192,541.
The Investment Management Agreement for the Trust is dated April 3, 1995,
and was approved by shareholders on March 29, 1995.
The Agreement has an initial term of two years and may be renewed each year
only so long as such renewal and continuance are specifically approved at
least annually by the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Trust, and only if the terms and the
renewal thereof have been approved by the vote of a majority of trustees of
the Trust who are not parties thereto or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. The Agreement is terminable without penalty on 60 days' notice by
the trustees of the Trust or by the Manager. The Agreement will terminate
automatically in the event of its assignment.
The Investment Management Agreement provides that the Trust shall pay the
Manager a management fee equal to (on an annual basis) .60% on the first $500
<PAGE> 80
million of the Trust's average daily net assets, .575% on the next $250
million and .55% on the average daily net assets in excess of $750 million,
less all trustees' fees paid to the unaffiliated trustees of the Trust.
On February 28, 1995, the total net assets of the Trust were $986,551,505.
Investment management fees paid by the Trust for the past three fiscal years
were $4,913,153 for 1993, $5,790,585 for 1994 and $5,743,977 for 1995.
Under the general supervision of the Board of Trustees, the Manager makes
all investment decisions which are implemented by the Trust. The Manager pays
the salaries of all trustees, officers and employees of the Trust who are
affiliated with the Manager. The Trust pays all of its other expenses,
including its proportionate share of rent and certain other administrative
expenses. The ratio of expenses to average daily net assets for the Class A
Shares for the fiscal year ended February 28, 1995 was 0.90%. Based on the
actual expenses incurred by the Class A Shares during the fiscal year ended
February 28, 1995, the expenses of the Class B Shares are expected to be
1.73% for the fiscal year ended February 29, 1996. Each ratio reflects the
impact of each class' respective 12b-1 Plan.
Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor under a
Distribution Agreement dated April 3, 1995. The Distributor is an affiliate
of the Manager and bears all of the costs of promotion and distribution,
except for payments by the Class A Shares and Class B Shares under their
respective 12b-1 Plans. Prior to January 3, 1995, Delaware Distributors, Inc.
("DDI") served as the national distributor of the Trust's shares. On that
date, Delaware Distributors, L.P., a newly formed limited partnership,
succeeded to the business of DDI. All officers and employees of DDI became
officers and employees of Delaware Distributors, L.P. DDI is the corporate
general partner of Delaware Distributors, L.P. and both DDI and Delaware
Distributors, L.P. are indirect, wholly-owned subsidiaries of Delaware
Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate of
the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the Trust's shareholder servicing, dividend disbursing and transfer agent
pursuant to a Shareholders Services Agreement dated June 29, 1988. The
Transfer Agent is also an indirect, wholly-owned subsidiary of Delaware
Management Holdings, Inc.
<PAGE> 81
OFFICERS AND TRUSTEES
The business and affairs of the Trust are managed under the direction of its
Board of Trustees.
Certain officers and trustees of the Trust hold identical positions in each
of the other funds in the Delaware Group. On March 31, 1995, the Trust's
officers and trustees, as a group, owned less than 1% of the Trust's
outstanding shares.
As of March 31, 1995, the Trust believes that Merrill Lynch, Pierce, Fenner
& Smith Inc., Mutual Fund Operations, P.O. Box 41621, Jacksonville, FL 32203,
held of record for the benefit of others 7,113,543 shares (5.98%) of the
outstanding shares of the Class A Shares. As of the same date, the Trust
believes that Merrill Lynch, Pierce, Fenner & Smith Inc., Mutual Fund
Operations, Attention: Book Entry, 4800 Deer Lake Dr. East, 3rd Fl.,
Jacksonville, FL 32246, held of record for the benefit of others 85,182
shares (5.87%) of the outstanding shares of the Class B Shares.
DMH Corp., Delaware Management Company, Inc., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International Holdings Ltd., Founders
Holdings, Inc., Delaware International Advisers Ltd. and Delaware Investment
Counselors, Inc. are direct or indirect, wholly-owned subsidiaries of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger
between DMH and a wholly-owned subsidiary of Lincoln National Corporation
("Lincoln National") was completed. In connection with the merger, a new
Investment Management Agreement between the Trust and the Manager was
executed following shareholder approval. As a result of the merger, DMH and
the Manager became indirect, wholly-owned subsidiaries of and are thus
subject to the ultimate control of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.
Trustees and principal officers of the Trust are noted below along with
their ages and their business experience for the past five years. Unless
otherwise noted, the address of each officer and trustee is One Commerce
Square, Philadelphia, PA 19103.
<PAGE> 82
*Wayne A. Stork (57)
Chairman, Trustee and/or Director of the Trust and each
of the other 16 Funds in the Delaware Group.
Chairman, Chief Executive Officer, Chief Investment
Officer and Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of
Delaware Management Holdings, Inc., DMH Corp.,
Delaware International Advisers Ltd., Delaware
International Holdings Ltd. and Founders
Holdings, Inc.
Chairman and Director of Delaware Management Trust
Company.
Director of Delaware Distributors, Inc., Delaware
Service Company, Inc. and Delaware Investment
Counselors, Inc.
During the past five years, Mr. Stork has served in various
executive capacities at different times within the
Delaware organization.
Brian F. Wruble (52)
President and Chief Executive Officer of the Trust and
15 other Funds in the Delaware Group (which
excludes Delaware Pooled Trust, Inc.).
Director of Delaware International Advisers Ltd. and
Delaware Investment Counselors, Inc.
President, Chief Operating Officer and Director of Delaware
Management Holdings, Inc., DMH Corp. and
Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of
Delaware Service Company, Inc.
Chairman and Director of Delaware Distributors, Inc.
Chairman of Delaware Distributors, L.P.
President of Founders Holdings, Inc.
From 1992 to 1995, Mr. Wruble was a trustee of the
Trust and a director of each of the other funds in the
Delaware Group. Before joining the Delaware Group
in 1992, Mr. Wruble was Chairman, President and
Chief Executive Officer of Equitable Capital Manage-
ment Corporation from July 1985 through April 1992
and was Executive Vice President of Equitable Life
Assurance Society of the United States from
September 1984 through April 1992 and Chief
Investment Officer from April 1991 through April 1992.
Mr. Wruble has previously held executive positions
with Smith Barney, Harris Upham, and H.C.
Wainwright & Co.
<PAGE> 83
Winthrop S. Jessup (49)
Executive Vice President of the Trust and 15 other Funds
in the Delaware Group (which excludes Delaware
Pooled Trust, Inc.).
President and Chief Executive Officer of Delaware Pooled
Trust, Inc.
President and Director of Delaware Investment
Counselors, Inc.
Executive Vice President and Director of Delaware Manage-
ment Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Management
Trust Company, 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. and
Delaware International Advisers Ltd.
During the past five years, Mr. Jessup has served in various
executive capacities at different times within the
Delaware organization.
Richard G. Unruh, Jr. (55)
Executive Vice President of the Trust and each of the
other 16 Funds in the Delaware Group.
Executive Vice President and Director of Delaware Manage-
ment Company, Inc.
Senior Vice President of Delaware Management Hold-
ings, Inc.
During the past five years, Mr. Unruh has served in various
executive capacities at different times within the
Delaware organization.
Walter P. Babich (67)
Trustee and/or Director of the Trust and each of the other
16 Funds in the Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin &
Leighton and from 1988 to 1991, he was a partner of
I&L Investors.
Anthony D. Knerr (56)
Trustee and/or Director of the Trust and each of the other
16 Funds in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Consultant, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice
President/Finance and Treasurer of Columbia
University, New York. From 1987 to 1989, he was
also a lecturer in English at the University. In addition,
Mr. Knerr was Chairman of The Publishing Group,
Inc., New York, from 1988 to 1990. Mr. Knerr
founded The Publishing Group, Inc. in 1988.
- -----------------
*Trustee affiliated with the investment manager of the Trust and considered
an "interested person" as defined in the Investment Company Act of 1940.
<PAGE> 84
Ann R. Leven (54)
Trustee and/or Director of the Trust and each of the other
16 Funds in the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief
Fiscal Officer of the Smithsonian Institution,
Washington, DC, and from 1975 to 1994, she was
Adjunct Professor of Columbia Business School.
W. Thacher Longstreth (74)
Trustee and/or Director of the Trust and each of the other
16 Funds in the Delaware Group.
1617 John F. Kennedy Boulevard, Philadelphia, PA 19103.
Vice Chairman, Packquisition Corp., a financial printing,
commercial printing and information processing firm.
Philadelphia City Councilman.
President, MLW, Associates.
Director, Tasty Baking Company.
Director, Healthcare Services Group.
Charles E. Peck (69)
Trustee and/or Director of the Trust and each of the other
16 Funds in the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief
Executive Officer of The Ryland Group, Inc.,
Columbia, MD.
David K. Downes (55)
Senior Vice President/Chief Administrative Officer/Chief
Financial Officer of the Trust, each of the other
16 Funds in the Delaware Group and Delaware
Management Company, Inc.
President/Chief Executive Officer and Director of Delaware
Management Trust Company.
Senior Vice President/Chief Administrative Officer/Chief
Financial Officer/Treasurer of Delaware Management
Holdings, Inc.
Senior Vice President/Chief Financial Officer/Treasurer and
Director of DMH Corp.
Senior Vice President/Chief Administrative Officer and
Director of Delaware Distributors, Inc.
Senior Vice President/Chief Administrative Officer of
Delaware Distributors, L.P.
Senior Vice President/Chief Administrative Officer/Chief
Financial Officer and Director of Delaware Service
Company, Inc.
Chief Financial Officer and Director of Delaware
International Holdings Ltd.
Senior Vice President/Chief Financial Officer/Treasurer of
Delaware Investment Counselors, Inc.
Senior Vice President/Chief Financial Officer and Director
of Founders Holdings, Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes
was Chief Administrative Officer, Chief Financial
Officer and Treasurer of Equitable Capital Management
Corporation, New York, from December 1985
through August 1992, Executive Vice President from
December 1985 through March 1992, and Vice
Chairman from March 1992 through August 1992.
<PAGE> 85
George M. Chamberlain, Jr. (48)
Senior Vice President and Secretary of the Trust, each of
the other 16 Funds in the Delaware Group,
Delaware Management Holdings, Inc. and Delaware
Distributors, L.P.
Senior Vice President, Secretary and Director of DMH
Corp., Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Service Company,
Inc., Delaware Management Trust Company and
Founders Holdings, Inc.
Secretary and Director of Delaware International
Holdings Ltd.
Senior Vice President and Secretary of Delaware Investment
Counselors, Inc.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served
in various capacities at different times within the
Delaware organization.
Paul E. Suckow (47)
Senior Vice President/Chief Investment Officer, Fixed
Income of the Trust, each of the other 16 Funds in
the Delaware Group and Delaware Management
Company, Inc.
Senior Vice President and Director of Founders Hold-
ings, Inc.
Before returning to the Delaware Group in 1993,
Mr. Suckow was Executive Vice President and
Director of Fixed Income for Oppenheimer Manage-
ment Corporation, New York, NY. Prior to that,
Mr. Suckow was a fixed income portfolio manager
for the Delaware Group.
J. Michael Pokorny (55)
Vice President/Senior Portfolio Manager of the Trust, of
nine other income (including tax-exempt) funds in
the Delaware Group and of Delaware Management
Company, Inc.
During the past five years, Mr. Pokorny has served in
such capacity within the Delaware organization.
Joseph H. Hastings (45)
Vice President/Corporate Controller of the Trust, each of
the other 16 Funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc. and Founders Holdings, Inc.
Vice President/Corporate Controller/Treasurer of Delaware
Management Trust Company.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings
was Chief Financial Officer for Prudential Residential
Services, L.P., New York, NY from 1989 to 1992.
Prior to that, Mr. Hastings served as Controller and
Treasurer for Fine Homes International, L.P.,
Stamford, CT from 1987 to 1989.
<PAGE> 86
Eugene J. Cichanowsky (48)
Vice President/Corporate Tax of the Trust, each of the
other 16 Funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., Founders Holdings, Inc. and Delaware
Management Trust Company.
1818 Market Street, Philadelphia, PA 19103.
During the past five years, Mr. Cichanowsky has served
in various capacities at different times within the
Delaware organization.
Theresa M. Messina (33)
Vice President/Treasurer of the Trust, each of the other
16 Funds in the Delaware Group and Delaware
Service Company, Inc.
Vice President/Treasurer of Founders Holdings, Inc.
Vice President/Assistant Treasurer of Delaware Manage-
ment Company, Inc., Delaware Distributors, L.P.,
and Delaware Distributors, Inc.
Vice President of Delaware International Holdings, Ltd.
Before joining the Delaware Group in 1994, Ms. Messina
was Vice President/Treasurer for Capital Holdings,
Frazer, PA. Prior to that, Ms. Messina was Vice
President/Fund Accounting for SEI Corporation,
Wayne, PA from 1988 to 1994.
The following is a compensation table listing for each trustee entitled to
receive compensation, the aggregate compensation received from the Trust, the
total compensation received from all Delaware Group funds and an estimate of
annual benefits to be received upon retirement under the Delaware Group
Retirement Plan as of February 28, 1995.
Pension or
Retirement Estimated Total
Benefits Annual Compensation
Aggregate Accrued Benefits from all 17
Compensation as Part of Upon Delaware
Name from Trust Trust Expenses Retirement* Group Funds
W. Thacher Longstreth $2,568.00 None $18,100 $43,187.94
Ann R. Leven $3,075.35 None $18,100 $51,232.90
Walter P. Babich $3,008.10 None $18,100 $50,323.88
Anthony D. Knerr $ 757.20 None $18,100 $15,357.89
Charles E. Peck $2,568.00 None $18,100 $43,187.94
*Under the terms of the Delaware Group Retirement Plan for trustees/directors,
each disinterested trustee who, at the time of his or her retirement from the
Board, has attained the age of 70 and served on the Board for at least five
continuous years, is entitled to receive payments from the Trust for a period
equal to the lesser of the number of years that such person served as a
trustee or the remainder of such person's life. The amount of such payments
will be equal, on an annual basis, to the amount of the annual retainer that
is paid to trustees of the Trust at the time of such person's retirement. If
an eligible trustee retired as of February 28, 1995, he or she would be
entitled to annual payments totaling $18,100, in the aggregate, from all of
the funds in the Delaware Group, based on the number of funds in the Delaware
Group as of that date.
<PAGE> 87
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and for
shareholders of classes of other funds in the Delaware Group are set forth in
the relevant prospectuses for such classes. The following supplements that
information. The Trust reserves the right to reject exchange requests at any
time. The Trust may modify, terminate or suspend the exchange privilege upon
60 days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and
carefully read that fund's prospectus before buying shares in an exchange.
The prospectus contains more complete information about the fund, including
charges and expenses. A shareholder requesting such an exchange will be sent
a current prospectus and an authorization form for any of the other mutual
funds in the Delaware Group. Exchange instructions must be signed by the
record owner(s) exactly as the shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund or series
and the purchase of another. The sale may involve either a capital gain or
loss to the shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between
funds in the Delaware Group on behalf of their clients by telephone or other
expedited means. This service may be discontinued or revised at any time by
the Transfer Agent. Such exchange requests may be rejected if it is
determined that a particular request or the total requests at any time could
have an adverse effect on any of the funds. Requests for expedited exchanges
may be submitted with a properly completed exchange authorization form, as
described above.
Telephone Exchange Privilege
Shareholders owning shares for which certificates have not been issued or
their investment dealers of record may exchange shares by telephone for
shares in other mutual funds in the Delaware Group. This service is
automatically provided unless the Trust receives written notice from the
shareholder to the contrary.
Shareholders or their investment dealers of record may contact the Transfer
Agent at 800-523-1918 (in Philadelphia, 215-988-1241) to effect an exchange.
The shareholder's current Trust account number must be identified, as well as
the registration of the account, the share or dollar amount to be exchanged
and the fund into which the exchange is to be made. Requests received on any
day after the time the offering price and net asset value are determined will
be processed the following day. See Determining Offering Price and Net Asset
Value. Any new account established through the exchange will automatically
carry the same registration, shareholder information and dividend option as
the account from which the shares were exchanged. The exchange requirements
of the fund into which the exchange is being made, such as sales charges,
eligibility and investment minimums, must be met. (See the prospectus of the
fund desired or inquire by calling the Transfer Agent.)
<PAGE> 88
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of
the funds in the Delaware Group. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and the Trust
reserve the right to record exchange instructions received by telephone and
to reject exchange requests at any time in the future.
As described in the Trust's Prospectus, neither the Trust nor the Transfer
Agent is responsible for any shareholder loss incurred in acting upon written
or telephone instructions for redemption or exchange of Trust shares which
are reasonably believed to be genuine.
Following is a summary of the investment objectives of the other Delaware
Group funds:
Delaware Fund seeks long-term growth by a balance of capital appreciation,
income and preservation of capital. It uses a dividend-oriented valuation
strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Dividend
Growth Fund seeks current income and capital appreciation by
investing primarily in income-producing common stocks, with a focus on common
stocks the Manager believes have the potential for above average dividend
increases over time.
Trend Fund seeks long-term growth by investing in common stock issued by
emerging growth companies exhibiting strong capital appreciation potential.
Value Fund seeks capital appreciation by investing primarily in common
stocks whose market values appear low relative to their underlying value or
future potential.
DelCap Fund seeks long-term capital growth by investing in common stocks
and securities convertible into common stocks of companies that have a
demonstrated history of growth and have the potential to support continued
growth.
Decatur Income Fund seeks the highest possible current income by investing
primarily in common stocks that provide the potential for income and capital
appreciation without undue risk to principal. Decatur Total Return Fund seeks
long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to
principal.
Delchester Fund seeks as high a current income as possible by investing
principally in corporate bonds, and also in U.S. Government securities and
commercial paper.
U.S. Government Fund seeks high current income by investing in long-term
U.S. Government debt obligations.
Treasury Reserves Intermediate Fund seeks high, stable income by investing
primarily in a portfolio of short- and intermediate-term securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
instruments secured by such securities. U.S. Government Money Fund seeks
maximum current income with preservation of principal and maintenance of
liquidity by investing only in short-term securities issued or guaranteed as
to principal and interest by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities, while maintaining a stable net asset value.
<PAGE> 89
Delaware Cash Reserve seeks the highest level of income consistent with the
preservation of capital and liquidity through investments in short-term money
market instruments, while maintaining a stable net asset value.
Tax-Free USA Fund seeks high current income exempt from federal income tax
by investing in municipal bonds of geographically-diverse issuers. Tax-Free
Insured Fund invests in these same types of securities but with an emphasis
on municipal bonds protected by insurance guaranteeing principal and interest
are paid when due. Tax-Free USA Intermediate Fund seeks a high level of
current interest income exempt from federal income tax, consistent with the
preservation of capital by investing primarily in municipal bonds.
Tax-Free Money Fund seeks high current income, exempt from federal income
tax, by investing in short-term municipal obligations, while maintaining a
stable net asset value.
International Equity Fund seeks to achieve long-term growth without undue
risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. Global Bond Fund
seeks to achieve current income consistent with the preservation of principal
by investing primarily in global fixed income securities that may also
provide the potential for capital appreciation. Global Assets Fund seeks to
achieve long-term total return by investing in global securities which will
provide higher current income than a portfolio comprised exclusively of
equity securities, along with the potential for capital growth.
Delaware Group Premium Fund offers nine series available exclusively as
funding vehicles for certain insurance company separate accounts.
Equity/Income Series seeks the highest possible total rate of return by
selecting issues that exhibit the potential for capital appreciation while
providing higher than average dividend income. High Yield Series seeks as
high a current income as possible by investing in rated and unrated corporate
bonds, U.S. Government securities and commercial paper. Capital Reserves
Series seeks a high stable level of current income while minimizing
fluctuations in principal by investing in a diversified portfolio of short-
and intermediate-term securities. Money Market Series seeks the highest level
of income consistent with preservation of capital and liquidity through
investments in short-term money market instruments. Growth Series seeks
long-term capital appreciation by investing its assets in a diversified
portfolio of securities exhibiting the potential for significant growth.
Multiple Strategy Series seeks a balance of capital appreciation, income and
preservation of capital. It uses a dividend-oriented valuation strategy to
select securities issued by established companies that are believed to
demonstrate potential for income and capital growth. International Equity
<PAGE> 90
Series seeks long-term growth without undue risk to principal by investing
primarily in equity securities of foreign issuers that provide the potential
for capital appreciation and income. Value Series seeks capital appreciation
by investing in small- to mid-cap common stocks whose market values appear
low relative to their underlying value or future earnings and growth
potential. Emphasis will also be placed on securities of companies that may
be temporarily out of favor or whose value is not yet recognized by the
market. Emerging Growth Series seeks long-term capital appreciation by
investing primarily in small-cap common stocks and convertible securities of
emerging and other growth-oriented companies. These securities will have been
judged to be responsive to changes in the market place and to have
fundamental characteristics to support growth. Income is not an objective.
For more complete information about any of these funds, including charges
and expenses, you can obtain a prospectus from the Distributor. Read it
carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the information
contained in each Fund's prospectus(es).
GENERAL INFORMATION
The Manager is the investment manager of the Trust. The Manager or its
affiliate, Delaware International Advisers Ltd., manages the other funds in
the Delaware Group. The Manager, through a separate division, also manages
private investment accounts. While investment decisions of the Trust are made
independently from those of the other funds and accounts, they may make
investment decisions at the same time.
Access persons and advisory persons of the Delaware Group of funds, as
those terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide
services to Delaware Management Company, Inc., Delaware International
Advisers Ltd. or their affiliates, are permitted to engage in personal
securities transactions subject to the exceptions set forth in Rule 17j-1 and
the following general restrictions and procedures: (1) certain blackout
periods apply to personal securities transactions of those persons; (2)
transactions must receive advance clearance and must be completed on the same
day as the clearance is received; (3) certain persons are prohibited from
investing in initial public offerings of securities and other restrictions
apply to investments in private placements of securities; (4) opening
positions may only be closed-out at a profit after a 60-day holding period
has elapsed; and 5) the Compliance Officer must be informed periodically of
all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
<PAGE> 91
The Distributor acts as national distributor for the Trust and for the
other mutual funds in the Delaware Group. As previously described, prior to
January 3, 1995, DDI served as the national distributor for the Trust. The
Distributor, and, in its capacity as such, DDI, received net commissions from
the Trust on behalf of the Class A Shares after reallowances to dealers, as
follows:
Fiscal Total Amount of Amounts Net
Year Underwriting Reallowed Commission
Ending Commissions to Dealers to DDI
------- ----------------- ------------- -----------
2/28/95 $2,314,576 $1,933,079 $381,497
2/28/94 5,279,191 4,394,782 884,409
2/28/93 5,364,604 4,462,965 901,639
For the fiscal year ended February 28, 1995, the Distributor, and, in its
capacity as the Trust's national distributor, DDI, received Limited CDSC
payments in the amount of $9,359 with respect to the Class A Shares. However,
the Class B Shares may vote on a proposal to increase materially the fees to
be paid by the Trust under Rule 12b-1 Plan relating to the Class A Shares.
For the period May 2, 1994 (date of initial public offering) through
February 28, 1995, the Distributor, and, in its capacity as the Trust's
national distributor, DDI, received CDSC payments in the amount of $4,941
with respect to the Class B Shares.
Effective as of January 3, 1995, all such payments described above have
been paid to Delaware Distributors, L.P.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Trust and for the
other mutual funds in the Delaware Group. The Transfer Agent is paid a fee by
the Trust for providing these services consisting of an annual per account
charge of $11.00 plus transaction charges for particular services according
to a schedule. Compensation is fixed each year and approved by the Board of
Trustees, including a majority of the unaffiliated trustees.
Morgan Guaranty Trust Company of New York ("Morgan"), 60 Wall Street, New
York, NY 10260, is custodian of the Trust's securities and cash. As custodian
for the Trust, Morgan maintains a separate account or accounts for the Trust;
receives, holds and releases portfolio securities on account of the Trust;
receives and disbursements of money on behalf of the Trust; and collects and
receives income and other payments and distributions on account of the
Trust's portfolio securities.
Shareholder and Trustee Liability
Under Pennsylvania law, shareholders of such a Trust may, under certain
circumstances, be held personally liable as partners for the obligations of
the Trust. The Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Trust or the trustees, but this
disclaimer may not be effective in some jurisdictions or as to certain types
of claims. The Declaration of Trust provides for indemnification out of the
Trust property of any shareholder held personally liable for the obligations
of the Trust. The Declaration of Trust also provides that the Trust shall,
upon request, assume the defense of any claim made against any shareholder
for any act or obligation of the Trust and satisfy any judgment thereon.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations.
<PAGE> 92
The Declaration of Trust further provides that the trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
The legality of the issuance of the shares offered hereby, pursuant to
registration under the Investment Company Act Rule 24f-2, has been passed
upon for the Trust by Messrs. Stradley, Ronon, Stevens & Young, Philadelphia,
Pennsylvania.
Capitalization
DMC Tax-Free Income Trust-Pennsylvania (which, as of May 18, 1992, is known
and does business as Tax-Free Pennsylvania Fund) offers two classes of
shares, the Class A Shares and Class B Shares, and has an unlimited
authorized number of shares of beneficial interest with no par value
allocated to each Class. All shares have equal voting rights, no preemptive
rights, are fully transferable and, when issued, are fully paid and
nonassessable. The Class A Shares and Class B Shares represent a
proportionate interest in the assets of the Trust and have the same voting
and other rights and preferences, except that shareholders of the Class A
Shares may not vote on matters affecting the Trust's Plan under Rule 12b-1
relating to the Class B Shares, and the shareholders of the Class B Shares
may not vote on matters affecting the Trust's Plan under Rule 12b-1 relating
to the Class A Shares. However, the Class B Shares may vote on a proposal to
increase materially the fees to be paid by the Trust under the Rule 12b-1
Plan relating to the Class A Shares.
Prior to May 2, 1994, Tax-Free Pennsylvania Fund A Class was known as
Tax-Free Pennsylvania Fund.
Noncumulative Voting
These shares have noncumulative voting rights which means that the holders
of more than 50% of the shares of the Trust voting for the election of
trustees can elect all the trustees if they choose to do so, and, in such
event, the holders of the remaining shares will not be able to elect any
trustees.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the Securities and Exchange
Commission.
<PAGE> 93
APPENDIX A--DESCRIPTION
OF RATINGS
Bonds
Excerpts from Moody's description of its bond ratings: Aaa--judged to be the
best quality. They carry the smallest degree of investment risk; Aa--judged to
be of high quality by all standards; A--possess favorable attributes and are
considered "upper medium" grade obligations; Baa--considered as medium grade
obligations. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time; Ba--judged to
have speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate
and thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class;
B--generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small; Caa--are of poor standing.
Such issues may be in default or there may be present elements of danger with
respect to principal or interest; Ca--represent obligations which are
speculative in a high degree. Such issues are often in default or have other m
arked shortcomings; C--the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal
and interest; AA--also qualify as high grade obligations, and in the majority
of instances differ from AAA issues only in a small degree; A--strong
ability to pay interest and repay principal although more susceptible to
changes in circumstances; BBB--regarded as having an adequate capacity to pay
interest and repay principal; BB, B, CCC, CC--regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions; C--reserved for income bonds on which no interest is being paid;
D--in default, and payment of interest and/or repayment of principal is in
arrears.
State and Municipal Notes
MIG-1/VMIG-1--Notes bearing either of these designations are of the best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established and broad-based access to the market for
refinancing, or both.
MIG-2/VMIG-2--Notes bearing either of these designations are of high
quality, with margins of protection ample although not so large as in the
preceding group.
SP-1--Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
<PAGE> 94
APPENDIX B--TAX EXEMPT vs TAXABLE YIELDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 Rates Tax Free Yield--5.0%
-------------------- --------------------------------------------------------
Federal Federal
Taxable Income Federal State State
State County County
Federal County Pittsburgh Philadelphia
Taxable Taxable Taxable Taxable
Joint Return Single Return Fed State Income Equivalent Equivalent Equivalent(1) Equivalent(2)
- ---------------- --------------- ---- ------------ ---------- ---------- ------------- -------------
<C> <C> <C> <C> <C> <C> <C> <C>
$0-38,000 $0-22,750 15% 2.8% 5.88% 6.46% 7.29% 6.81%
$38,001-91,850 $22,751-55,100 28% 2.8% 6.94% 7.56% 8.38% 7.96%
$91,851-140,000 $55,101-115,000 31% 2.8% 7.25% 7.87% 8.69% 8.29%
$140,001-250,000 $115,001-250,000 36%+ 2.8% 7.81% 8.45% 9.27% 8.90%
Over $250,000 Over $250,000 39.6%+ 2.8% 8.28% 8.93% 9.75% 9.41%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Tax Free Yield--6.0%
---------------------------------------------------------
Federal Federal
Taxable Income Federal State State
State County County
Federal County Pittsburgh Philadelphia
Taxable Taxable Taxable Taxable
Joint Return Single Return Fed State Income Equivalent Equivalent Equivalent(1) Equivalent(2)
- ---------------- --------------- --- ------------ ----------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0-38,000 $0-22,750 15% 2.8% 7.06% 7.67% 8.50% 8.09%
$38,001-91,850 $22,751-55,100 28% 2.8% 8.33% 8.98% 9.81% 9.47%
$91,851-140,000 $55,101-115,000 31% 2.8% 8.70% 9.36% 10.18% 9.86%
$140,001-250,000 $115,001-250,000 36%+ 2.8% 9.38% 10.06% 10.88% 10.60%
Over $250,000 Over $250,000 39.6%+ 2.8% 9.93% 10.63% 11.45% 11.20%
</TABLE>
<TABLE>
<CAPTION>
1995 Rates Tax Free Yield--7.0%
-------------------- -------------------------------------------------------
Taxable Income Federal Federal
Federal State State
State County County
Federal County Pittsburgh Philadelphia
Taxable Taxable Taxable Taxable
Joint Return Single Return Fed State Income Equivalent Equivalent Equivalent(1) Equivalent(2)
- -------------- ------------- --- ------------ ---------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0-38,000 $0-22,750 15% 2.8% 8.24% 8.88% 9.71% 9.36%
$38,001-91,850 $22,751-55,100 28% 2.8% 9.72% 10.41% 11.24% 10.97%
$91,851-140,000 $55,101-115,000 31% 2.8% 10.14% 10.85% 11.67% 11.43%
$140,001-250,000 $115,001-250,000 36%+ 2.8% 10.94% 11.66% 12.49% 12.29%
Over $250,000 Over $250,000 39.6%+ 2.8% 11.59% 12.33% 13.16% 13.00%
</TABLE>
<TABLE>
<CAPTION>
Tax Free Yield--8.0%
----------------------------------------------------------
Taxable Income Federal Federal
Federal State State
State County County
Federal County Pittsburgh Philadelphia
Taxable Taxable Taxable Taxable
Joint Return Single Return Fed State Income Equivalent Equivalent Equivalent(1) Equivalent(2)
- -------------- ------------- --- ------------ ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0-38,000 $0-22,750 15% 2.8% 9.41% 10.09% 10.92% 10.64%
$38,001-91,850 $22,751-55,100 28% 2.8% 11.11% 11.84% 12.67% 12.48%
$91,851-140,000 $55,101-115,000 31% 2.8% 11.59% 12.34% 13.16% 13.00%
$140,001-250,000 $115,001-250,000 36%+ 2.8% 12.50% 13.27% 14.09% 13.99%
Over $250,000 Over $250,000 36.9%+ 2.8% 13.25% 14.04% 14.86% 14.79%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Equivalent yields are based on a fixed $1,000 investment with all taxes deducted
from income. Included in all areas are the effects of: federal income tax minus
savings from itemizing state and local taxes, a 2.8% Pennsylvania income tax and
a 4 mill county personal property tax. (1) Pittsburgh equivalent yields also
include 4 mill city and 4 mill school property taxes. (2) Philadelphia
equivalent yields also include the 4.96% school income tax. While it is expected
that the Trust will invest primarily in obligations exempt from taxes, other
income received by the Trust may be taxable. The yield used in the illustration
should not be considered representative of the Trust's yield at any specific
time.
+For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate. In
addition, a 10% surtax (not applicable to capital gains) applies to certain
high-income taxpayers. It is computed by applying a 39.6% rate to taxable
income in excess of $250,000. The above tables do not reflect the personal
exemption phaseout nor the limitations of itemized deductions that may apply.
<PAGE> 95
FINANCIAL STATEMENTS
The Trust's Statement of Net Assets, Statement of Operations, Statement of
Changes in Net Assets, and Notes to Financial Statements, as well as the
report of Ernst & Young LLP, independent auditors, for the fiscal year ended
February 28, 1995, are included in the Trust's Annual Report to shareholders.
The financial statements, the notes relating thereto and the report of Ernst
& Young LLP listed above are incorporated by reference from the Annual Report
into this Part B.
<PAGE> 96
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
PART C
------
Other Information
-----------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Part A- Financial Highlights
*Part B- Statement of Net Assets
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Accountant's Report
* The financial statements and Accountant's Report listed above are
incorporated by reference from the Registrant's Annual Report for
the fiscal year ended February 28, 1995 into Part B.
(b) Exhibits:
(1) Declaration of Trust. Incorporated by reference to Post-
Effective Amendment No. 10 filed May 12, 1980, Post-
Effective Amendment No. 21 filed February 27, 1987 and
Post-Effective Amendment No. 33 filed April 29, 1994.
(2) Procedural Guidelines. Attached as Exhibit.
(3) Voting Trust Agreement. Inapplicable.
(4) Specimen Certificate. Incorporated by reference to Post-
Effective Amendment No. 23 filed April 27, 1988.
(5) Investment Management Agreement. Investment Management
Agreement dated April 3, 1995 attached as Exhibit.
i
<PAGE> 97
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
(6) (a) Distribution Agreement. Incorporated by reference to
Post-Effective Amendment No. 30 filed June 26, 1992.
(b) Administration and Service Agreement. Form of
Administration and Service Agreement attached as
Exhibit.
(c) Dealer's Agreement. Attached as Exhibit.
(d) Form of Mutual Fund Agreement for the Delaware Group
of Funds attached as Exhibit.
(7) Bonus, Profit Sharing, Pension Contracts. Amended and
Restated Profit Sharing Plan attached as Exhibit.
(8) Custodian Agreement. Incorporated by reference to Post-
Effective Amendment No. 24 filed February 28, 1989 and
Post-Effective Amendment No. 26 filed April 27, 1990.
(9) Other Material Contracts. Incorporated by reference to
Post-Effective Amendment No. 24 filed February 28, 1989.
(10) Opinion of Counsel. Filed with letter relating to Rule 24f-2
on April 27, 1995.
(11) Consent of Auditors. Attached as Exhibit.
(12-14) Inapplicable.
(15) Plans under Rule 12b-1. Incorporated by reference to Post-
Effective Amendment No. 30 filed June 26, 1992.
(16) Schedules of Computation for each Performance Quotation.
Incorporated by reference to Post-Effective Amendment No.
30 filed June 26, 1992.
Schedules of Computation for each non-standardized
Performance Quotation attached as Exhibit.
(17) Financial Data Schedule. Attached as Exhibit.
(18) Inapplicable.
(19) Other: Trustees' Power of Attorney. Attached as Exhibit.
ii
<PAGE> 98
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
Item 25. Persons Controlled by or under Common Control with Registrant. None.
Item 26. Number of Holders of Securities.
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
DMC Tax-Free Income Trust - Pennsylvania's
Tax-Free Pennsylvania Fund A Class:
Shares of Beneficial Interest 24,845 Accounts as of
with No Par Value Per Share March 31, 1995
DMC Tax-Free Income Trust - Pennsylvania's
Tax-Free Pennsylvania Fund B Class:
Shares of Beneficial Interest 481 Accounts as of
with No Par Value Per Share March 31, 1995
Item 27. Indemnification. Incorporated by reference to Post-Effective
Amendment No. 10 filed May 12, 1980.
Item 28. Business and Other Connections of Investment Adviser.
Delaware Management Company, Inc. (the "Manager") or its affiliate,
Delaware International Advisers Ltd., also serves as investment manager or
sub-adviser to the other funds in the Delaware Group (Delaware Group Delaware
Fund, Inc., Delaware Group Trend Fund, Inc., Delaware Group Value Fund, Inc.,
Delaware Group DelCap Fund, Inc., Delaware Group Decatur Fund, Inc., Delaware
Group Delchester High-Yield Bond Fund, Inc., Delaware Group Government Fund,
Inc., Delaware Group Treasury Reserves, Inc., Delaware Group Cash Reserve,
Inc., Delaware Group Tax-Free Fund, Inc., Delaware Group Tax-Free Money Fund,
Inc., Delaware Group Premium Fund, Inc., Delaware Group Global &
International Funds, Inc., Delaware Pooled Trust, Inc., Delaware Group
Dividend and Income Fund, Inc., and Delaware Group Global Dividend and Income
Fund, Inc.) and provides investment advisory services to institutional
accounts, primarily retirement plans and endowment funds. In addition,
certain directors of the Manager also serve as directors/trustees of the
other Delaware Group funds, and certain officers are also officers of these
other funds. A company owned by the Manager's parent company acts as
principal underwriter to the mutual funds in the Delaware Group (see Item 29
below) and another such company acts as the shareholder servicing, dividend
disbursing and transfer agent for all of the mutual funds in the Delaware
Group.
iii
<PAGE> 99
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
The following persons serving as directors or officers of the
Manager have held the following positions with Registrant during the past two
years:
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name and Principal Business Address** with Manager with Registrant
- ------------------------------------- --------------------- ---------------------
<S> <C> <C>
Wayne A. Stork Chairman of the Board, Chief Chairman of the Board
Executive Officer, Chief and Trustee
Investment Officer and Director
Brian F. Wruble President, Chief Operating President and Chief
Officer and Director Executive Officer
Winthrop S. Jessup Executive Vice President Executive Vice President
and Director
Richard G. Unruh, Jr. Executive Vice President Executive Vice President
and Director
Paul E. Suckow(1) Senior Vice President/ Senior Vice President/
Chief Investment Officer, Chief Investment Officer,
Fixed Income Fixed Income
David K. Downes Senior Vice President/Chief Senior Vice President/Chief
Administrative Officer/Chief Administrative Officer/Chief
Financial Officer Financial Officer
George M. Chamberlain, Jr. Senior Vice President/ Senior Vice President/
Secretary and Director Secretary
Eric E. Miller Vice President/ Vice President/
Assistant Secretary Assistant Secretary
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
iv
<PAGE> 100
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name and Principal Business Address* with Manager with Registrant
- ------------------------------------- --------------------- ---------------------
<S> <C> <C>
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Richard J. Flannery Managing Director/Corporate Vice President
and Tax Affairs
Joseph H. Hastings Vice President/ Vice President/
Corporate Controller Corporate Controller
Eugene J. Cichanowsky Vice President/ Vice President/
Corporate Tax Corporate Tax
Bruce A. Ulmer(2) Vice President/Director Vice President/Director
of Internal Audit of Internal Audit
Lisa O. Brinkley(3) Vice President/ Vice President/
Compliance Compliance
Theresa M. Messina(4) Vice President/ Vice President/Treasurer
Assistant Treasurer
Joseph A. Finelli Vice President/ Vice President/
Client Services Client Services
Rosemary E. Milner Vice President/Legal Vice President/Legal
Douglas L. Anderson(5) Vice President/ None
Operations
Diane Z. Frustaci Vice President/ None
Human Resources
Michael T. Taggart(6) Vice President/Facilities None
Management and Administrative
Services
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
v
<PAGE> 101
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name and Principal Business Address* with Manager with Registrant
- ------------------------------------- --------------------- ---------------------
<S> <C> <C>
Gerald T. Nichols Vice President/Senior Vice President/Senior
Portfolio Manager Portfolio Manager
J. Michael Pokorny Vice President/Senior Vice President/Senior
Portfolio Manager Portfolio Manager
James R. Raith, Jr. Vice President/Senior Vice President/Senior
Portfolio Manager Portfolio Manager
Patrick P. Coyne Vice President/Senior Vice President/Senior
Portfolio Manager Portfolio Manager
Gary A. Reed Vice President/Senior Vice President/Senior
Portfolio Manager Portfolio Manager
Paul A. Matlack Vice President/Senior Vice President/Senior
Portfolio Manager Portfolio Manager
Roger A. Early(7) Vice President/Senior Vice President/Senior
Portfolio Manager Portfolio Manager
Edward N. Antoian Vice President/Senior None
Portfolio Manager
George H. Burwell Vice President/Senior None
Portfolio Manager
John B. Fields Vice President/Senior None
Portfolio Manager
Edward A. Trumpbour Vice President/Senior None
Portfolio Manager
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
vi
<PAGE> 102
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name and Principal Business Address* with Manager with Registrant
- ------------------------------------- --------------------- ---------------------
<S> <C> <C>
David C. Dalrymple Vice President/Senior None
Portfolio Manager
Jennifer L. Craney Assistant Vice President/ Assistant Vice President/
Fixed Income Trading Fixed Income
Robert C. Fett Assistant Vice President/ Assistant Vice President/
Fixed Income Research Research Analyst
Paul Grillo Assistant Vice President/ Assistant Vice President/
Fixed Income Trading Fixed Income Trading
Robert C. Whiteman Assistant Vice President/ Assistant Vice President/
Fixed Income Trading Fixed Income Trading
Cynthia I. Isom Assistant Vice President/ Assistant Vice President/
Fixed Income Trading Trading
Lorraine Warren Assistant Vice President/ Assistant Vice President/
Trading Trading
Helen C. Merichko Assistant Vice President/ None
Administration and Planning
Richard W. Buckmaster(8) Assistant Vice President/ None
Internal Audit
Miriam C. Mayerson Assistant Vice President/ None
Planning
Susan L. Hanson(9) Assistant Vice President/ None
Assistant Controller
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
vii
<PAGE> 103
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name and Principal Business Address* with Manager with Registrant
- ------------------------------------- --------------------- ---------------------
<S> <C> <C>
Patricia A. Olivieri Human Resources Officer None
Nancy L. Nessler(10) Human Resources Officer None
</TABLE>
(1) Executive Vice President and Director of Fixed Income, Oppenheimer
Management Corporation prior to April 1993.
(2) Assistant Vice President and Director of Internal Audit, Vanguard Group
prior to June 1993 and Senior Vice President and Director of Internal
Audit, Thomson McKinnon Securities prior to December 1992.
(3) Vice President and Compliance Officer, Banc One Securities Corporation
prior to August 1994 and Assistant Vice President and Compliance Officer,
Aetna Life and Casulty prior to March 1993.
(4) Vice President/Treasurer, Capital Holdings prior to October 1994 and Vice
President/Fund Accounting, SEI Corporation prior to June 1994.
(5) Vice President of Operations, Supervised Service Company prior to March
1994.
(6) Assistant Vice President/Administrative Services, United Pacific Life
Insurance prior to January 1994.
(7) Senior Vice President and Portfolio Manager, Federated Investors prior to
July 1994.
(8) Senior EDP Audit Manager, The Vanguard Group prior to November 1993.
(9) Manager of Financial Advisory Services, Coopers & Lybrand prior to March
1994.
(10) Employment Recruiter, Silo, Inc. prior to February 1994.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter for
all the mutual funds in the Delaware Group.
(b) Information with respect to each director, officer or partner
of principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Business Address* Positions with Underwriter Positions with Registrant
- ------------------------------------- -------------------------- -------------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Management
Company, Inc. Limited Partner None
Delaware Investment
Counselors, Inc. Limited Partner None
Brian F. Wruble Chairman President, Chief
Executive Officer
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
viii
<PAGE> 104
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
<TABLE>
<CAPTION>
Name and Principal Business Address* Positions with Underwriter Positions with Registrant
- ------------------------------------- -------------------------- -------------------------
<S> <C> <C>
Winthrop S. Jessup Vice Chairman Executive Vice President
Keith E. Mitchell President and Chief None
Executive Officer
David K. Downes Senior Vice President/ Senior Vice President/Chief
Chief Administrative Officer Financial Officer/Chief
Administrative Officer
George M. Chamberlain, Jr. Senior Vice President/ Senior Vice President/
Secretary Secretary
J. Lee Cook Senior Vice President/ None
National Sales Manager
Stephen H. Slack Senior Vice President/Wholesaler None
William F. Hostler Senior Vice President/ None
Marketing Services
Richard J. Flannery Managing Director/Corporate Vice President
& Tax Affairs
Joseph A. Finelli Vice President/Chief Vice President/
Financial Officer Client Services
Theresa M. Messina Vice President/Assistant Vice President/Treasurer
Treasurer
Eric E. Miller Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Joseph H. Hastings Vice President/ Vice President/
Corporate Controller Corporate Controller
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
ix
<PAGE> 105
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
<TABLE>
<CAPTION>
Name and Principal Business Address* Positions with Underwriter Positions with Registrant
- ------------------------------------- -------------------------- -------------------------
<S> <C> <C>
Eugene J. Cichanowsky Vice President/Corporate Tax Vice President/Corporate Tax
Lisa O. Brinkley Vice President/Compliance Vice President/Compliance
Rosemary E. Milner Vice President/Legal Vice President/Legal
Diane M. Anderson Vice President/Institutional None
Qualified Plans
Diane Z. Frustaci Vice President/Human Resources None
Denise F. Guerriere Vice President/Client Services None
Minette van Noppen Vice President/Marketing/ None
Defined Contribution Plans
Julia R. Vander Els Vice President/ None
Institutional Retirement
Jerome J. Alrutz Vice President/ None
Institutional Retirement
Michael J. Cole Vice President/ None
Institutional Retirement
Joanne A. Mettenheimer Vice President/ None
National Accounts
Christopher H. Price Vice President/Annuity None
Marketing & Administration
Jennifer B. Streitweiser Vice President/ None
Fixed Income Coordinator
Thomas S. Butler Vice President/ None
DDI Administration
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
x
<PAGE> 106
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
<TABLE>
<CAPTION>
Name and Principal Business Address* Positions with Underwriter Positions with Registrant
- ------------------------------------- -------------------------- -------------------------
<S> <C> <C>
Frank Albanese Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William L. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Paul D. Graffy Vice President/Wholesaler None
Alan D. Kessler Vice President/Wholesaler None
William M. Kimbrough Vice President/Wholesaler None
Mac McAuliffe Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Henry W. Orvin Vice President/Wholesaler None
Jackson B. Reece, Jr. Vice President/Wholesaler None
Philip G. Richards Vice President/Wholesaler None
Dion D. Rooney Vice President/Wholesaler None
Michael W. Rose Vice President/Wholesaler None
Thomas E. Sawyer Vice President/Wholesaler None
Sanford G. Simmons, Jr. Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xi
<PAGE> 107
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
<TABLE>
<CAPTION>
Name and Principal Business Address* Positions with Underwriter Positions with Registrant
- ------------------------------------- -------------------------- -------------------------
<S> <C> <C>
Carl E. Sundgren Vice President/Wholesaler None
Holly W. Reimel Assistant Vice President/ None
Telemarketing
Daniel J. O'Brien Assistant Vice President/ None
Insurance Products
Helen C. Merichko Assistant Vice President/ None
Administration & Planning
Catherine A. Seklecki Assistant Vice President/ None
Retirement Plans
Jodie L. Johnson Assistant Vice President/ None
Retirement Plans
Dinah J. Huntoon Assistant Vice President/ None
Product Management
Catherine Love Assistant Vice President/ None
National Accounts
Maria E. Pollack Assistant Vice President/ None
Administration Manager
Susan T. Friestedt Assistant Vice President/ None
Customer Service
Ellen M. Krott Assistant Vice President/ None
Communications
Andrew J. Whittaker Assistant Vice President/ None
Wholesaler
John A. Cionci Marketing Officer/ None
Wholesaler
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xii
<PAGE> 108
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
<TABLE>
<CAPTION>
Name and Principal Business Address* Positions with Underwriter Positions with Registrant
- ------------------------------------- -------------------------- -------------------------
<S> <C> <C>
Zina DeVassal Marketing Officer/ None
Wholesaler
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
---------------------------------
All accounts and records are maintained in Philadelphia at 1818 Market
Street, Philadelphia, PA 19103 or One Commerce Square, Philadelphia,
PA 19103.
Item 31. Management Services. None.
--------------------
Item 32. Undertakings.
-------------
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's annual
report to shareholders, upon request and without charge.
xiii
<PAGE> 109
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in this City of Philadelphia and Commonwealth of
Pennsylvania on this 20th day of April, 1995.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
By /s/ Brian F. Wruble
------------------------
Brian F. Wruble
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Wayne A. Stork Chairman of the Board and Trustee April 20, 1995
- --------------------------------
Wayne A. Stork
/s/ Brian F. Wruble President and Chief April 20, 1995
- -------------------------------- Executive Officer
Brian F. Wruble
/s/ David K. Downes Senior Vice President/Chief Financial April 20, 1995
- -------------------------------- Officer/Chief Administrative Officer
David K. Downes (Principal Financial Officer and
Principal Accounting Officer)
/s/ Walter P. Babich * Trustee April 20, 1995
- --------------------------------
Walter P. Babich
/s/ Anthony D. Knerr * Trustee April 20, 1995
- --------------------------------
Anthony D. Knerr
/s/ Ann R. Leven * Trustee April 20, 1995
- --------------------------------
Ann R. Leven
/s/ W. Thacher Longstreth * Trustee April 20, 1995
- --------------------------------
W. Thacher Longstreth
/s/ Charles E. Peck * Trustee April 20, 1995
- --------------------------------
Charles E. Peck
</TABLE>
*By /s/ Wayne A. Stork
--------------------
Wayne A. Stork
as Attorney-in-Fact
for each of the persons indicated
<PAGE> 110
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE> 111
INDEX TO EXHIBITS
Sequentially
Numbered Page
Exhibit No. Exhibit Number
- ----------- ------- -------------
(b)(2) Procedural Guidelines 112
(b)(5) Investment Management Agreement 133
(b)(6)(b) Form of Administration
and Service Agreement 138
(b)(6)(c) Dealer's Agreement 142
(b)(6)(d) Form of Mutual Fund Agreement for the
Delaware Group of Funds 150
(b)(7) Amended and Restated Profit Sharing Plan 154
(b)(11) Consent of Auditors 197
(b)(16) Schedules of Computation for each
non-standardized Performance Quotation 199
(b)(17) Financial Data Schedule 215
(b)(19) Trustees' Power of Attorney 217
<PAGE> 112
DMC TAX-FREE INCOME TRUST - PA
CERTIFICATION OF AMENDMENT TO PROCEDURAL GUIDELINES
AMENDING SECTION 5.5 OF ARTICLE IV
JANUARY 28, 1995
The Undersigned Secretary of DMC Tax-Free Income Trust-PA does hereby
certify that at the Board of Directors of the Fund at a meeting duly called and
held on January 28, 1995 did adopt the following resolution amending Section 5.5
of Article IV of the Fund's procedural guidelines:
RESOLVED, that Section 5.5 be added to Article IV of the Procedural
Guidelines as follows:
Section 5.5. Voting and Other Action By Proxy--Every shareholder
entitled to vote at a meeting of shareholders or to express consent or
dissent to action by the Trust in writing without a meeting may authorize
another person to act for him by proxy. Such proxy shall be executed in
writing by the shareholder or by his duly authorized attorney-in-fact.
A telegram, telex, cablegram, or datagram or similar transmission from a
shareholder or attorney-in-fact or photographic facsimile or similar
reproduction of a writing executed by a shareholder or attorney-in-fact
may be treated as properly executed.
IN WITNESS WHEREOF, I have hereto subscribed my name this 28th day of
January, 1995.
/s/George M. Chamberlain, Jr.
-------------------------------------------------
George M. Chamberlain, Jr.
Secretary
<PAGE> 113
AMENDMENT TO PROCEDURAL GUIDELINES
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
At a meeting of the Board of Trustees held September 20, 1984 the following
Resolutions amending the Procedural Guidelines was adopted:
RESOLVED, that Article III, Section 3.1 be amended as of September 30, 1984
to read as follows:
Section 3.1. Officers and Election. At the first meeting of the Board
of Trustees after the election of Trustees in each year the Board
shall elect a Chairman, a President and Chief Executive Officer, one
or more Vice Presidents, a Secretary and a Treasurer, and may elect or
appoint one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers and agents as the Board may deemed
necessary and as the business of the Corporation may require.
RESOLVED, that Article III, Section 3.3 be amended as of September 30, 1984
to read as follows:
Section 3.3. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and the Board of Trustees
and shall be a member ex officio of all standing committees. He shall
have those duties and responsibilities as shall be assigned to him by
the Chairman or the Board of Trustees. He shall call all special or
other meetings of the shareholders and the Trustees. In the absence,
resignation, disability or death of the President, the Chairman shall
exercise all powers and perform all duties of the President until his
return, or until such disability shall have been removed or until a
new President shall have been elected.
<PAGE> 114
In case the Chairman or President shall at any time neglect or refuse
to call a special meeting of shareholders, then and in such case, such
special meeting shall be called by the Secretary, if directed to do
so, in writing, by a majority of the Trustees.
FURTHER RESOLVED, that Article III, Section 3.4 be amended as of September
30, 1984 to read as follows:
Section 3.4. President. The President shall be the Chief Executive
Officer and head of the Corporation, and in the recess of the Board of
Trustees shall have the general control and management of its business
and affairs, subject, however, to the regulations of the Board of
Trustees.
The President shall, in the absence of the Chairman, preside at all
meetings of stockholders and the Board of Directors. In the event of
the absence, resignation, disability or death of the Chairman, the
President shall exercise all powers and perform all duties of the
Chairman until his return, or until such disability shall have been
removed or until a new Chairman shall have been elected. He shall call
meetings of the shareholders and the Trustees in the absence of the
Chairman or in the event he fails to act.
FURTHER RESOLVED, that Article III, Section 3.5 be amended as of September
30, 1984 to read as follows:
Section 3.5. Executive Vice Presidents: Vice Presidents. The Executive
Vice President, and the Vice Presidents, shall have those duties and
responsibilities as shall be assigned to them by the Chairman or the
President. In the event of the absence, resignation, disability or
death of the Chairman and President, the Executive Vice President
<PAGE> 115
shall exercise all powers and perform all duties of the President
until his return, or until such disability shall have been removed or
until a new President shall have been elected.
I, Donald M. Allen, Secretary of DMC Tax-Free Income Trust - Pennsylvania,
do hereby certify that the foregoing is a true and correct copy of the
Resolutions adopted by the Board of Trustees at their meeting held September 20,
1984.
/s/Donald M. Allen
-------------------------------------------------
Donald M. Allen
<PAGE> 116
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
At a meeting of the Board of Trustees held November 17, 1983, the following
Resolution amending the Procedural Guidelines was adopted:
RESOLVED, that Section 4.5 of the Procedural Guidelines be amended to
read:
Section 4.5. Meetings of Shareholders. Meetings of Shareholders of the
Trust for the election of Trustees, or for the transaction of other
business, shall be held at the offices of the Corporation Trust
Company in Wilmington, Delaware, or at such other places as the
Trustees may prescribe at such time as the Trustees shall direct.
/s/Donald M. Allen
-------------------------------------------------
Donald M. Allen, Secretary
<PAGE> 117
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
At a meeting of the Board of Trustees held December 16, 1982, the following
Resolution amending the Procedural Guidelines was adopted:
RESOLVED, that Article IV, Section 5, be amended to provide that:
Section 5. The Annual Meeting of Shareholders shall be held 10:00 a.m.
on the third Tuesday of April each year.
I, Donald M. Allen, Secretary of DMC Tax-Free Income Trust - Pennsylvania,
do hereby certify that the foregoing is a true and correct copy of the
Resolution adopted by the Board of Trustees at their meeting held December 16,
1982.
/s/Donald M. Allen
-------------------------------------------------
Donald M. Allen, Secretary
<PAGE> 118
At a meeting of the Trustees held December 15, 1977, the following
Resolution amending the Procedural Guidelines was adopted:
RESOLVED, that Section 4.5 be added to Article IV of the Procedural
Guidelines and that it should read as follows:
Section 4.5. Annual Meeting of Shareholders The Annual Meeting of
Shareholders of the Trust for the election of Trustees and for the
transaction of other business shall be held at the offices of the
Corporation Trust Company in Wilmington, Delaware or at such other
places as the Trustees may prescribe on the third Tuesday of April at
4:00 p.m., unless that date shall be a legal holiday, and in which
event the meeting shall be held on the first date following which is
not a legal holiday.
I, Donald M. Allen, Secretary of DMC Tax-Free Income Trust - Pennsylvania,
do hereby certify that the foregoing is a true and correct copy of the
Resolution adopted by the Trustees at their meeting held December 15, 1977.
/s/Donald M. Allen
-------------------------------------------------
Donald M. Allen, Secretary
<PAGE> 119
At a meeting of the Board of Directors held April 21, 1977, the following
Resolutions amending the Procedural Guidelines was adopted:
RESOLVED, that Article VI, Section 3 be amended to read as follows:
At the first meeting of the Board of Trustees after the election of
trustees in each year, the Board shall elect a Chairman and Chief
Executive Officer, a President, a Secretary and a Treasurer and may
elect or appoint one or more Assistant Secretaries, one or more
Assistant Treasurers, and such other officers and agents as the Board
may deem necessary and as the business of the Corporation may require.
RESOLVED, that Article VII, Section 3 be amended to read as follows:
Section 3. The Chairman of the Board shall be the Chief Executive
Officer and head of the Corporation, and in the recess of the Board of
Trustees shall have the general control and management of its business
and affairs, subject, however, to the regulations of the Board of
Directors. He shall preside at all meetings of the stockholders and
the Board of Trustees and shall be a member ex officio of all standing
committees.
RESOLVED, that Article VII, Sections 4 and 5 be amended to read as
follows:
Section 4. The President shall have those duties and responsibilities
as shall be assigned to him by the Chairman or the Board of Trustees,
and those not specifically reserved to the Chairman by law or by the
Board of Trustees.
The President shall, in the absence of the Chairman, preside at all
meetings of stockholders and the Board of Trustees. In the event of
the absence, resignation, disability or death of the Chairman, the
President shall exercise all powers and perform all duties of the
Chairman until his return, or until such disability shall have been
removed or until a new Chairman shall have been elected.
<PAGE> 120
Section 5. The Executive Vice President, and the Vice Presidents,
shall have those duties and responsibilities as shall be assigned to
them by the Chairman or the President. In the event of the absence,
resignation, disability or death of the President, the Executive Vice
President shall exercise all powers and perform all duties of the
President until his return, or until such disability shall have been
removed or until a new President shall have been elected.
I, Donald M. Allen, Secretary of DMC Tax-Free Income Trust - Pennsylvania,
do hereby certify that the foregoing is a true and correct copy of the
Resolutions adopted by the Board of Trustees at their meeting held April 21,
1977.
/s/Donald M. Allen
-------------------------------------------------
Donald M. Allen, Secretary
<PAGE> 121
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
PROCEDURAL GUIDELINES
ARTICLE I
OFFICES
Section 1.1. Principal Office. The principal office of the Trust shall be
in the City of Philadelphia, County of Philadelphia, Commonwealth of
Pennsylvania. The Trust shall also have offices at such other places as the
Trustees may from time to time determine and the business of the Trust may
require.
ARTICLE II
SHARES OF BENEFICIAL INTEREST AND CERTIFICATES
Section 2.1. Certificates. The Trust shall not issue certificates
representing the shares or beneficial interest of shareholders, except that in
the discretion of the Trustees, a certificate therefor may be issued to a
shareholder upon request. A certificate shall be in the form as may be required
by law and as the Trustee may prescribe, and, shall be signed by the Chairman,
the President or a Vice President and by the Treasurer or an Assistant
Treasurer, or by the Secretary or an Assistant Secretary. The Trustees may
permit the use of a facsimile signatures of officers as permitted by law.
<PAGE> 122
Section 2.2. Lost Certificates. Any person desiring a certificate for
shares of the Trust to be issued in lieu of one lost or destroyed shall make an
affidavit or affirmation setting forth the loss or destruction of such
certificate, and shall advertise such loss or destruction in such manner as the
Trustees may require, and shall, if the Trustees shall so require, give the
Trust a bond of indemnity, in such form with such security as may be
satisfactory to the Trustee, indemnifying the Trust against any loss that may
result upon the issuance of a new certificate. Upon receipt of such affidavit
and proof of publication of the advertisement of such loss or destruction, and
the bond, if any, require by the Trustees, a new certificate may be issued of
the same tenor and for the same number of shares as the one alleged to have been
lost or destroyed.
ARTICLE III
OFFICERS AND AGENTS
Section 3.1. Officers and Election. At the first meeting of the Trustees
after the election of Trustees in each year, Trustees shall elect a Chairman, a
President and Chief Executive Officer, one or more Vice Presidents, a Secretary
and a Treasurer, and may elect or appoint one or more Assistant Secretaries,
<PAGE> 123
one or more Assistant Treasurers and such other officers and agents as the
Trustees may deem necessary and as the business of the Trust may require.
Section 3.2. Tenure. The President and the Chairman shall be elected from
the membership of the Trustees, but other officers need not be Trustees. Any two
or more offices may be held by the same person except the offices of President
and Vice President. All officers of the Trust shall serve for one year and until
their successors shall have been duly elected and shall have qualified;
provided, however, that any officer may be removed at any time, either with or
without cause, by action by the Trustees. Any officer of the Trust may resign by
filing a written resignation with the President, with the Trustees or with the
Secretary. Any vacancy occurring in any office of the Trust by death,
resignation, or removal or otherwise, shall be filled by the Trustees.
Section 3.3. Chairman of the Board. The Chairman of the Trustees shall
preside at all meetings of the shareholders and the Trustees and shall be a
member ex-officio of all standing committees. He shall call all special or other
meetings of the shareholders and the Trustees.
<PAGE> 124
In case the Chairman or President shall at any time neglect or refuse to
call a special meeting of the shareholders, then and in such case, such special
meeting shall be called by the secretary, if directed to do so, in writing, by a
majority of the Trustees.
Section 3.4. President. The President shall be the Chief Executive Officer
of the Trust and shall have the general control and management of its business
and affairs, subject however, to the regulation of the Trustees. He shall call
meetings of the shareholders and the Trustees in the absence of the Chairman or
in the event he fails to act.
Section 3.5. Executive Vice Presidents: Vice Presidents. The Executive Vice
Presidents, and the Vice Presidents shall have those duties and responsibilities
as shall be assigned to them by the President.
In the event of the absence, resignation, disability or death of the
President, the Executive Vice President, Policy shall exercise all the powers
and perform all the duties of the President until his return, or until such
disability shall be removed or until a new President shall have been elected.
Section 3.6. Secretary. The Secretary shall attend all meetings of the
shareholders and shall record all the proceedings thereof in a book to be kept
for the purpose, and he shall be the custodian of the corporate seal of the
<PAGE> 125
Trust. In the absence of the Secretary, an Assistant Secretary or any other
person appointed or elected by the Trustees, as is elsewhere in these Procedural
Guidelines provided, may exercise the rights and perform the duties of the
Secretary.
Section 3.7. Assistant Secretary. The Assistant Secretary, or, if there be
more than one Assistant Secretary, then the Assistant Secretaries in the order
of their seniority, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary. Any Assistant
Secretary shall also perform such other duties and exercise such other powers as
the Trustees shall from time to time prescribe.
Section 3.8. Treasurer. The Treasurer shall keep full and correct accounts
of the receipts and expenditures of the Trust in books belonging to the Trust,
and shall deposit all monies and valuable effects in the name and to the credit
of the Trust and in such depositories as may be designated by the Trustees.
He shall disburse funds of the Trust as may be ordered by the Trustees,
taking proper vouchers for such disbursements, and shall render to the President
and the Trustees at the regular meetings of the Trustees, or whenever they may
require it, an account of all his transactions as the chief fiscal officer
of the Trust, and of the financial condition of the Trust.
<PAGE> 126
Section 3.9. Assistant Treasurer. The Assistant Treasurer, or, if there be
more than one Assistant Treasurer, then the Assistant Treasurers in the order of
their seniority, shall, in the absence or disability of the Treasurer, perform
the duties and exercise the powers of the Treasurer. Any Assistant Treasurer
shall also perform such duties and exercise such powers as the Trustees shall
from time to time prescribe.
Section 3.10. Compensation. The salaries or other compensation of all
officers and agents of the Trust shall be fixed by the Trustees, except that the
Trustees may delegate to any Committee or to the President, the power to fix the
salary or other compensation of any officer or agent of the Trust.
ARTICLE IV
GENERAL PROVISIONS
Section 4.1. Checks. All checks shall bear the signature or such person or
persons as the Trustees may from time to time direct.
<PAGE> 127
Section 4.2. Drafts and Notes. All notes and other similar obligations and
acceptances of drafts by the Trust shall be signed by such person or persons as
the Trustees may from time to time direct.
Section 4.3. Endorsements. Any officer of the Trust or any other employee,
as the Trustees may from time to time direct, shall have full power to endorse
for deposit all checks and all negotiable paper drawn payable to his or their
order or to the order of the Trust.
ARTICLE V
NOTICES
Section 5.1. Form. Notices to Shareholders shall be in writing and
delivered personally or mailed to the Shareholders at their addresses appearing
on the books of the Trust. Notices of Trustees shall be oral or by telephone or
telegram or in writing delivered personally or mailed to the Trustees at their
addresses appearing on the books of the Trust. Notice by mail shall be deemed to
be given at the time when the same shall be mailed. Notice to Trustees need not
state the purpose of a Regular or Special Meeting.
<PAGE> 128
Section 5.2. Waiver. Whenever any notice of the time, place or purpose of
any meeting of Shareholders, Trustees or Committee is required to be given under
the provisions of Pennsylvania law or under the provisions of the Declaration of
Trust or these Procedural Guidelines, a waiver thereof in writing, signed by the
person or persons entitled to such notice and filed with the records of the
meeting, whether before or after the holding thereof, or actual attendance at
the meeting of Shareholders in person or by proxy, or at the meeting of Trustees
or Committee in person, shall be deemed equivalent to the giving of such notice
to such persons.
ARTICLE VI
INVESTMENT RESTRICTIONS
The Trust has adopted the following restrictions and fundamental policies.
These restrictions cannot be changed without approval by the holders of a
majority, as defined in the Investment Company Act of 1940 (the "Act"), of the
outstanding shares of the Trust. The Trust may not under any circumstances:
Section 6.1. Borrow money in excess of 10% of the value of its assets and
then only as a temporary measure for extraordinary purposes. Any borrowing will
be done from a bank and to the extent that such borrowing exceeds 5% of the
<PAGE> 129
value of the Trust's assets, asset coverage of at least 300 per centum is
required. In the event that such asset coverage shall at any time fall below 300
per centum, the Trust shall, within three days thereafter (not including Sunday
or holidays) or such longer period as the Securities and Exchange Commission may
prescribe by rules and regulations, reduce the amount of its borrowings to such
an extent that the asset coverage of such borrowings shall be at least 300 per
centum. The Trust will not issue senior securities as defined in the Investment
Company Act of 1940, except for notes to banks.
Section 6.2. Sell securities short.
Section 6.3. Write or purchase put or call options.
Section 6.4. Underwrite the securities of other issuers or purchase
securities subject to restrictions on disposition under the Securities Act of
1933 (so called "restricted securities"), except that the Trust may participate
as part of a group in bidding for the purchase of Municipal Bonds directly from
an issuer for its own portfolio in order to take advantage of the low purchase
price available to members of such a group.
Section 6.5. Purchase or sell commodities or commodity contracts.
<PAGE> 130
Section 6.6. Purchase or sell real estate, but this shall not prevent the
Trust from investing in Municipal Bonds secured by real estate or interest
therein.
Section 6.7. Make loans to other persons except through the use of
repurchase agreements or the purchase of commercial paper. For these purposes
the purchase of a portion of an issue of debt securities which is part of an
issue to the public shall not be considered the making of a loan. Not more than
10% of the Trust's total assets will be invested in repurchase agreements
maturing in more than seven days.
Section 6.8. With respect to 75% of the value of its total assets, not to
invest more than 5% of the value of its assets in the securities of any one
issuer (other than U.S. Government securities) nor to acquire more than 10% of
the voting securities of such an issuer. Where securities are issued by one
agency or authority but are guaranteed by another governmental body, "issuer"
shall not be deemed to include the guarantor so long as the value of all
securities owned by the Trust which have been guaranteed by that guarantor does
not exceed 10% of the value of the Trust's assets.
Section 6.9. Purchase more than 10% of the outstanding debt obligations of
any issuer or invest in companies for the purpose of exercising control.
<PAGE> 131
Section 6.10. Invest in securities of other investment companies, except as
they be acquired as part of a merger, consolidation or acquisition of assets and
except for the purchase of shares of registered unit investment trusts whose
assets consist substantially of Municipal Bonds.
Section 6.11. Invest more than 25% of its total assets in any particular
industry or industries, except that the Trust may invest more than 25% of the
value of its total assets in Municipal Bonds and in obligations issued or
guaranteed by the U.S. Government, its agents or instrumentalities.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in value or net
assets will not result in a violation of the restrictions.
ARTICLE VII
AMENDMENTS
Section 7.1. When and How. These Procedural Guidelines may be altered or
repealed at any Regular or Special Meeting of the Trustees, provided that the
provisions of Article VI may not be amended without the consent of a majority
vote of the holders of the Trust's outstanding Shares.
<PAGE> 132
At a meeting of the Trustees held February 24, 1977, the following
Resolution amending the By-laws was adopted:
RESOLVED, that Section 4.4 be added to Article IV and that it should
be as follows:
Section 4.4 Fiscal Year - The fiscal year of the Trust shall commence
on March 1st of each year and terminate on the last day of February of
the following year.
I, Donald M. Allen, Secretary of DMC Tax-Free Income Trust - Pennsylvania,
do hereby certify that the foregoing is a true and correct copy of the
Resolution adopted by the Trustees at their meeting held February 24, 1977.
/s/Donald M. Allen
-------------------------------------------------
Donald M. Allen, Secretary
<PAGE> 133
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DMC TAX-FREE INCOME TRUST-
PENNSYLVANIA (the "Fund"), and DELAWARE MANAGEMENT COMPANY, INC., a Delaware
corporation (the "Investment Manager").
W I T N E S S E T H:
WHEREAS, the 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 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 indirect parent company of the Investment Manager
completed on the date of this Agreement a merger transaction which resulted
in a change of control of the Investment Manager and an automatic termination
of the previous Investment Management Agreement dated as of the 29th day of
June, 1988; and
WHEREAS, the Board of Directors and shareholders of the Fund have
determined to enter into a new Investment Management Agreement with the
Investment Manager to be effective as of the date of this Agreement.
<PAGE> 134
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 Fund's assets and to administer its
affairs, subject to the direction of the Board 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 to purchase and
sell on behalf of the Fund and shall give written instructions to the Trading
Department maintained by the Fund for implementation of such decisions and
shall furnish the Board of Trustees of the Fund with such information and
reports regarding the Fund's investments as the Investment Manager deems
appropriate or as the Trustees 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; and taxes. Directors, officers and employees of the Investment Manager
may be directors, officers and employees of the funds of which Delaware
Management Company, Inc. is Investment Manager. Directors, officers and
employees of the Investment Manager who are directors, officers and/or
employees of the funds shall not receive any compensation from the funds for
acting in such dual capacity.
<PAGE> 135
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, with appropriate proration of expenses
between them.
3. (a) The Fund shall place and execute its own orders for the
purchase and sale of portfolio securities with broker/dealers. Subject to the
primary objective of obtaining the best available prices and execution, the
Fund will place orders for the purchase and sale of portfolio securities with
such broker/dealers selected from among those designated from time to time by
the Investment Manager, who provide statistical, factual and financial
information and services to the Fund, to the Investment Manager, or to any
other fund for which the Investment Manager 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 provides investment
advisory services. Broker/dealers who sell shares of the Fund of which
Delaware Management Company, Inc. 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
Trustees 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 it 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 for which the
Investment Manager exercises investment discretion.
<PAGE> 136
4. As 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 a fee based on the daily average net
assets of the Fund. Such fee shall be calculated in accordance with the
following rates and provisions, less all amounts paid to members of the Board
of Trustees of the Fund during the same period:
Equivalent Average Daily
Monthly Rate Annual Rate Net Assets
6/120 of 1% .600% on the first $500,000,000
5.75/120 of 1% .575% on the next $250,000,000
5.5/120 of 1% .550% on assets over $750,000,000
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 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 so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
6. 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, may render underwriting services to the Fund
or to any other investment company, corporation, association, firm or
individual.
7. In the absence of willful misfeasance, bad faith, gross
negligence, or a reckless disregard of the performance of duties of the
Investment Manager to the Fund, the Investment Manager shall not be subject
to liabilities 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.
<PAGE> 137
8. This Agreement shall be executed and become effective on the
date written below if approved by the vote of a majority of the outstanding
voting securities of the Fund. It shall continue in effect for a period of
two years and may be renewed thereafter only so long as such renewal and
continuance is specifically approved at least annually by the Board of
Trustees or by vote of a majority of the outstanding voting securities of the
Fund and only if the terms and the renewal hereof have been approved by the
vote of a majority of the Trustees of the Fund, who are not parties hereto or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. No amendment to this Agreement shall
be effective unless the terms thereof have been approved by the vote of a
majority of the outstanding voting securities of the Fund and by the vote of
a majority of Trustees of the Fund who are not parties to the Agreement or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. Notwithstanding the foregoing, this
Agreement may be terminated by the Fund at any time, without the payment of a
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 Trustees of the
Fund or pursuant to vote of a majority of the outstanding voting securities
of the Fund. The Investment Manager may terminate this Agreement at any
time, without the payment of penalty on sixty days' written notice to 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 Fund to pay to the Investment Manager the fee provided in
Paragraph 4 hereof, prorated to the date of termination. This Agreement
shall automatically terminate in the event of its assignment.
9. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
10. For the purposes of this Agreement, the terms "vote of a
majority of the outstanding voting securities"; "interested persons"; and
"assignment" shall have the meanings defined in the Investment Company Act of
1940.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
by having it signed by their duly authorized officers as of the 3rd day of
April, 1995.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
Attest: /s/ Eric E. Miller By: /s/ Brian F. Wruble
--------------------- ----------------------
Eric E. Miller Brian F. Wruble
DELAWARE MANAGEMENT COMPANY, INC.
Attest: /s/ Richelle S. Maestro By: /s/ Wayne A. Stork
------------------------- -------------------------
Richelle S. Maestro Wayne A. Stork
<PAGE> 138
__________________________________
Administration and Service Agreement
Gentlemen:
This Administration and Service Agreement ("Agreement") has been adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by
each fund in the _____________________ listed on Exhibit A hereto (each
individually a "Fund" and collectively the "Funds"), as part of a plan pursuant
to said rule (each individually a "Plan" and collectively the "Plans"). Each
Plan has been approved by a majority of the Directors or Trustees, as relevant,
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan (the "non-interested
Directors"), cast in person at a meeting called for the purpose of voting on
such Plan. Such approval included a determination that in the exercise of the
reasonable business judgment of each Board of Directors or Trustees and in light
of the Directors' or Trustees' fiduciary duties, there is a reasonable
likelihood that the Plan will benefit each Fund and its shareholders. Each Plan
and the compensation to be paid under such Plan has also been approved by a vote
of at least a majority of the outstanding voting securities of such Fund, as
defined in the Act.
The Plan(s) and this Agreement shall continue in effect for a period of
more than one year from the date of execution or adoption only so long as such
continuance is approved at least annually by the non-interested Directors or
Trustees in the manner described in the preceding paragraph. In voting to
continue a Plan, Directors and Trustees have a duty to request and evaluate, and
any contra party hereto has a duty to furnish, such information as may
reasonably be necessary to an informed determination of whether the Plan should
be continued. Similarly, in voting to continue a Plan, Directors or Trustees
must conclude, in the exercise of their reasonable business judgment and in
light of their fiduciary duties, that there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders.
TERMS
1. To the extent you provide administrative and other services, including,
but not limited to, furnishing personal and other services and assistance to
your customers who own Fund shares, answering routine inquiries regarding a
Fund, assisting in changing account designations and addresses, maintaining such
<PAGE> 139
accounts or such other services as a Fund may require, to the extent permitted
by applicable statutes, rules, or regulations, we shall pay you a fee based on
the value of the shares of each Fund which are attributable to customers of your
firm (all such shares being hereinafter referred to as "qualified assets")
calculated on the basis and at the rate set forth in the Schedule attached
hereto and made a part of this Agreement (the "Schedule").
2. Without prior approval by a majority of the outstanding shares of a
Fund, the aggregate annual fees paid to you pursuant to the Schedule attached
hereto shall not exceed the amount stated as the "annual maximum" on the
Schedule, which amount shall be a specified percent of the value of the Fund's
net assets held in your customers' accounts which are eligible for payment
pursuant to this Agreement (determined in the same manner as each Fund uses to
compute its net assets as set forth in its effective Prospectus).
3. You shall furnish us and each Fund with such information as shall
reasonably be requested by the Board of Directors or Trustees with respect to
the fees paid to you pursuant to the Schedule.
4. We shall furnish to the Board of Directors or Trustees, for their
review, on a quarterly basis, a written report of the amounts expended under the
Plan by us with respect to the relevant Fund and the purposes for which such
expenditures were made.
5. As to a Fund, this Agreement may be terminated by us or by you, by the
vote of a majority of the Directors or Trustees with responsibility for such
Fund who are non-interested Directors, or by a vote of a majority of the
outstanding voting securities of such Fund, on sixty (60) days' written notice
all without payment of any penalty. This Agreement shall also be terminated
automatically by any act that terminates a Fund's Underwriting Agreement with
its Underwriter or a Fund's Management Agreement with its manager.
6. Any obligation assumed by a Fund pursuant to this Agreement shall be
limited in all cases to the assets of such Fund and no person shall seek
satisfaction thereof from shareholders of a Fund.
7. The provisions of the Plan between each Fund and us, insofar as they
relate to you, are incorporated herein by reference.
8. This Agreement shall take effect on the date set forth on the attached
Schedule.
<PAGE> 140
9. The terms and provisions of the current Prospectus and Statement of
Additional Information for each relevant Fund are hereby accepted and agreed to
by the parties hereto as evidenced by our execution hereof.
GENERAL
10. Governing Law. This Agreement will be governed by and construed in
accordance with the law of the State of ____________, without reference to that
state's choice of law doctrine.
11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one Agreement.
12. Severability. In the event that any provision of this Agreement, or the
application of any such provision to any person or set of circumstances, shall
be determined to be invalid, unlawful, void or unenforceable to any extent, the
remainder of this Agreement, and the application of such provision to persons or
circumstances other than those as to which it is determined to be invalid,
unlawful, void or unenforceable, shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest extent permitted by
law.
13. Entire Agreement. This Agreement sets forth the entire understanding of
the parties hereto and supersedes all prior agreements and understandings
between the parties hereto relating to the subject matter hereof.
14. Headings. The underlined headings contained herein are for convenience
of reference only, shall not be deemed to be a part of this Agreement and shall
not be referred to in connection with the interpretation hereof.
________________________________________________
By: ______________________________
Agreed and Accepted:
______________________________
(Name)
By: __________________________
(Authorized Officer)
<PAGE> 141
________________________________________
SCHEDULE TO ADMINISTRATION AND SERVICE AGREEMENT
________________________________________
AND
Pursuant to the provisions of the Administration and Service Agreement
between the above parties, each Fund listed below shall pay a fee to the
above-named party based on the net asset value of each Fund's shares during the
period indicated which are attributable to the above-named party calculated as
follows:
Frequency of
Name of Fund Amount Reimbursement
------------ ------ -------------
______________________________ _____________________________________
(Name)
By:___________________________ By:__________________________________
(Authorized Officer)
Dated:________________________
<PAGE> 142
DELAWARE
GROUP Dealer's Agreement
========
- ---------------------------------------------------------------------------
We invite you, as a selected dealer, to participate as principal in the
distribution of the shares of all of the Funds in the Delaware Group of
Investment Companies which retain us, Delaware Distributors, L.P., to act as
exclusive national distributor. The term "Fund" as used in this Agreement,
refers to each Fund in the Delaware Group which retains us to promote and
sell its shares, and any Fund which may hereafter be added to the Delaware
Group and retain us as national distributor. Such additional Funds will be
included in this Agreement upon our providing you with written notice of such
inclusion.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by
a Fund or its agent, Delaware Service Company, Inc., will be at the public
offering price applicable to each order as set forth in that Fund's
Prospectus. The manner of computing the net asset value of shares, the public
offering price and the effective time of orders received from you are
described in the Prospectus for each Fund. We reserve the right, at any time
and without notice, to suspend the sale of Fund Shares.
CONCESSIONS TO YOU: You will be entitled to deduct the applicable concession
as set forth in the then current Prospectus of a Fund from the purchase price
of certain purchase orders placed by you for shares of a Fund having a sales
charge. We reserve the right from time to time, without prior notice, to
modify, suspend or eliminate such concessions by amendment, sticker or
supplement to the Prospectus for the Fund. If any shares confirmed to you
under the terms of this Agreement are redeemed or repurchased by the Fund or
by us as agent for the Fund, or are tendered for redemption or repurchase,
within seven business days after the date of our confirmation of the original
purchase order, you shall promptly refund to us the concession allowed to you
on such shares.
PURCHASE PLANS: The purchase price on all orders placed by you and any
concessions or other fees otherwise due to you under this Agreement will be
subject to the then current terms and provisions of any applicable special
plans and accounts (e.g., volume purchases, letters of intent, right of
accumulation, combined purchases privilege, exchange and reinvestment
privileges and retirement plan accounts) as set forth from time to time in
the Prospectus. We must be notified when an order is placed if it qualifies
for a reduced sales charge under any of these plans. We reserve the right, at
any time, without prior notice, to modify, suspend or eliminate any such
plans or accounts by amendment, sticker or supplement to the Prospectus for
the Fund.
SALES, ORDERS AND CONFIRMATIONS: In offering Fund shares to the public or
otherwise, you shall act as dealer for your own account, and in no
transaction shall you have any authority to act as agent for the Fund, for
any other selected dealer or for us. No person is authorized to make any
representations concerning the shares of the Fund except those contained in
the Prospectus and in written information issued by the Fund or by us as a
supplement to such Prospectus. In purchasing Fund shares, you shall rely only
on such representations.
All sales must be made subject to confirmation and orders are subject to
acceptance or rejection by the Fund in its sole discretion. Your orders must be
wired, telephoned or written to the Fund or its agent. You agree to place
orders for the same number of shares sold by you at the price at which such
shares are sold. You agree that you will not purchase Fund shares except for
investment or for the purpose of covering purchase orders already received
and that you will not, as principal, sell Fund shares unless purchased by you
from the Fund under the terms hereof. You also agree that you will not
withhold placing with us orders received from your customers so as to profit
yourself from such withholding. Each of your orders shall be confirmed by you
in writing on the same day.
<PAGE> 143
PAYMENT AND ISSUANCE OF CERTIFICATES: The shares purchased by you hereunder
shall be paid for in full at the public offering price, less any concession to
you as set forth above, by check payable to the Fund, at its office, within five
business days after our acceptance of your order. If not so paid, we reserve the
right to cancel the sale and to hold you responsible for any loss sustained by
us or the Fund (including lost profit) in consequence. Certificates representing
the Fund's shares will not be issued unless a specific request is received from
the purchaser. Certificates, if requested, will be issued in the names indicated
by registration instructions accompanying your payment.
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under
all ordinary circumstances, will redeem shares held by shareholders on
demand. You agree that you will not make any representations to shareholders
relating to the redemption of their shares other than the statements
contained in the Prospectus and the underlying organizational documents of
the Fund, to which it refers, and that you will quote as the redemption price
only the price determined by the Fund. You shall not repurchase any shares
from your customers at a price below that next quoted by the Fund for
redemption. You may charge a reasonable fee for services in connection with
the repurchase by you from your customers of shares. You may hold such
repurchased shares only for investment purposes or submit such shares to the
Fund for redemption.
12b-1 PLAN: With respect to any Fund that has a Distribution Plan under Rule
12b-1 (a "12b-1 Plan") of the Investment Company Act of 1940 (the "1940
Act"), we expect you to provide distribution and marketing services in the
promotion of the Fund's shares and services and assistance to your customers
who own Fund shares, including but not limited to, answering inquiries
regarding the Fund or the status of a customer's account, assisting in
changing dividend options, account designations and addresses and providing
information to customers relating to maintaining their investment in the
Fund. For such services we will pay you a fee, as established by us from time
to time, based on a portion of the net asset value of the accounts of your
clients in the Fund. We are permitted to make this payment under the terms of
the 12b-1 Plans adopted by certain of the Funds, as such Plans may be in
effect from time to time; provided, however, that no payments shall be due
and paid to you hereunder unless and until the form of this Agreement shall
have been approved by a majority of the Board of Directors or Trustees of the
Fund and by a majority of the directors or trustees who are not "interested
persons" of us, the Fund or its investment manager, as such term is defined
in the 1940 Act (i.e., non-interested directors or trustees) by vote cast in
person at a meeting called for the purpose of voting on this form of
Agreement. The 12b-1 Plans in effect on the date of this Agreement are
substantially in the form set forth as Exhibit A hereto. Each Fund reserves the
right to terminate or suspend its 12b-1 Plan at any time as specified in the
Plan and we reserve the right, at any time, without notice, to modify, suspend
or terminate payments hereunder in connection with such 12b-1 Plan. You will
furnish the Fund and us with such information as may be reasonably requested
by the Fund or its directors or trustees or by us with respect to such fees
paid to you pursuant to this Agreement.
LEGAL COMPLIANCE: This Agreement and any transaction with, or payment to, you
pursuant to the terms hereof is conditioned on your representation to us
that, as of the date of this Agreement you are, and at all times during its
effectiveness you will be: (a) a registered broker/dealer under the
Securities Exchange Act of 1934 and qualified under applicable state
securities laws in each jurisdiction in which you are required to be
qualified to act as a broker/dealer in securities, and a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD");
or (b) a foreign broker/dealer not eligible for membership in the NASD and
otherwise in compliance with applicable U.S. federal and state securities
laws. You agree to notify us promptly in writing and immediately suspend sales
of Fund shares if this representation ceases to be true. You also agree that,
whether you are a member of the NASD or a foreign broker/dealer not eligible
for such membership, you will comply with the rules of the NASD including, in
particular, Sections 2 and 26 of Article III thereof, and that you will
maintain adequate records with respect to your transactions with the Funds.
<PAGE> 144
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect
to your right to sell Fund shares in any state or jurisdiction. From time to
time we may furnish you with information identifying the states and
jurisdictions under the securities laws of which it is believed a Fund's
shares may be sold. You will not transact orders for Fund shares in states or
jurisdictions in which we indicate Fund shares may not be sold. You agree to
offer and sell Fund shares outside the United States only in compliance with
all applicable laws, rules and regulations of any foreign government having
jurisdiction over such transactions in addition to any applicable laws, rules
and regulations of the United States.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicly available by the Fund, in
reasonable quantities upon your request. You agree to deliver a copy of the
current Prospectus in accordance with the provisions of the Securities Act of
1933 to each purchaser of Fund shares for whom you act as broker. We shall
file Fund sales literature and promotional material with NASD and SEC as
required. You may not publish or use any sales literature or promotional
materials with respect to the Funds without our prior review and written
approval.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed
to us at One Commerce Square, 2005 Market Street, Philadelphia, PA 19103. Any
notice from us to you shall be deemed to have been duly given if mailed or
telegraphed to you at the address set forth below. Each of us may change the
address to which notices shall be sent by notice to the other in accordance
with the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon the
appointment of a trustee for you under the Securities Investor Protection
Act, or any other act of insolvency by you. Notwithstanding the ter mination
of this Agreement, you shall remain liable for any amounts otherwise owing to
us or the Funds and for your portion of any transfer tax or other liability
which may be asserted or assessed against the Fund, or us, or upon any one or
more of the selected dealers based upon the claim that the selected dealers
or any of them constitute a partnership, an unincorporated business or other
separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you notify us in writing to the contrary, you will
be deemed to have accepted such modifications. Additional or modified forms
of Rule 12b-1 Plans may be included in this Agreement from time to time.
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of
the terms and conditions of this Agreement, you will indemnify us, the Funds,
and our affiliates for any damages, losses, costs and expenses (including
reasonable attorneys' fees) arising out of or relating to such breach and we
may offset any such damages, losses, costs and expenses against any amounts
due to you hereunder. Nothing contained herein shall constitute you, us and
any dealers an association or partnership. All references in this Agreement
to the "Prospectus" refer to the then current version of the Prospectus and
include the Statement of Additional Information incorporated by reference
therein and any stickers or supplements thereto. This Agreement supercedes
and replaces any prior agreement between us and you with respect to your
purchase and sale of Fund shares and is to be construed in accordance with
the laws of the State of Delaware.
Please confirm this Agreement by executing one copy of this Agreement below
and returning it to us. Keep the enclosed duplicate copy for your records.
DELAWARE DISTRIBUTORS, L.P.
By: Delaware Distributors, Inc., General Partner
By: /s/ Keith E. Mitchell
----------------------------------------
Name: Keith E. Mitchell
Title: President/Chief Executive Officer
<PAGE> 145
_____________________________________________________________________________
DEALER'S AGREEMENT ACCEPTANCE
DELAWARE DISTRIBUTORS, L.P.
The undersigned hereby confirms the Dealer's Agreement and acknowledges that
any purchase of Fund shares made during the effectiveness of this Agreement
is subject to all the applicable terms and conditions set forth in this
Agreement, and agrees to pay for the shares at the price and upon the terms
and conditions stated in the Agreement. The undersigned hereby acknowledges
receipt of Prospectuses relating to the Fund shares and confirms that, in
executing the Dealer's Agreement, it has relied on such Prospectuses and not
on any other statement whatsoever, written or oral.
INVESTMENT DEALER PLEASE SIGN HERE AND COMPLETE BELOW
BY:_________________________________________ DATE________________________
Name:_______________________________________
Title:______________________________________
____________________________________________
FIRM
____________________________________________
FIRM'S TAX IDENTIFICATION NUMBER
____________________________________________
STREET ADDRESS
____________________________________________
CITY/STATE/ZIP
<PAGE> 146
EXHIBIT A-1
FORM OF 12b-1 PLANS
A CLASS AND CONSULTANT CLASS SHARES
The 12b-1 Plans adopted by Funds in the Delaware Group
offering A Class Shares that are subject to a front-end sales
charge or Consultant Class Shares (money market funds) are
substantially in the following form:
DISTRIBUTION PLAN
The following Distribution Plan (the "Plan") has been adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "Act") by the Fund (the
"Fund"), on behalf of the Fund_______________ Class ("Class"). The Plan has
been approved by a majority of the Board of Directors, including a majority of
the directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related thereto, cast in person at a meeting called for the
purpose of voting on such Plan. Such approval by the directors included a
determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders. The Plan has also been
approved by a vote of the holders of a majority of the outstanding voting
securities of the Class as defined in the Act.
The Fund is a corporation organized under the laws of the State of Maryland
authorized to issue different series of securities and is an open-end
management investment company registered under the Act. Delaware Management
Company, Inc. ("DMC") or Delaware International Advisers Ltd. ("Delaware
International"), an affiliate of DMC, serves as the Fund's investment adviser
and manager pursuant to an Investment Management Agreement. Delaware Service
Company, Inc. serves as the Fund's shareholder servicing, dividend disbursing
and transfer agent. Delaware Distributors, L.P. (the "Distributor") is the
principal underwriter and national distributor for the Fund's shares,
including shares of the Class, pursuant to the Distribution Agreement between
the Distributor and the Fund ("Distribution Agreement").
The Distributor may enter into agreements with other registered
broker/dealers substantially in the form of the Dealer Agreement in the
implementation of this Plan and of the Distribution Agreement between it and
the Fund. The Fund may, in addition, enter into arrangements with other than
broker/dealers which are not "affiliated persons" or "interested persons" of
the Fund, DMC, Delaware International, or the Distributor to provide to the
Fund services in the Fund's marketing of shares of the Class, such
arrangements to be reflected by Service Agreements.
The Plan provides that:
1. The Fund shall pay a monthly fee not to exceed 0.3% (3/10 of 1%) per annum
of the Fund's average daily net assets represented by shares of the Class
(the "Maximum Amount") as may be determined by the Fund's Board of Directors
from time to time. Such monthly fee shall be reduced by the aggregate sums
paid by the Fund to other than broker-dealers (the "Service Providers")
pursuant to Service Agreements referred to above.
2. (a) The Distributor shall use the monies paid to it pursuant to paragraph 1
above to furnish, or cause or encourage others to furnish, services and
incentives in connection with the promotion, offering and sale of Class
shares and, where suitable and appropriate, the retention of Class shares by
shareholders.
(b) The Service Providers shall use the monies paid respectively
to them to reimburse themselves for the actual costs they have incurred in
confirming that their customers have received the Prospectus and Statement of
Additional Information, if applicable , and as a fee for: (1) assisting such
customers in maintaining proper records with the Fund; (2) answering
questions relating to their respective accounts; and (3) aiding in
maintaining the investment of their respective customers in the Class.
<PAGE> 147
3. The Distributor shall report to the Fund at least monthly on the amount and
the use of the monies paid to it under the Plan. The Service Providers shall
inform the Fund monthly and in writing of the amounts each claims under the
Service Agreement and the Plan; both the Distributor and the Service
Providers shall furnish the Board of Directors of the Fund with such other
information as the Board may reasonably request in connection with the
payments made under the Plan and the use thereof by the Distributor and the
Service Providers, respectively, in order to enable the Board to make an
informed determination of the amount of the Fund's payments and whether the
Plan should be continued.
4. The officers of the Fund shall furnish to the Board of Directors of the
Fund, for their review, on a quarterly basis, a written report of the amounts
expended under the Plan and the purposes for which such expenditures were
made.
5. This Plan shall take effect on the date on which the Class commences
operations with public shareholders ("Commencement Date"); thereafter, it
shall continue in effect for a period of more than one year from the
Commencement Date only so long as such continuance is specifically approved at
least annually by a vote of the Board of Directors of the Fund, and of the
directors who are not interested persons of the Fund and have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related to the Plan ("non-interested directors"), cast in person at a meeting
called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of the
non-interested directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount
to be spent for distribution pursuant to paragraph 1 thereof without approval
by the shareholders of the Class.
7. The Distribution Agreement between the Fund and the Distributor, and the
Service Agreements between the Fund and the Service Providers, shall
specifically have a copy of this Plan attached to and its terms and
provisions incorporated respectively by reference in such agreements.
8. All material amendments to this Plan shall be approved by the
non-interested directors in the manner described in paragraph 5 above.
9. So long as the Plan is in effect, the selection and nomination of the
Fund's non-interested directors shall be committed to the discretion of such
non-interested directors.
10. The definitions contained in Sections 2(a)(3), 2(a)(4), 2(a)(19) and
2(a)(42) of the Act shall govern the meaning of "affiliated person,"
"assignment," "interested person(s)" and "vote of a majority of the
outstanding voting securities," respectively, for purposes of this Plan.
<PAGE> 148
Exhibit A-2
FORM OF 12b-1 PLANS
B CLASS SHARES
The 12b-1 Plans adopted by the Funds in the Delaware Group
offering B Class Shares are substantially in the following form:
DISTRIBUTION PLAN
The following Distribution Plan (the "Plan") has been adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "Act") by the Fund (the
"Fund"), on behalf of the Fund B Class (the "Class"). The Plan has been
approved by a majority of the Board of Directors, including a majority of the
Directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related thereto, cast in person at a meeting called for the purpose of voting
on such Plan. Such approval by the Directors included a determination that in
the exercise of reasonable business judgment and in light of their fiduciary
duties, there is a reasonable likelihood that the Plan will benefit the Fund
and its shareholders. The Plan has been approved by a vote of the holders of
a majority of the outstanding voting securities of the Class, as defined in
the Act.
The Fund is a corporation organized under the laws of the State of Maryland,
is authorized to issue different series and classes of securities and is an
open-end management investment company registered under the Act. Delaware
Management Company, Inc. ("DMC") or Delaware International Advisers Ltd.
("Delaware International"), an affiliate of DMC, serves as the Fund's
investment adviser and manager pursuant to an Investment Management
Agreement. Delaware Service Company, Inc. serves as the Fund's shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors,
L.P. (the "Distributor") is the principal underwriter and national
distributor for the Fund's shares, including shares of the Class, pursuant to
the Distribution Agreement between the Distributor and the Fund
("Distribution Agreement").
The Plan provides that:
1.(a) The Fund shall pay to the Distributor a monthly fee not to exceed 0.75%
(3/4 of 1%) per annum of the Fund's average daily net assets represented by
shares of the Class as may be determined by the Fund's Board of Directors
from time to time.
(b) In addition to the amounts described in paragraph 1(a) above, the Fund
shall pay: (i) to the Distributor for payment to dealers or others; or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of
the Fund's average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements, the forms of which
have been approved from time to time by the Fund's Board of Directors.
2.(a) The Distributor shall use the monies paid to it pursuant to paragraph
1(a) above to assist in the distribution and promotion of shares of the
Class. Payments made to the Distributor under the Plan may be used for, among
other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be used to
pay dealers or others for, among other things, furnishing personal services
and maintaining shareholder accounts, which services include confirming that
customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective
customers in the Fund.
<PAGE> 149
3. The Distributor shall report to the Fund at least monthly on the amount
and the use of the monies paid to it under paragraph 1(a) above. In addition,
the Distributor and others shall inform the Fund monthly and in writing of
the amounts paid under paragraph 1(b) above; both the Distributor and any
others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan
should be continued.
4. The officers of the Fund shall furnish to the Board of Directors of the
Fund, and the Directors shall review, on a quarterly basis, a written report
of the amounts expended under the Plan and the purposes for which such
expenditures were made.
5. This Plan shall take effect at such time as the Distributor shall notify
the Fund in writing of the commencement of the Plan (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more
than one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Directors
of the Fund, and of the Directors who are not interested persons of the Fund
and have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan ("non-interested Directors"),
cast in person at a meeting called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of the
non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to be
spent for distribution pursuant to paragraph 1 thereof without approval by the
shareholders of the Class.
7. The Distribution Agreement between the Fund and the Distributor, and any
dealers or servicing agreements between the Distributor and brokers or others
or between the Fund and others receiving a servicing fee, shall specifically
have a copy of this Plan attached to, and its terms and provisions
incorporated respectively by reference in, such agreements.
8. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
9. So long as the Plan is in effect, the selection and nomination of the
Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
10. The definitions contained in Sections 2(a)(3), 2(a)(4), 2(a)(19) and
2(a)(42) of the Act shall govern the meaning of "affiliated person,"
"assignment" "interested person(s)" and "vote of a majority of the outstanding
voting securities," respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as previously defined.
AA-17A-1/95-U
<PAGE> 150
EXHIBIT 1.24(b)(6)(d)
MUTUAL FUND AGREEMENT
FOR THE DELAWARE GROUP OF FUNDS
Gentlemen:
We are the national distributor for the Delaware Group of Funds with exclusive
right to sell and distribute Fund shares. (The term "Funds" in this Agreement
refers to each or any of the Funds that from time to time comprise the Delaware
Group and for whom we act as distributor.) You have indicated that you wish to
act as agent for your customers in connection with the purchase, sale and
redemption of Fund shares and desire to provide certain services to your
customers relating to their ownership of Fund shares, all in accordance with the
terms of this Agreement.
AGENT FOR CUSTOMERS: In placing orders for the purchase and sale of Fund shares,
you will be acting as agent for your customers and will not have any authority
to act as agent for us, any of the Funds or any of our affiliates or
representatives. Neither you nor any of your employees or agents are authorized
to make any representations concerning the Funds or Fund shares except those
contained in the then current "Prospectus" and in written information issued by
the Fund or by us as a supplement to the Prospectus. In purchasing Fund shares
your customers may rely only on such authorized information.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by
the Fund or its agent, Delaware Service Co. Inc., will be at the public offering
price applicable to each order as set forth in the Prospectus. The manner of
computing the net asset value, the public offering price and the effective time
of orders received from you are described in the Prospectus for each Fund. We
reserve the right at any time, without notice, to suspend the sale of Fund
shares or withdraw the public offering.
SALES, ORDERS AND CONFIRMATIONS: All orders must be made subject to
confirmation. Your orders must be wired, telephoned or written to the Fund or
its agent. You agree to place orders on behalf of your customers for the number
of shares, and at the price, as in bona fide orders from your customers. We will
not accept any conditional orders. We will send a written confirmation of each
trade indicating that the trade was on a fully disclosed basis to your customer.
It is agreed and understood that, whether shares are registered in the
purchaser's name, in your name or in the name of your nominee, your customer
will have full beneficial ownership of the Fund shares.
AGENCY FEES: On each order accepted by us for a Fund with a sales charge, we
understand that you will charge your customer an agency commission or agency
transaction fee ("agency fee") as set forth in the schedule of sales concessions
and agency fees set forth in that Fund's Prospectus, as it may be amended from
time to time. This fee shall be subject to the provisions of all terms set forth
in the Prospectus for volume purchases and special plans and accounts (e.g.
retirement plans, letters of intent, etc.) You will not receive from us a
dealer's concession or similar allowance out of the sales charge. In accordance
with interpretations by the Staff of the Securities and Exchange Commission (the
"Commission"), the agency fee will be your sole charge to your customers for
placing such orders. You may elect to make payments in either of two ways: (a)
you may send us the public offering price for the Fund shares purchased less the
amount of the agency fee due you or (b) you or your customer may send us the
entire public offering price for the Fund shares and we will, on a periodic
basis, remit to you the agency fee due. You will notify us in writing of which
method of payment you elect. If any shares sold to your customer under the terms
of this Agreement are repurchased by the Fund or by us, or are tendered to a
Fund for redemption or repurchase, within seven (7) business days after the date
of the confirmation of the original purchase order, you will promptly refund to
us full agency fee paid or allowed to you on such shares.
<PAGE> 151
PAYMENT AND ISSUANCE OF CERTIFICATES: Regardless of the payment method elected,
Fund shares purchased by you for your customers hereunder shall be paid for in
fully by check payable to the Fund at its office within five business days after
our acceptance of your order. If not so paid, the Fund reserves the right,
without notice, to cancel the sale and to hold you responsible for any loss,
including lost profit, sustained by us or the Fund in consequence. Certificates
representing Fund shares will not be issued unless a specific request is
received from you or your customer. Certificates, if requested, will be issued
in the names indicated by registration instructions accompanying payment.
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will repurchase its shares from shareholders on demand.
You agree that you will not make any representations to shareholders relating to
the purchase of their Fund shares other than the statements contained in the
Prospectus and the underlying organizational documents of the Fund, to which it
refers, and that you will quote to your customers as the redemption price only
the price determined by the Fund.
12b-1 PLAN: With respect to any Fund that has a Distribution Plan under Rule
12b-1 (a "12b-1 Plan") of the Investment Company Act of 1940 (the "1940 Act"),
we expect you will provide shareholder and administrative services to your
customers, such as: answering inquiries regarding the Fund; assisting in
changing dividend options, account designations and addresses; performing
sub-accounting; establishing and maintaining shareholder accounts and records;
processing purchase and redemption transactions; providing periodic statements
and/or updates showing a customer's account balance and integrating such
statements with those of other transactions and balances in the customer's other
accounts serviced by you; and arranging for bank wires. You will transmit
promptly to customers all communications sent to you for transmittal to clients
by or on behalf of us, any Fund or such Fund's investment advisor, custodian or
transfer or dividend disbursing agent. You will promptly answer all written
complaints received by you relating to Fund accounts or promptly forward such
complaints to us and assist us in answering such complaints. For such services
we will pay you a fee as set by us from time to time, based on a portion of the
net asset value of the accounts of your clients in the Fund. We are permitted to
make this payment under the terms of the 12b-1 Plan adopted by certain of the
Funds, as such 12b-1 Plans may be in effect from time to time, provided,
however, that no payments shall be due and paid to you hereunder with respect to
a Fund unless and until the form of this Agreement shall have been approved by a
majority of the Board of Directors or Trustees of that Fund and by a majority of
the directors or trustees who are not "interested persons" of us, the Fund or
its investment manager, as such term is defined in the 1940 Act (i.e., non-
interested directors) by vote cast in person at a meeting called for the purpose
of voting on this form of Agreement. Each Fund reserves the right, at any time,
to suspend payments under its 12b-1 plan. You will furnish the Fund and us with
such information as may be reasonably requested by the Fund or its directors or
trustees or by us with respect to fees paid to you pursuant to this Agreement.
In accordance with interpretations and rulings to the Staff of the Commission,
you will not charge your customers any fees for services for which you are being
compensated under a 12b-1 Plan of a Fund.
SALE OF NO-LOAD - NON 12B-1 PLAN FUNDS: In connection with any orders placed by
you on behalf of your customers for shares of Funds that do not charge a sales
load and do not have a 12b-1 Plan, we understand that you may charge your
customers a limited service or transaction fee, in accordance with
interpretations and rulings of the Staff of the Commission.
<PAGE> 152
LEGAL COMPLIANCE: This Agreement and any transaction with or payment to you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are and at all times during its
effectiveness yo will be (a) a registered broker-dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws, if
any, to act as a broker or dealer in securities, and a member in good standing
of the National Association of Securities Dealers, Inc. (the "NASD"); or (b) a
"bank" as defined in Section 3(a)(6) of the Securities Exchange Act of 1934 (or
other financial institution) and not otherwise required to register as a broker
or dealer under such Act. You agree to notify us promptly in writing if this
representation ceases to be true. You also agree that you will comply with the
rules of the NASD including, in particular, Sections 2 and 26 of Article III
thereof, to the extent applicable, that you will maintain adequate records with
respect to your customers and their transactions, and that such transactions
will be without recourse against you by your customers. We recognize that, in
addition to applicable provisions of state and federal securities laws, you may
be subject to the provisions of the Glass-Steagall Act and other laws governing,
among other things, the conduct of activities by federal and state chartered and
supervised financial institutions and their affiliated organizations. Because
you will be the only one having a direct relationship with the customer, yo will
be responsible in that relationship for insuring compliance with all laws and
regulations, including those of all applicable federal and state regulatory
authorities and bodies having jurisdiction over you or your customers to the
extent applicable to securities purchases hereunder.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we shall furnish you with information identifying the states under the
securities laws of which it is believed a Fund's shares may be sold. You will
not transact orders for Fund shares in states in which we indicate Fund shares
may not be sold.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicly available by the Fund, in
reasonable quantities upon your request. We shall file Fund sales literature and
promotional material with the NASD and SEC as required. You may not publish or
use any sales literature or promotional materials with respect to the Funds
without our prior review and written approval.
CUSTOMERS: The names of your customers will remain your sole property and will
not be used by us except for servicing or informational mailings and other
correspondence in the normal course of business.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at 1818 Market Street, Philadelphia, PA 19103. Any notice from us to you
shall be deemed to have been duly given if mailed or telegraphed to you at the
address set forth above. Each of us may change the address to which notices
shall be sent by notice to the other in accordance with the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Fund and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, us or any one or more of our dealers,
based upon the claim that you and such dealers or any of them constitute a
partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you promptly notify us in writing to the contrary, you
will be deemed to have accepted such modifications.
<PAGE> 153
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach. Nothing contained
herein shall constitute you, us and any dealers an association or partnership.
All references in this Agreement to the "Prospectus" include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto, provided that any requirement in this Agreement to deliver
a copy of the Prospectus shall not include the Statement of Additional
Information unless requested by the customer. This Agreement is to be construed
in accordance with the laws of the State of Delaware.
Please confirm this Agreement by executing one copy of this Agreement below and
returning it to us. Keep the enclosed duplicate copy for your records.
Date:________________ DELAWARE DISTRIBUTORS, L.P.
BY: DELAWARE DISTRIBUTORS, INC.,
General Partner
Accepted and Agreed to:
- ---------------------------
(Name of Firm)
BY:________________________
Name:
Title:
<PAGE> 154
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
<PAGE> 155
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I
PURPOSE CLAUSE . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III
ELIGIBILITY OF EMPLOYEES
TO PARTICIPATE IN THE PLAN . . . . . . . . . . . . . . 6
ARTICLE IV
CONTRIBUTIONS TO PLAN . . . . . . . . . . . . . . . . . 7
ARTICLE V
ALLOCATION OF CONTRIBUTIONS . . . . . . . . . . . . . . 12
ARTICLE VI
RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . 14
ARTICLE VII
DISABILITY BENEFITS . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII
DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IX
OTHER SEPARATION FROM SERVICE . . . . . . . . . . . . . 16
ARTICLE X
METHOD OF PAYMENT . . . . . . . . . . . . . . . . . . . 18
ARTICLE XI
ADMINISTRATION OF PLAN . . . . . . . . . . . . . . . . 26
ARTICLE XII
AMENDMENT, CONSOLIDATION, MERGER
OR TERMINATION . . . . . . . . . . . . . . . . . . . . 29
(i)
<PAGE> 156
ARTICLE XIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XIV
LOANS . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XV
LIMITATIONS ON ALLOCATIONS . . . . . . . . . . . . . . 32
ARTICLE XVI
TOP HEAVY DEFINITIONS AND RULES . . . . . . . . . . . . 36
(ii)
<PAGE> 157
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
ARTICLE I
PURPOSE CLAUSE
--------------
This Profit Sharing Plan and the Trust Agreement forming a part hereof are
established for the benefit of the employees of Delaware Group Delaware Fund,
Inc. and the other investment companies of the Delaware Group of Funds to
promote in them a strong interest in the successful operation of the business
and to provide for them an opportunity for accumulation of funds for their
retirement benefit.
ARTICLE II
DEFINITIONS
-----------
When used herein, the following words shall have the following meanings
unless the context clearly indicates otherwise:
2.1 "Administrative Committee" or "Committee" shall mean the Administrative
Committee with authority and responsibility to manage and direct the operation
and administration of this Plan. "Administrative Committee" shall be deemed to
also mean "Administrator" and "Plan Administrator" as defined in ERISA.
2.2 "Anniversary Date" shall mean the first day of each Plan Year.
2.3 "Beneficiary" shall mean the person or persons designated by a
Participant to receive benefits upon the death of said Participant pursuant to
Article VIII.
2.4 "Board of Directors" shall mean the Board of Directors of the Employer.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.6 "Effective Date" of the Plan shall mean October 1, 1983. The Effective
Date of this amended and restated Plan shall mean April 1, 1989, except where
indicated otherwise.
2.7 "Eligibility Computation Period" shall mean the period of twelve (12)
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<PAGE> 158
consecutive months beginning on the date an Employee first performs an Hour of
Service upon hire or rehire after a One Year Break in Service, and any Plan Year
following such date of hire or date of rehire following a One Year Break in
Service.
2.8 "Eligibility Year of Service" shall mean the Eligibility Computation
Period during which the Employee performs one thousand (1,000) or more Hours of
Service. Eligibility Years of Service shall include an Employee's prior service
with Delaware Management Company, Inc. or any Entity required to be aggregated
with Delaware Management Company, Inc. under Sections 414(b) or(c) of the Code.
2.9 "Employee" shall mean any person employed by the Employer or by any
affiliated Entity which adopts this Plan; provided, however, no person covered
by a collective bargaining agreement under which the Employer has participated
in good faith bargaining concerning retirement benefits shall be considered an
Employee for the purposes of this Plan. Any Leased Employee shall not be
considered an Employee for purposes of the Plan.
2.10 "Employer" shall mean Delaware Group Delaware Fund, Inc. and any other
affiliated investment company which adopts this Plan. Effective October 1, 1987,
and solely for purposes of determining periods of service for eligibility for
participation and vesting, the term "Employer" shall include any corporation
which is a member of a controlled group of corporations (as defined in Section
414(b) of the Code) which includes the Employer; any trade or business (whether
or not incorporated) which is under common control (as defined in Section 414(c)
of the Code) with the Employer; any organization (whether or not incorporated)
which is a member of an affiliated service group (as defined in Section 414(m)
of the Code) which includes the Employer; and any other Entity required to be
aggregated with the Employer pursuant to regulations under Section 414(o) of the
Code.
2.11 "Employer Contribution Account" shall mean a Participant's account
derived from Employer contributions and the earnings thereon.
2.12 "Entity" shall mean an individual, partnership, corporation or
unincorporated organization.
2.13 "ERISA" shall mean the Employee Retirement Income Security Act of 1974
and the Regulations promulgated thereunder by either the Department of Labor or
Treasury.
2.14 "Hour of Service" shall mean:
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<PAGE> 159
(a) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer. These hours will be credited to the
Employee for the computation period in which the duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to payment, by the
Employer on account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability), layoff, jury
duty, military service or leave of absence. No more than 501 Hours of Service
will be credited under this paragraph for any single continuous period (whether
or not such period occurs in a single computation period); and
(c) Each hour for which back pay, regardless of mitigation of damages, is
either awarded or agreed to by the Employer. The same Hours of Service will not
be credited both under paragraph (a) or paragraph (b), as the case may be, and
under this paragraph (c). These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.
(d) Hours of Service will be calculated on the basis described in
Department of Labor Regulations Section 2530.200b-2(b) and (c).
(e) Solely for purposes of determining whether a Break in Service has
occurred, for participation and vesting purposes, an individual who is absent
from work for maternity or paternity reasons will receive credit for the Hours
of Service which would otherwise have been credited to such individual. In the
event these hours cannot be determined, eight (8) Hours of Service per day will
be used. For purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence (i) by reason of the pregnancy of the
individual, (ii) by reason of the birth of a child of the individual, (iii) by
reason of the placement of a child with the individual in connection with the
adoption of the child by such individual, or (iv) for purposes of caring for the
child for a period beginning immediately following such birth or placement.
However, in no event will the hours treated as Hours of Service under this
paragraph (e), by reason of any pregnancy or placement, exceed 501 hours. The
Hours of Service credited under this paragraph will be credited (i) in the Plan
Year in which the absence begins if the crediting is necessary to prevent a
Break in Service in that period, or (ii) in all other cases, in the following
Plan Year.
(f) Effective for Plan Years beginning on or after April 1, 1994, an
Employee shall be credited with 45 Hours of Service for each week for which he
would be required to be credited with at least one Hour of Service under
paragraphs (a)-(e) above.
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<PAGE> 160
2.15 "Leased Employee" shall mean any person described in Section 414(n) of
the Code who is not an employee of the Employer who, pursuant to an agreement
between the Employer and any other person, has performed service for the
Employer (or for any related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full-time basis for a period of at
least one year and such services are of a type historically performed by
employees in the Employer's business field.
2.16 "Named Fiduciary" shall be the Administrative Committee and the
Trustee or Trustees serving from time to time and any other person who is
specifically so designated by the Board of Directors.
2.17 "Normal Retirement Date" shall mean the date on which a Participant
shall reach age 65.
2.18 "One Year Break in Service" or "Break in Service" shall mean a Plan
Year during which an Employee has or was separated from employment with Employer
and has completed 500 or less Hours of Service.
2.19 "Participant" shall mean any Employee who meets the eligibility
requirements under Article III or any Employee who is or may become eligible to
receive a benefit under the Plan or whose Beneficiaries may be eligible to
receive any such benefit.
2.20 "Participant Contribution Account" shall mean a Participant's account
derived from his voluntary contributions and the earnings thereon.
2.21 "Plan" shall mean the Employer's Profit Sharing Plan set forth in this
document and all subsequent amendments thereto.
2.22 "Plan Compensation" shall mean as of each Anniversary Date, the basic
compensation received by an Employee from the Employer during the preceding Plan
Year, including salary, draw, overtime and bonuses, but excluding contributions
to this or any other deferred compensation plan. Plan Compensation includes
salary reduction contributions paid by the Employer on the Employee's behalf to
a cafeteria plan, within the meaning of Section 125 of the Code, maintained by
the Employer. Effective for Plan Years beginning on or after April 1, 1994, Plan
Compensation shall mean the sum of (a) the total earnings which are received by
the Employee from the Employer for the preceding Plan Year and which are
required to be reported as wages on the Employee's Form W-2 (in the wages, tips
and other compensation box) and (b) the total amount contributed by the
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<PAGE> 161
Employer on behalf of the Employee pursuant to a salary reduction agreement
which is not includable in the gross income of the Employee under Sections 125
or 402 (e)(3) of the Code, but excluding all of the following items (even if
includable in gross income): reimbursements or other expense allowances, fringe
benefits (cash and non-cash), moving expenses, deferred compensation and welfare
benefits.
For Plan Years beginning on or after April 1, 1989, the Plan Compensation
of each Participant taken into account under the Plan shall not exceed $200,000,
as adjusted by the Secretary of the Treasury. In determining the Plan
Compensation of a Participant for purposes of the limitations set forth in the
preceding sentence, the rules of Section 414(q)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only the spouse
of the Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the Plan Year. If, as a result of the
application of such rules, the adjusted $200,000 limitation is exceeded, then
the limitation shall be prorated among the affected individuals in proportion to
each such individual's Plan Compensation as determined under this Section 2.22
prior to the application of this limitation. Effective for Plan Years beginning
on or after January 1, 1994, the Plan Compensation of a Participant shall not
exceed $150,000, as adjusted at the time and manner prescribed by Section 401
(a)(17)(B) of the Code.
2.23 "Plan Year" shall mean a twelve-month period beginning on April 1st
and ending on March 31st. For the Plan Years beginning before April 1, 1989 and
after December 31, 1986, the term Plan Year means a twelve month period
beginning October 1st and ending September 30th, except that the Plan Year
beginning October 1, 1988 is a short year which ends March 31, 1989.
2.24 "Total and Permanent Disability" shall mean incapacity, resulting from
injury or disease, of a Participant to perform any work for Employer and shall
be presumed permanent after the same has continued uninterrupted for six months
as certified by a qualified physician selected by the Administrative Committee.
2.25 "Trustee" or "Trustees" shall mean the trustee or trustees named in
the Trust Agreement attached hereto and forming a part hereof, or any successor
thereto.
2.26 "Trust Fund" or "Fund" shall mean all property held pursuant to the
Trust Agreement.
2.27 "Valuation Date" means the last day of each Plan Year and such other
quarterly, monthly or daily dates as determined by the Administrative Committee.
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<PAGE> 162
2.28 "Year of Service" shall mean a Plan Year during which an Employee
completes at least 1,000 Hours of Service; provided, however, that for the
period from October 1, 1988 through March 31, 1990, an Employee shall be given
credit for a Year of Service if he completes 1,000 Hours of Service during the
period October 1, 1988 to September 30, 1989 and shall be given credit for an
additional Year of Service if he completes 1,000 Hours of Service during the
period April 1, 1989 to March 31, 1990. For purposes of determining a
Participant's nonforfeitable right to his Employer Contribution Account, Years
of Service shall include an Employee's prior service with Delaware Management
Company, Inc. or any other Entity required to be aggregated with Delaware
Management Company, Inc. under Sections 414(b) or (c) of the Code. An Employee
shall also receive credit for a Year of Service if he completes 1000 or more
Hours of Service during his initial Eligibility Computation Period.
2.29 Whenever used herein, the masculine provision includes the feminine
and the singular includes the plural.
ARTICLE III
ELIGIBILITY OF EMPLOYEES
TO PARTICIPATE IN THE PLAN
--------------------------
3.1 Each Employee who was a Participant on March 31, 1989 shall continue as
a Participant. Each other Employee shall be eligible to participate in this Plan
on the first day of the Plan Year within which he completes one Eligibility Year
of Service.
3.2 Any Participant who returns to service after a Break in Service shall
be admitted to the Plan as a Participant on his date of re-employment.
3.3 Within 60 days of each Anniversary Date of this Plan, the Employer
shall furnish the Administrator a list showing all eligible Employees, the date
of employment, the Years of Service, the Plan Compensation of each eligible
Employee and the date of termination of any terminated Employees.
3.4 Notwithstanding the provisions of Section 3.1 to the contrary, if an
Employee is employed by the Employer on March 31, 1989 and has completed by such
date 1,000 or more Hours of Service during an Eligibility Computation Period
which began on or before October 1, 1988, such Employee shall be eligible to
participate in the Plan on October 1, 1988.
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<PAGE> 163
ARTICLE IV
CONTRIBUTIONS TO PLAN
---------------------
4.1 Each participating Employer may contribute to the Plan's Trust Fund for
each taxable year an amount, if any, determined in accordance with a resolution
of the Board of Directors adopted before the date prescribed by law for filing
its Federal income tax return for such taxable year (including extensions
thereof); provided, however, that no contributions shall be made for any year in
excess of the amount deductible for such year under provisions of the Code and
regulations thereunder as then in effect. For Plan Years beginning on or after
April 1, 1989, the Employer may make contributions regardless of whether or not
it has Net Profits and Earnings for its tax year.
4.2 For Plan Years beginning before April 1, 1989, Net Profits and Earnings
in any one year of operations means the net income before provisions for Federal
and State income taxes as determined by the certified public accountants
employed by the Employer in accordance with generally accepted accounting
principles of open-end management investment companies.
4.3 For each taxable year, the contributions shall accrue on the
Anniversary Date thereof, but shall not be considered as accruing during the
said taxable year prior to the Anniversary Date thereof.
4.4 The Trust Fund shall not be diverted to any use other than the
exclusive benefit of eligible Employees and their Beneficiaries.
4.5 Effective August 1, 1991, a Participant may not make voluntary
contributions to his Participant Contribution Account. Prior to August 1, 1991,
a Participant may make voluntary contributions to his Participant Contribution
Account. Such contributions may be made by payroll deductions or in such other
manner and subject to such procedures as the Administrator may prescribe. No
Participant may contribute more than ten percent of his aggregate Plan
Compensation for all Plan Years during which he participated in the Plan.
4.6 Notwithstanding the provisions of Article IX, a Participant shall have
a nonforfeitable interest in all voluntary contributions made by him and in any
increase in his account attributable to such contributions.
4.7 A Participant shall have the right to withdraw the total amount of his
voluntary contributions at any time; provided, however, that such withdrawal
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<PAGE> 164
shall be permissible only with respect to the amount of such Participant's
voluntary contributions and not to any increase in his account attributable to
such contributions. No Participant shall be permitted to make withdrawals of
his voluntary contributions more than four times in any one calendar year.
Effective as of the date of adoption of this amended and restated Plan, a
Participant shall be permitted to make withdrawals as frequently as monthly of
all or a portion of his voluntary contributions, including the earnings
thereon.
4.8 The Fund may accept rollover contributions on behalf of an Employee
(including an Employee who has not satisfied the requirements to be eligible to
participate) from any other plan maintained for his benefit which satisfies the
requirements of a tax-qualified plan, or a rollover individual retirement
account; provided, however, that such rollovers are permitted by and effected in
accordance with the requirements of the Code. The Administrative Committee may
as a condition of acceptance of such rollovers demand such information, opinions
and statements as it deems necessary to assure that such rollovers conform to
the requirements of the federal tax laws.
4.9 An Employee for whom a rollover has been made shall be deemed a
Participant with respect to the amount contributed and shall have a
nonforfeitable interest in such amount and any increases attributable to it. Any
such rollovers shall be held in a special account for the Participant segregated
from other assets held by the fund. Such contributions will be administered and
distributed pursuant to the provisions of this Plan.
4.10 The following special non-discrimination rules pertaining to voluntary
contributions shall be applicable for Plan Years beginning on or after October
1, 1987 and before April 1, 1990.
(a) For any Plan Year, the Contribution Percentage for all Highly
Compensated Employees will not exceed the greater of (i) or (ii) as follows:
(i) The Contribution Percentage for all Non-Highly Compensated Employees,
times 1.25; or
(ii) The lesser of the Contribution Percentage for all Non-Highly
Compensated Employees, times 2.0, provided that the Contribution Percentage for
all Highly Compensated Employees may not exceed the Contribution Percentage for
all Non-Highly Compensated Employees by more than two (2) percentage points or
such lesser amount as the Secretary of Treasury will prescribe to prevent the
multiple use of this alternative limitation with respect to any Highly
Compensated Employee.
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(b) Distribution of Excess Aggregate Contributions.
(i) Excess Aggregate Contributions, plus any income and minus any loss
allocable thereto, will be distributed no later than the last day of each Plan
Year to Participants to whose accounts Excess Aggregate Contributions were
allocated for the preceding Plan Year.
(ii) For the Plan Year beginning on October 1, 1987, the income or loss
allocable to Excess Aggregate Contributions shall be determined under any
reasonable method, which method shall be applied on a consistent basis for all
Participants. For Plan Years beginning after 1987, the income or loss allocable
to Excess Aggregate Contributions shall be the sum of (A) and (B) below:
(A) The income or loss for the Plan Year allocable to the Participant's
voluntary contribution Account multiplied by a fraction, the numerator of which
is the Participant's Excess Aggregate Contributions for the year, and the
denominator of which is the balance of the Participant's voluntary contribution
account as of the end of the Plan Year, minus income (or plus losses) allocable
to such account.
(B) The income or loss for the period between the end of the Plan Year and
the date of the distribution allocable to the Participant's voluntary
contribution account multiplied by the fraction described in (A), above.
In lieu of using the formula described in (B), the income or loss for the
period between the end of the Plan Year and the date of the distribution
allocable to Excess Aggregate Contributions for the year may be calculated under
the following alternative method, provided such method is applied on a
consistent basis for all Participants: ten percent (10%) of the amount
determined under (A), above, multiplied by the number of whole calendar months
that have elapsed since the end of the Plan Year. For this purpose, if a
distribution of Excess Aggregate Contributions is made after the 15th day of a
month, that month will be counted as a whole month.
(c) The following definitions apply for purposes of this Section 4.10.:
(i) "Contribution Percentage" means, for a group of Participants, the
average of the following ratios (calculated separately) for each Participant in
the group:
(A) The sum of voluntary contributions made on behalf of each Participant
for the Plan Year; over
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(B) The Participant's Compensation for that Plan Year, whether or not the
Participant was a Participant for the entire Plan Year.
The Contribution Percentage for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to have voluntary employee
contributions or employer matching contributions allocated to his account under
two or more plans described in Section 401(a) of the Code or arrangements
described in Section 401(k) of the Code that are maintained by the employer or
an entity that is required to be aggregated with the employer pursuant to
Sections 414(b), (c), (m), or (o) of the Code will be determined as if all such
contributions were made under a single plan. If a Highly Compensated Employee
participates in two or more arrangements described in Section 401(k) of the Code
that have different plan years, all such arrangements ending with or within the
same calendar year shall be treated as a single arrangement.
For purposes of determining the Contribution Percentage of a Participant
who is a five-percent owner or one of the ten most Highly Compensated Employees,
the Contribution Percentage and compensation of such Participant will include
the Contribution Percentage and Compensation of Family Members, and such Family
Members will be disregarded in determining the Contribution Percentage for
Participants who are Non-Highly Compensated Employees.
Voluntary contributions will be considered made for a Plan Year if made by
the date specified in the applicable regulations and allocated to a
Participant's account for the Plan Year.
The determination and treatment of the Contribution Percentage of any
Participant will satisfy such other requirements as may be prescribed by
Secretary of the Treasury.
In the event that this Plan satisfies the requirements of Sections 401(m),
401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans,
or if one or more other plans satisfy the requirements of such Sections only if
aggregated with this Plan, then this Section 4.10 will be applied by determining
the Contribution Percentages of eligible Participants as if all such plans were
a single plan. For plan years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Section 401(m) of the Code only if they have the
same plan year.
(ii) "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of:
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(A) The aggregate Contribution Percentage amounts taken into account in
computing the numerator of the Contribution Percentage actually made on behalf
of Highly Compensated Employees for such Plan Year; over
(B) The maximum Contribution Percentage amounts permitted by the
Contribution Percentage limits set forth in this Section 4.10 (determined by
reducing contributions made on behalf of Highly Compensated Employees in order
of their Contribution Percentages beginning with the highest of such
percentages).
(iii) "Family Member" means an individual described in Section 414(q)(6)(B)
of the Code.
(iv) "Highly Compensated Employee" means a highly compensated active
employee or a highly compensated former employee, as described below.
A highly compensated active employee includes any employee who performs
service for the employer during the determination year and who, during the
look-back year: (i)received compensation from the employer in excess of $75,000
(as adjusted pursuant to Section 415(d) of the Code); (ii) received compensation
from the employer in excess of $50,000 (as adjusted pursuant to Section 415(d)
of the Code) and was a member of the top-paid group for such year; or (iii) was
an officer of the employer and received compensation during such year that is
greater than 50 percent of the dollar limitation in effect under Section
415(b)(1)(A) of the Code. The term Highly Compensated Employee also includes:
(i) employees who are both described in the preceding sentence if the term
"determination year" is substituted for the term "look-back year" and the
employee is one of the 100 employees who received the most compensation from the
Employer during the determination year; and (ii) employees who are five percent
owners at any time during the look-back year or determination year.
If no officer has satisfied the compensation requirement of (iii) above
during either a determination year or a look-back year, the highest paid officer
for such year shall be treated as a Highly Compensated Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back shall be the twelve (12)-month period immediately preceding the
determination year.
A highly compensated former employee includes any employee who separated
from service (or was deemed to have separated) prior to the determination year,
performs no service for the employer during the determination year, and was a
highly compensated active employee for either the separation year or any
determination year ending on or after the employee's fifty-fifth (55th)
birthday.
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If an employee is, during a determination year or look-back year, a Family
Member of either a five percent owner who is an active or former employee or a
Highly Compensated Employee who is one of the ten (10) most Highly Compensated
Employees ranked on the basis of compensation paid by the Employer during such
year, then the Family Member and the five percent owner or top-ten (10) Highly
Compensated Employee shall be aggregated. In such case, the Family Member and
five percent owner or top-ten Highly Compensated Employee shall be treated as a
single employee receiving compensation and Plan contributions or benefits equal
to the sum of such compensation and contributions or benefits of the Family
Member and five percent owner or ten (10) most Highly Compensated Employee.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of employees in the top-paid group,
the top one hundred (100) employees, a five percent owner, the number of
employees treated as officers and the compensation that is considered, will be
made in accordance with Section 414(q) of the Code and the regulations
thereunder.
(v) "Compensation" means all of an Employee's compensation, as that term is
defined in Article XV, Limitations on Allocations, and shall include elective
contributions that are made by the Employer on behalf of the Employee and which
are not includable in income under Section 125 of the Code. Compensation shall
be subject to the limitation of Section 401(a)(17) of the Code.
ARTICLE V
ALLOCATION OF CONTRIBUTIONS
---------------------------
5.1 A separate and complete accounting shall be maintained for each
Participant which shall set forth the amount credited to or forfeited from his
Employer Contribution Account and his Participant Contribution Account. Employer
contributions and Participant contributions shall be allocated among investment
companies managed by Delaware Management Company, Inc. Each Participant shall
file a written notice with the Committee thereby making an election as to what
proportion of his contributions, including both contributions made by the
Employer and voluntary contributions, shall be allocated to the eligible
investment company funds, as announced from time to time by the Committee. Each
Participant shall have the right to change the investment allocation of his
contributions and his accumulated account balance, in accordance with rules and
procedures as announced from time to time by the Committee, provided changes are
subject to any limitations imposed on the right of exchange by the investment
media.
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5.2 The Employer's contributions and any forfeitures for each Plan Year
shall be credited to the Employer Contribution Accounts of Participants who are
employed by the Employer on the Anniversary Date and allocated in the proportion
that the Plan Compensation of each Participant bears to the total Plan
Compensation of all Participants for such Plan Year. A Participant who
terminates employment on the Anniversary Date shall be treated as employed by
the Employer on the Anniversary Date. All voluntary contributions made by a
Participant prior to August 1, 1991 shall be credited to his Participant
Contribution Account.
5.3 As of the Anniversary Date, each Participant's Employer Contribution
Account and his Participant Contribution Account shall be valued at its fair
market value. For the purposes of paying benefits to a Participant, his accounts
shall be valued on the most recent Valuation Date as determined by the
Administrative Committee.
5.4 Income when earned less expenses, if any, when charged, shall be
credited to or charged against each Participant's account, in accordance with
the self-directed investments selected by the Participant.
5.5 The Committee shall, as of each Anniversary Date, determine the total
amount of forfeitures which accrued during the Plan Year and shall add the
forfeited amount to the Employer's annual contribution for the purposes of
reallocation to the remaining Participants as provided in Section 5.2.
5.6 Any allocation made and credited to the account of a Participant under
this Article shall not cause such Participant to have any right, title or
interest in or to any assets of the Trust Fund except at the time or times, and
under the terms and conditions, expressly provided for in this Plan.
5.7 (a) In the case of a contribution to the Plan which is made by the
Employer because of a mistake of fact, the Employer may, within one year after
the payment of such contribution, withdraw such contribution from the Trust
Fund.
(b) Employer contributions to the Plan are expressly conditioned on the
deductibility of such contributions under Section 404 of the Code. To the extent
such contributions are disallowed, the Employer may, within one year of the
disallowance of the deduction, withdraw such contribution from the Trust Fund.
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ARTICLE VI
RETIREMENT BENEFITS
-------------------
6.1 Upon attaining Normal Retirement Date, a Participant shall have a fully
vested and nonforfeitable right to his entire Employer Contribution Account and
shall be entitled to retire and upon so retiring shall be entitled to the
commencement of the payment of his benefits, consisting of the balance of his
accounts, in accordance with the method of payment elected pursuant to Article
X.
6.2 A Participant who retires after his Normal Retirement Date shall
continue to be a Participant in the Plan until his actual retirement and shall
be eligible to share in the allocation of Employer contributions as provided in
Section 5.2.
ARTICLE VII
DISABILITY BENEFITS
-------------------
7.1 If the employment of a Participant has been terminated prior to his
retirement date because of Total and Permanent Disability, such Participant
shall be entitled to receive his entire Participant Contribution Account and his
entire Employer Contribution Account in accordance with the manner elected under
Article X.
7.2 Upon a Participant's cessation of Total and Permanent Disability and
upon his return to work for Employer before all of his account has been
distributed, no further payments shall be made therefrom by reason of the
disability. A Participant shall have no right or obligation to repay any amount
distributed to him pursuant to Section 7.1.
ARTICLE VIII
DEATH BENEFITS
--------------
8.1 Notwithstanding anything stated in the Plan to the contrary, if a
Participant dies prior to receiving the entire nonforfeitable amount credited to
his accounts, all such undistributed nonforfeitable amounts shall be paid to the
Participant's surviving spouse, unless there is no surviving spouse or the
surviving spouse consents in writing to the payment of death benefits to another
Beneficiary. A spouse's consent must satisfy the following requirements:
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(a) the consent must be in writing;
(b) the consent must be witnessed by a member of the Administrative
Committee or a notary public;
(c) the consent must approve a designation of a specific Beneficiary,
including any class of Beneficiaries or any contingent Beneficiaries, which may
not be changed without spousal consent, or the spouse expressly permits
designations by the Participant without any further spousal consent; and
(d) the consent acknowledges the effect of the Participant's designation of
Beneficiary. If a consent permits designations by the Participant without any
requirement of further consent by such spouse, it must acknowledge that the
spouse has the right to limit consent to a specific Beneficiary and that the
spouse voluntarily elects to relinquish such right.
Written consent of a spouse need not be obtained if the Participant
establishes to the satisfaction of the Committee that there is no spouse or that
the spouse cannot be located. Any such designation may be changed from time to
time by the Participant by filing a new designation with the Committee, provided
the spousal consent requirements above are satisfied.
8.2 Each Participant may file with the Committee a designation of
Beneficiary to receive amounts payable under this Plan upon his death. The
designation may be changed from time to time by the Participant, except that a
married Participant may not name a Beneficiary other than his spouse without a
written consent which satisfies the requirements of Section 8.1. If no
designation has been filed, or all designated Beneficiaries have predeceased the
Participant, then any amounts payable shall be paid to his surviving spouse. If
there is no surviving spouse, any amounts payable shall be paid to his estate.
8.3 If at, after or during the time when a benefit is payable to any
Beneficiary, the Administrative Committee, upon request of the Trustee or at its
own instance, mails by registered or certified mail to the Beneficiary at the
Beneficiary's last known address a written demand for his then address, or for
satisfactory evidence of his continued life or both, and, if the Beneficiary
shall fail to furnish the information to the Committee within 3 years from the
mailing of the demand, then the Committee shall distribute the remaining
benefits to the Beneficiary next entitled thereto under Section 8.3 above as if
the Beneficiary designated by the Participant or Section 8.3 were then deceased.
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ARTICLE IX
OTHER SEPARATION FROM SERVICE
-----------------------------
9.1 (a) If a Participant separates from service other than under Articles
VI, VII or VIII, he shall be entitled to receive a lump sum distribution of his
entire Participant Contribution Account and his entire nonforfeitable Employer
Contribution Account. Such distribution shall be made upon the written request
of the Participant and shall be made as soon as practicable following the
Participant's separation from service, but not later than the close of the
second Plan which such separation occurs.
(b) If the non-forfeitable portion of the Participant's Employer
Contribution Account and his Participant Contribution Account exceeds $3500 (or
ever exceeded $3500 at the time of an earlier distribution), and the Participant
does not consent in writing to receive a lump sum distribution of his accounts
by the close of the second Plan Year following his separation from service, no
distribution shall be made to the Participant until he attains his Normal
Retirement Date. Regardless of whether the Participant consents in writing, if
the non-forfeitable portion of the Participant's Employer Contribution Account
and Participant Contribution Account does not exceed $3500 (or did not exceed
$3500 at the time of a prior distribution), a lump sum distribution shall be
made to the Participant of the entire value of the non-forfeitable portion of
his accounts not later than the end of the second Plan Year following his
separation from service.
(c) If a distribution is made to the Participant of the nonforfeitable
portion of his Employer Contribution Account upon his separation from service,
the non-vested portion of his Account, if any, will be treated as a forfeiture
and reallocated to remaining Participants as provided in Section 5.2. If the
Participant does not receive a distribution of his Employer Contribution Account
upon his separation from service, such Account shall be held for the Participant
until he attains Normal Retirement Date and the non-vested portion of the
Account shall be treated as a forfeiture when the Participant sustains five
consecutive One Year Breaks in Service.
(d) In the event a Participant who is less than fully vested in his
Employer Contribution Account receives a distribution of his vested interest in
such Account upon his separation from service, and such Participant subsequently
returns to employment of the Employer, the Participant's Employer Contribution
Account will be restored to the value of the Account on the date of the
distribution if the Participant repays to the Trustees the full amount of such
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distribution before the earlier of five consecutive One-Year Breaks in Service
or five years after the Participant's date of reemployment. Restoration of the
forfeited amount of a Participant's Account shall be made from forfeitures or
Employer contributions.
9.2 (a) In the event a Participant separates from service with the Employer
for reasons other than retirement, disability, death or a layoff by the
Employer, he shall have a nonforfeitable right to the amount credited to his
Employer Contribution Account in accordance with the following schedule:
Completed Years of Service Percentage
-------------------------- ----------
At least But less than
0 1 0%
1 2 20%
2 3 40%
3 4 60%
4 5 80%
5 or more 100%
(b) A Participant shall have a wholly vested and nonforfeitable right to
his Employer Contribution Account upon separation from service on account of
retirement on or after the Normal Retirement Date, Total and Permanent
Disability, death while in the employ of the Employer or layoff by the Employer.
For purposes of this Section 9.2, the term "layoff" shall mean any involuntary
separation from service other than separation due to cause. If a Participant
separates from service with the Employer, the non-vested portion of his Employer
Contribution Account, if any, shall be forfeited upon the death of the
Participant.
(c) If the Employer amends the Plan in a manner which directly or
indirectly affects the computation of a Participant's nonforfeitable percentage,
each Participant who completes an Hour of Service in any Plan Year beginning
after December 31, 1988 and who has at least three Years of Service may elect
after the adoption of such amendment to have his nonforfeitable interest
computed under the Plan without regard to such amendment. The period during
which the election may be made shall commence the day the amendment is adopted
and shall end on later of:
(i) sixty (60) days after the amendment is adopted;
(ii) sixty (60) days after the amendment becomes effective; or
(iii) sixty (60) days after the Participant is issued written notice of the
amendment by the Employer or the Committee.
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9.3 (a) In the case of a Participant who has a Break in Service, Years of
Service completed before such Break shall not be counted until the Participant
has completed a Year of Service for the purpose of determining his
nonforfeitable percentage of the amount credited to his Employer Contribution
Account after such Break in Service.
(b) Years of Service completed on reemployment and after separation from
service with the Employer in connection with which he has five consecutive One
Year Breaks in Service shall not be counted for purposes of determining such
Participant's nonforfeitable percentage right to amounts credited to his
Employer Contribution Account before such Break in Service.
ARTICLE X
METHOD OF PAYMENT
-----------------
10.1 At the request of a Participant, the form of benefit payments may be
one of the following in cash:
(a) in a lump sum payment; or
(b) in periodic, monthly, quarterly, semi-annual or annual installments
over a period certain not exceeding the Participant's life expectancy or the
joint life expectancy of the Participant and his designated Beneficiary. If
periodic installments are to be paid, a Participant's account shall be invested
in the investment company funds available under the Plan as designated by the
Participant.
If periodic installments are paid over the life expectancy of the
Participant or joint life expectancy of the Participant and a designated
Beneficiary, a Participant may elect, prior to the time distributions begin,
whether or not to have his life expectancy and his Beneficiary's life expectancy
(if the Beneficiary is his spouse) annually recalculated. In the absence of such
election, life expectancies will not be recalculated.
10.2 In no event shall payments of benefits under this Plan commence later
than sixty (60) days after the close of the Plan Year in which the latest of the
following events occur:
(a) the Participant attains age sixty-five (65); or
(b) the Participant completes ten years of participation in the Plan; or
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(c) the termination of the Participant's service with the Employer.
10.3 (a) Notwithstanding the other requirements of this Plan, distributions
on behalf of any Participant, including a five percent (5%) owner, may be made
in accordance with all of the following requirements (regardless of when such
distribution commences):
(i) The distribution by the Trust Fund is one which would not have
disqualified such Trust under Section 401(a)(9) of the Code as in effect prior
to amendment by the Deficit Reduction Act of 1984.
(ii) The distribution is in accordance with a method of distribution
designated by the Participant whose interest is being distributed or, if the
Participant is deceased, by a Beneficiary of such Participant.
(iii) Such designation was in writing, was signed by the Participant or the
Beneficiary, and was made before January 1, 1984.
(iv) The Participant had accrued a benefit under the Plan as of December
31, 1983.
(v) The method of distribution designated by the Participant or the
Beneficiary specifies the time at which distribution will commence, the period
over which distributions will be made, and in the case of any distribution upon
the Participant's death, the Beneficiaries of the Participant listed in order of
priority.
(b) A distribution upon death will not be covered by this Section unless
the information in the designation contains the required information described
above with the respect to the distributions to be made upon the death of the
Participant.
(c) For any distribution which commenced before January 1, 1984, but
continues after December 31, 1983, the Participant, or the Beneficiary, to whom
such distribution is being made, will be presumed to have designated the method
of distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements in subsections (a)(i) and (v) above.
(d) If a designation is revoked, any subsequent distribution must satisfy
the requirements of Section 401(a)(9) of the Code. Any changes in the
designation will be considered to be revocation of the designation. However, the
mere substitution or addition of another Beneficiary (one not named in the
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designation) under the designation will not be considered to be revocation
of the designation, so long as such substitution or addition does not alter the
period over which distributions are to be made under the designation, either
directly or indirectly (for example, by altering the relevant measuring life).
10.4 Required Distributions. All distributions required under this Section
10.4 shall be determined and made in accordance with the proposed regulations
under Section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirement of Section 1.401(a)(9)-2 of the proposed
regulations.
(a) Required beginning date. The entire interest of a Participant must be
distributed or begin to be distributed no later than the Participant's required
beginning date.
(b) Limits on Distribution Periods. As of the first distribution calendar
year, distributions, if not made in a single-sum, may only be made over one of
the following periods (or a combination thereof):
(1) a period certain not extending beyond the life expectancy of the
Participant, or
(2) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated beneficiary.
(c) Determination of amount to be distributed each year. If the
Participant's interest is to be distributed in other than a single sum, the
following minimum distribution rules shall apply on or after the required
beginning date:
(1) If a Participant's benefit is to be distributed over (i) a period not
extending beyond the life expectancy of the Participant or the joint life and
last survivor expectancy of the Participant and the Participant's designated
beneficiary or (ii) a period not extending beyond the life expectancy of the
designated beneficiary, the amount required to be distributed for each calendar
year, beginning with distributions for the first distribution calendar year,
must at least equal the quotient obtained by dividing the Participant's benefit
by the applicable life expectancy.
(2) For calendar years beginning before January 1, 1989, if the
Participant's spouse is not the designated beneficiary, the method of
distribution selected must assure that at least fifty percent (50%) of the
present value of the amount available for distribution is paid within the life
expectancy of the Participant.
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(3) For calendar years beginning after December 31, 1988, the amount to be
distributed each year, beginning with distributions for the first distribution
calendar year, shall not be less than the quotient obtained by dividing the
Participant's benefit by the lesser of (1) the applicable life expectancy or (2)
if the Participant's spouse is not the designated beneficiary, the applicable
divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of
the proposed regulations. Distributions after the death of the Participant shall
be distributed using the applicable life expectancy in (c)(i)(A) above as the
relevant divisor without regard to proposed regulations Section 1.401(a)(9)-2.
(4) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the Participant's required
beginning date. The minimum distribution for other calendar years, including the
minimum distribution for the distribution calendar year in which the
Participant's required beginning date occurs, must be made on or before December
31 of that distribution calendar year.
(d) Death Distribution Provisions.
(1) Distribution beginning before death. If the Participant dies after
distribution of his or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the method
of distribution being used prior to the Participant's death.
(2) Distribution beginning after death. If the Participant dies before
distribution of his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the calendar year
containing the fifth (5th) anniversary of the Participant's death except to the
extent that the Participant or his designated beneficiary elects to receive
distributions in accordance with (i) or (ii) below:
(i) if any portion of the Participant's interest is payable to a designated
beneficiary, distributions may be made over a period certain not greater than
the life expectancy of the designated beneficiary commencing on or before
December 31 of the calendar year immediately following the calendar year in
which the Participant died;
(ii) if the designated beneficiary is the Participant's surviving spouse,
the date distributions are required to begin in accordance with (i) above shall
not be earlier than the later of (1) December 31 of the calendar year
immediately following the calendar year in which the Participant died and (2)
December 31 of the calendar year in which the Participant would have attained
age 70 1/2.
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If the Participant has not made an election pursuant to Section 10.4(d)(2)
by the time of his or her death, the Participant's designated beneficiary must
elect the method of distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to begin under this
Section 10.4(d), or (2) December 31 of the calendar year which contains the
fifth (5th) anniversary of the date of death of the Participant. If the
Participant has no designated beneficiary, or if the designated beneficiary does
not elect a method of distribution, distribution of the Participant's entire
interest must be completed by December 31 of the calendar year containing the
fifth (5th) anniversary of the Participant's death.
(3) For purposes of Section 10.4(d)(2) above, if the surviving spouse dies
after the Participant, but before payments to such spouse begin, the provisions
of Section 10.4(d)(2), with the exception of subparagraph (ii) therein, shall be
applied as if the surviving spouse were the Participant.
(4) For purposes of Section 10.4(d), distribution of a Participant's
interest is considered to begin on the Participant's required beginning date
(or, if Section 10.4(d)(3) above is applicable, the date distribution is
required to begin to the surviving spouse pursuant to Section 10.4(d)(3) above).
(e) Definitions.
(1) Applicable life expectancy. The life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the Participant (or
designated beneficiary) as of the Participant's (or designated beneficiary's)
birthday in the applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first calculated. If life
expectancy is being recalculated, the applicable life expectancy will be the
life expectancy as so recalculated. The applicable calendar year shall be the
first distribution calendar year and if life expectancy is being recalculated,
such succeeding calendar year.
(2) Designated beneficiary. The individual who is designated as the
beneficiary under the Plan in accordance with Section 401(a)(9) and the proposed
regulations thereunder.
(3) Distribution calendar year. A calendar year for which a minimum
distribution is required. For distributions beginning before the Participant's
death, the first distribution calendar year is the calendar year immediately
preceding the calendar year which contains the Participant's required beginning
date. For distributions beginning after the Participant's death, the first
distribution calendar year is the calendar year in which distributions are
required to begin pursuant to Section 10.4(d) above.
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(4) Life expectancy. Life expectancy and joint and last survivor expectancy
are computed by use of the expected return multiples in Tables V and VI of
Section 1.72-9 of the income tax regulations. Unless otherwise elected by the
Participant by the time distributions are required to begin, life expectancies
shall not be recalculated annually. Such election shall be irrevocable as to the
Participant (or spouse) and shall apply to all subsequent years. The life
expectancy of a nonspouse designated beneficiary may not be recalculated. A
spousal designated beneficiary may not elect to have his or her life expectancy
recalculated with respect to any distribution paid pursuant to Section
10.4(d)(2).
(5) Participant's benefit.
(i) The Participant's account balance as of the last valuation date in the
calendar year immediately preceding the distribution calendar year (valuation
calendar year) increased by the amount of any contributions or forfeitures
allocated to the account balance as of dates in the valuation calendar year
after the valuation date and decreased by distributions made in the valuation
calendar year after the valuation date.
(ii) For purposes of paragraph (i) above, if any portion of the minimum
distribution for the first distribution calendar year is made in the second
distribution calendar year on or before the required beginning date, the amount
of the minimum distribution made in the second distribution calendar year shall
be treated as if it had been made in the immediately preceding distribution
calendar year.
(6) Required beginning date.
(i) General rule. The required beginning date of a Participant is the first
day of April of the calendar year following the calendar year in which the
Participant attains age 70 1/2.
(ii) Transitional rules. The required beginning date of a Participant who
attains age 70 1/2 before January 1, 1988, shall be determined in accordance
with (A) or (B) below:
(A) Non-five (5)-percent owners. The required beginning date of a
Participant who is not a five (5)-percent owner is the first day of April of the
calendar year following the calendar year in which the later of retirement or
attainment of age 70 1/2 occurs.
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(B) Five (5)-percent owners. The required beginning date of a Participant
who is a five (5)-percent owner during any year beginning after December 31,
1979, is the first day of April following the later of:
(I) the calendar year in which the Participant attains age 70 1/2, or
(II) the earlier of the calendar year with or within which ends the Plan
Year in which the Participant becomes a five (5)-percent owner, or the calendar
year in which the Participant retires.
The required beginning date of a Participant who is not a five (5)-percent
owner who attains age 70 1/2 during 1988 and who has not retired as of January
1, 1989, is April 1, 1990.
(iii) Five (5)-percent owner. A Participant is treated as a five
(5)-percent owner for purposes of this section if such Participant is a five
(5)-percent owner as defined in Section 416(i) of the Code (determined in
accordance with Section 416 but without regard to whether the Plan is top-heavy)
at any time during the Plan Year ending with or within the calendar year in
which such owner attains age 66 1/2 or any subsequent Plan Year.
(iv) Once distributions have begun to a five (5)-percent owner under this
section, they must continue to be distributed, even if the Participant ceases to
be a five (5)-percent owner in a subsequent year.
10.5 Restrictions on Distributions Prior to Normal Retirement Date. If the
value of a Participant's vested account balance exceeds (or at the time of any
prior distribution exceeded) $3,500, the Participant must consent to any
distribution made to him before he attains the Normal Retirement Date. The
consent of the Participant shall be obtained in writing within the 90-day period
ending on the date benefits are paid. The Committee shall notify the Participant
of his right to defer any distribution until the Participant attains the Normal
Retirement Date (or would have attained the Normal Retirement Date if not
deceased). Such notification shall include a general description of the material
features, and an explanation of the relative values of, the optional forms of
benefit available under the Plan in a manner that would satisfy the notice
requirements of Section 417(a)(3) of the Code below, and shall be provided no
less than 30 days and no more than 90 days prior to the date benefits are paid.
The consent of the Participant shall not be required to the extent that a
distribution is required to satisfy Sections 401(a)(9) or 415 of the Code. A
distribution may be paid to the Participant less than 30 days after the notice
described in this Section 10.5 is given to him, provided that the Administrative
Committee clearly informs the Participant that he has the right to a period of
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at least 30 days after receiving the notice to consider the decision of
whether or not to elect the distribution and the Participant, after receiving
the notice, affirmatively elects to receive a distribution. In addition, subject
to Section 10.7, upon termination of this Plan, the Participant's entire account
balance may be distributed without the Participant's consent to the Participant
or transferred to another defined contribution plan (other than an employee
stock ownership plan, as defined in Section 4975(e)(7) of the Code) within the
same controlled group as the Employer.
10.6 Withdrawals upon Attainment of Age 59-1/2. Upon the attainment of age
59-1/2, a Participant who is fully vested in his Employer Contribution Account
will be entitled to withdraw once a Plan Year all or any portion of his account
balance in a single sum. Any withdrawal by a Participant under this Section 10.6
will be made only after the Participant files a written request with the
Administrative Committee pursuant to such terms and conditions as the Committee
may prescribe.
10.7 Direct Rollovers
(a) This Section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a distributee may elect, at
the time and in the manner prescribed by the Administrative Committee to have
any portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
(b) Definitions.
(i) Eligible rollover distribution: An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities).
(ii) Eligible retirement plan: An eligible retirement plan is an individual
retirement account described in section 408(a) of the Code, an individual
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retirement annuity described in section 408(b) of the Code, an annuity plan
described in section 403(a) of the Code, or a qualified trust described in
section 401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
(iii) Distributee: A distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse or former
spouse who is the alternate payee under a qualified domestic relations order, as
defined in section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
(iv) Direct rollover: A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
ARTICLE XI
ADMINISTRATION OF PLAN
----------------------
11.1 (a) This Plan shall be administered by a Committee which shall consist
of not less than two nor more than five members.
(b) The Committee shall serve without compensation from the Plan. Vacancies
may be filled by the Chief Executive Officer of Delaware Group Delaware Fund,
Inc. on an interim basis, until action to fill the vacancy is taken by the Board
of Directors of Delaware Group Delaware Fund, Inc.
(c) The Committee:
(1) shall act by affirmative vote of a majority of its members at a meeting
called with five days notice or in writing without a meeting;
(2) shall appoint a Secretary who may be but need not be one of its own
members. He shall keep complete records of the administration of the Plan;
(3) may authorize each and any one of its members to perform routine acts
and to sign documents on its behalf.
11.2 The Committee may appoint such persons or committees, employ such
attorneys, agents, accountants, investment managers, consultants, actuaries, and
other specialists as it deems necessary or desirable to advise or assist
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it in the performance of its duties hereunder and the Committee may rely upon
their respective written opinions or certificates. To the extent such persons
are empowered by written notification from the Committee to perform duties
defined in ERISA as fiduciary duties, such empowerment shall constitute a
delegation of fiduciary responsibility for purposes of determining the
co-fiduciary liability under ERISA. The Committee shall review the performance
of any such persons periodically.
11.3 Administration of the Plan shall consist of interpreting and carrying
out the provisions of this Plan. The Committee shall determine the eligibility
of Employees to participate in this Plan, their rights while Participants in
this Plan and the nature and amount of benefits to be received therefrom. The
Committee shall decide any disputes which may arise under this Plan and the
Trust Agreement. The Committee may provide rules and regulations for the
administration of the Plan consistent with its terms and provisions. Any
construction or interpretation of the Plan and any determination of fact in
administering the Plan made in good faith by the Committee shall be final and
conclusive for all Plan purposes. The Committee shall have the discretionary
authority to determine eligibility for benefits and to construe the terms of the
Plan.
11.4 (a) The Committee shall prescribe a form for the presentation of
claims under the terms of this Plan and/or Trust Agreement.
(b) Upon presentation to the Committee of a claim on the prescribed form,
the Committee shall make a determination of the validity thereof. If the
determination is adverse to the claimant, the Committee shall furnish to the
claimant within 90 days after the receipt of the claim a written notice setting
forth the following:
(1) The specific reason or reasons for the denial;
(2) Specific reference to pertinent provisions of the Plan on which the
denial is based;
(3) A description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such material or
information is necessary; and
(4) Appropriate information as to the steps to be taken if the claimant
wishes to submit his or her claim for review.
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(c) In the event of a denial of a claim, the claimant or his duly
authorized representative may appeal such denial to the Committee for a full and
fair review of the adverse determination. Claimant's request for review must be
in writing and made to the Committee within 60 days after receipt by claimant of
the written notification required under Section 11.4(b); provided, however, such
60 day period shall be extended if circumstances so warrant. Claimant or his
duly authorized representative may submit issues and comments in writing which
shall be given full consideration by the Committee in his review.
(d) The Committee may, in its sole discretion, conduct a hearing. A request
for a hearing made by claimant will be given full consideration. At such
hearing, the claimant shall be entitled to appear and present evidence and be
represented by counsel.
(e) A decision on a request for review shall be made by the Committee not
later than 60 days after receipt of the request; provided, however, in the event
of a hearing or other special circumstances, such decision shall be made not
later than 120 days after receipt of such request. If it is necessary to extend
the period of time for making a decision beyond 60 days after the receipt of the
request, the claimant shall be notified in writing of the extension of time
prior to the beginning of such extension.
(f) The Committee's decision on review shall state in writing the specific
reasons and references to the Plan provisions on which it is based. Such
decision shall be promptly provided to the claimant. If the decision on review
is not furnished in accordance with the foregoing, the claim shall be deemed
denied on review.
11.5 The Committee shall have the power to allocate its responsibilities
among its several members, except that all matters involving the hearing of and
decision on the claims and the review of the determination of benefits shall be
made by the full Committee; provided, however, that no member of the Committee
shall participate in any matter relating solely to himself.
11.6 To the extent required by law, the Committee shall give notice in
writing to all interested parties of any amendment of this Plan and/or Trust
Agreement and of any application to any government agency for any determination
of the effect of any such amendment on the Plan within the jurisdiction of that
agency.
11.7 (a) The Committee shall administer the Plan and the Trust Agreement
forming a part thereof under uniform rules of general application.
(b) The Committee or any member thereof:
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(1) May serve under the Plan and/or the Trust Agreement in one or more
fiduciary capacities, as that term is defined in ERISA; and
(2) May resign by giving written notice thereof to the Chief Executive
Officer of Delaware Group Delaware Fund, Inc. not less than fifteen (15) days
before the effective date of such resignation; and
(3) May be removed at any time, without cause, by the Board of Directors of
Delaware Group Delaware Fund, Inc.
ARTICLE XII
AMENDMENT, CONSOLIDATION, MERGER OR TERMINATION
-----------------------------------------------
12.1 Delaware Group Delaware Fund, Inc. may amend the Plan and the Trust
Agreement in any manner and at any time by action of its Board of Directors;
provided, however, that no amendment shall deprive any Participant or his
Beneficiary of any vested interest he may have hereunder unless the amendment is
for the purpose of conforming the Plan to the requirements of the Code or any
other applicable law. No amendment which affects the rights, responsibilities or
duties of the Trustee may be made without the Trustee's written consent. No
amendment shall be made to the Plan which has the effect of eliminating or
reducing an early retirement benefit or a retirement-type subsidy, eliminating
an optional form of benefit or decreasing a Participant's account balance with
respect to benefits attributable to service before the amendment. Further, if
the vesting schedule of the Plan is amended, in the case of an Employee who is a
Participant as of the later of the date such amendment is adopted or the date it
becomes effective, the nonforfeitable percentage (determined as of such date) of
such Employee's right to his Employer derived account balance will not be less
than his percentage computed under the Plan without regard to such amendment.
12.2 Any Participant on the effective date of an amendment who is not
actively participating in the Plan on such effective date shall not benefit from
an amendment unless otherwise required by law or unless such amendment is
specifically made applicable to such Participant.
12.3 In the event of any merger or consolidation with, or transfer of
assets or liabilities to, any other plan, each Participant shall be entitled to
a benefit after the merger, consolidation or transfer (if the Plan then
terminated) which is not less than the benefits he would have been entitled to
receive immediately before the merger, consolidation or transfer (if the Plan
had then terminated).
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12.4 The Employer intends to continue the Plan indefinitely but reserves
the right to discontinue contributions, terminate or partially terminate the
Plan at any time. In the event of a complete discontinuance of contributions,
termination or partial termination of the Plan, the interests of all
Participants affected shall become nonforfeitable. Upon termination of the Plan,
the Employer shall in its complete discretion notify the Trustee to either hold
all assets of the Trust Fund and make payments in accordance with the terms of
the Plan or distribute to each Participant his net account balance in a lump sum
payment in cash or kind. The Employer's contribution to the Trust Fund or the
income thereof shall not be paid to, or shall not revert to Employer and shall
not be used for any purpose other than the exclusive benefit of the Participants
or their Beneficiaries.
ARTICLE XIII
MISCELLANEOUS
-------------
13.1 To the extent permitted by law, it is a condition of the Plan that the
benefits provided hereunder shall not be subject to assignment, anticipation,
alienation, attachment, levy or transfer, and any attempt to do so shall not be
recognized. The preceding sentence shall also apply to the creation, assignment
or recognition of a right to any benefit payable with respect to a Participant
pursuant to a domestic relations order, unless such order is determined to be a
qualified domestic relations order as defined in Section 414(p) of the Code. If
provided by the terms of a qualified domestic relations order, a distribution of
benefits may be made from the Plan to the alternate payee under such order in a
single lump sum as soon as practicable following the determination by the
Administrative Committee that the order constitutes a qualified domestic
relations order. Payment of benefits may be made to the alternate payee even
though the Participant identified in the order has not attained the earliest
retirement age under the Plan. For purposes of this Section 13.1, the "earliest
retirement age" means the earlier of (i) the date in which the Participant is
entitled to a distribution under the Plan or (ii) the later of the date the
Participant attains age 50 or the earliest date on which the Participant would
begin receiving benefits if the Participant separated from service.
13.2 Nothing herein contained shall be deemed to give any Employee the
right to be retained in the employ of Employer or to interfere with the right of
the Employer to discharge any Employee at any time, nor shall it be deemed to
give the Employer the right to require any Employee to remain in its employ, nor
shall it interfere with the Employee's right to terminate his employment at any
time.
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13.3 All expenses incurred by the Trustees in the administration of the
Fund, including but not limited to the compensation of counsel, accountants,
Trustees, other agents or fiduciaries, shall be charged against the Employer,
unless otherwise paid by the Fund.
13.4 This Plan shall be interpreted in accordance with the laws of the
Commonwealth of Pennsylvania, except to the extent superseded by ERISA as in
effect from time to time.
ARTICLE XIV
LOANS
-----
14.1 The Committee, in its sole discretion, may direct the Trustees to make
a loan to a Participant, who is a party-in-interest, as defined in Section 3(14)
of ERISA, from the Participant's account balance upon receipt of a written
request from the Participant. The total amount of any such loan (when added to
the outstanding balance of all other loans to the Participant under the Plan or
any other qualified plan of the Employer) shall not exceed the lesser of $50,000
or 50% of the Participant's vested account balance. The $50,000 limitation shall
be reduced by the excess, if any, of the highest outstanding balance of loans to
the Participant from the Plan during the one-year period ending on the day
before the date on which such loan was made over the outstanding balance of
loans from the Plan to the Participant on the date that such loan was made.
14.2 A request by a Participant for a loan shall be made in writing to the
Committee and shall specify the amount of the loan. The terms and conditions on
which the Committee shall approve loans under the Plan shall be applied on a
reasonably equivalent basis with respect to all Participants. If a Participant's
request for a loan is approved by the Committee, the Committee shall furnish the
Trustees with written instructions directing the Trustees to make the loan in a
lump sum payment of cash to the Participant. In making any loan payment under
this Article XIV, the Trustees shall be fully entitled to rely on the
instructions furnished by the Committee, and shall be under no duty to make any
inquiry or investigation with respect thereto.
14.3 Loans shall be made on such terms and subject to such limitations as
the Committee may prescribe from time to time, provided that any such loan shall
be evidenced by a written note, shall bear a reasonable rate of interest on the
unpaid principal thereof, shall be adequately secured, and shall be repaid by
the Participant over a period not to exceed five years.
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14.4 Any loan to a Participant under the Plan shall be secured by the
pledge of not more than 50% percent of the Participant's right, title and
interest in his vested account balance. Such pledge shall be evidenced by the
execution of a promissory note by the Participant.
14.5 The Committee shall have the sole responsibility for insuring that a
Participant timely makes all loan repayments, and for notifying the Trustees in
the event of any default by the Participant on the loan. Each loan repayment
shall be paid to the Trustees, and shall be accompanied by written instructions
from the Committee that identifies the Participant on whose behalf the loan
repayment is being made. Repayment of loans shall be made solely by means of
payroll deductions, or such other manner approved by the Committee.
14.6 In the event of a default by a Participant on a loan repayment, all
remaining principal payments on the loan shall be immediately due and payable.
The Committee shall be authorized (to the extent permitted by law) to take any
and all actions necessary and appropriate to enforce collection of an unpaid
loan. However, in the event of a default, foreclosure on the note and attachment
of security will not occur until a distributable event occurs under the Plan.
14.7 Upon the occurrence of a Participant's retirement or death, or earlier
distribution of benefits, the unpaid balance of any loan, including any unpaid
interest, shall be deducted from any payment or distribution from the Trust Fund
to which such Participant or his Beneficiary may be entitled and his vested
interest in his account shall be reduced.
14.8 A loan to a Participant shall be considered an investment of the
separate account(s) of the Participant from which the loan is made. All loan
repayments shall be credited to such separate account(s) and reinvested in the
investment company fund designated by the Participant.
14.9 A loan may not be made to a Participant who owns (or is considered as
owning within the meaning of Section 318(a)(1) of the Internal Revenue Code)
more than 5% of the outstanding stock of the Employer.
14.10 For loans granted or renewed on or after the last day of first Plan
Year beginning on or after January 1, 1989, the Committee shall issue written
loan guidelines, which shall form part of the Plan, describing the procedures
and conditions for making loans, and may revise those guidelines at any time,
and for any reason.
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ARTICLE XV
LIMITATIONS ON ALLOCATIONS
--------------------------
15.1 The provisions of this Article XV shall be effective for limitation
years beginning after December 31, 1986.
(a) Notwithstanding any provisions of this Plan to the contrary, the annual
additions which may be credited to a Participant's account for any limitation
year will not exceed the lesser of the maximum permissible amount or any other
limitation contained in this Plan.
(b) As soon as is administratively feasible after the end of the limitation
year, the maximum permissible amount for the limitation year will be determined
on the basis of the Participant's actual compensation for the limitation year.
(c) In the event that it is determined that because of the allocation of
forfeitures, a reasonable error in estimating a Participant's annual
compensation or under other limited facts and circumstances permitted by the
Commissioner of the Internal Revenue Service, if there is an excess amount the
excess will be disposed of as follows:
(1) If the Participant is covered by the Plan at the end of the limitation
year, the excess amount shall be used to reduce employer contributions
(including any allocation of forfeitures) for such Participant in the next
limitation year, and each succeeding limitation year if necessary;
(2) If the Participant is not covered by the Plan at the end of the
limitation year, the excess amount will be held unallocated in a suspense
account. The suspense account will be applied to reduce future employer
contributions (including allocation of any forfeitures) for all remaining
Participants in the next limitation year, and each succeeding limitation year if
necessary;
(3) If a suspense account is in existence at any time during the limitation
year pursuant to this Section, it will not participate in the allocation of
investment gains and losses. The entire amount allocated to Participants from a
suspense account, including any such gains or other income or less any losses is
considered an annual addition.
(d) For the purpose of applying the limitations under this Article, all
defined contribution plans maintained by the employer are to be considered as a
single plan.
15.2 Definitions. For purposes of this Article only, the following
definitions and rules of interpretation will apply:
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(a) "annual additions" -- The sum of the following amounts credited to a
Participant's account for the limitation year:
(1) employer contributions;
(2) forfeitures;
(3) voluntary Employee contributions;
(4) amounts allocated after March 31, 1984, to an individual medical
account, as defined in Section 415(1)(1) of the Code, which is part of a pension
or annuity maintained by the employer;
(5) amounts derived from contributions paid or accrued after December 31,
1985, in taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account of a key
employee, as defined in Section 419A(d)(3) of the Code, under a welfare benefit
fund as defined in Section 419(e) of the Code, maintained by the employer; and
(6) excess amounts applied under this Article in the limitation year to
reduce employer contributions.
(b) "compensation" -- a Participant's earned income, wages, salaries, and
fees for professional services and other amounts received (without regard to
whether an amount is paid in cash) for personal services actually rendered in
the course of employment with the employer to the extent that the amounts are
includable in gross income (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits,
reimbursements and expense allowances), and excluding the following:
(1) Employer contributions to a plan of deferred compensation which are not
includable in the Employee's gross income for the taxable year in which
contributed, or Employer contributions under a simplified employee pension to
the extent such contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
(2) Amounts realized from the exercise of a nonqualified stock option, or
when restricted stock (or property) held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and
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(4) Other amounts which received special tax benefits, or contributions
made by the employer (whether or not under a salary reduction agreement) towards
the purchase of an annuity described in Section 403(b) of the Code (whether or
not the amounts are actually excludable from the gross income of the Employee);
and
(5) Any contribution for medical benefits (within the meaning of Section
419A(f)(2) of the Code) after separation from service which is otherwise treated
as an annual addition; and
(6) Any amount otherwise treated as an annual addition under Section
415(i)(1) of the Code.
For purposes of applying the limitations of this Article, compensation for
a limitation year is the compensation actually paid or includable in gross
income during such year.
Notwithstanding the preceding sentence, compensation for a Participant who
is permanently and totally disabled (as defined in Section 37(e)(3) of the Code)
is the compensation such Participant would have received for the limitation year
if the Participant had been paid at the rate of compensation paid immediately
before becoming permanently and totally disabled; such imputed compensation for
the disabled Participant may be taken into account only if the Participant is
not an officer, an owner, or highly compensated, and contributions made on
behalf of such Participant are nonforfeitable when made.
(c) "employer" -- The Employer that adopts this Plan, and all members of a
controlled group of corporations (as defined in Section 414(b) of the Code as
modified by Section 415(h) of the Code), all commonly controlled trades or
businesses (as defined in Section 414(c) of the Code as modified by Section
415(h) of the Code), or affiliated service groups (as defined in Section 414(m)
of the Code) of which the adopting Employer is a part.
(d) "excess amount" -- The excess of the Participant's annual additions for
the limitation year over the maximum permissible amount.
(e) "limitation year" -- Effective April 2, 1989, the twelve-month period
beginning April 2 and ending April 1. Prior to April 2, 1989, the limitation
year is the twelve-month period from November 1 through the following October
31, except the limitation year beginning November 1, 1988 shall end April 1,
1989.
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(f) "maximum permissible amount" -- The lesser of $30,000 (or, if greater,
1/4 of the dollar limitation in effect under Section 415(b)(1)(A) of the Code)
or twenty-five percent (25%) of the Participant's compensation for the
limitation year.
ARTICLE XVI
TOP HEAVY DEFINITIONS AND RULES
-------------------------------
16.1 Key employee. An Employee or former Employee, (or the Beneficiary of
such an Employee or former Employee) who at any time during the determination
period was:
(a) An officer of the Employer having an annual compensation greater than
fifty percent (50%) of the amount in effect under Section 415(b)(1)(A) of the
Code for any such Plan Year;
(b) One of the ten Employees having annual compensation from the Employer
of more than the limitation in effect under Section 415(c)(1)(A) of the Code and
owning (or considered as owning within the meaning of Section 318 of the Code)
the largest interests in the Employer;
(c) A person owning (or considered as owning within the meaning of Section
318 of the Code) more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more then five percent (5%) of the total combined
voting power of ail stock of the Employer, or
(d) A person who has annual compensation from the Employer of more than
$150,000 and who would be described in (c) hereof if one percent (1%) were
substituted for five percent (5%).
For purposes of (a) above, no more than fifty (50) Employees (or, if lesser, the
greater of three or ten percent of the Employees will be treated as officers.)
For purposes of (b), if two Employees have the same interest in the Employer,
the Employee having greater annual compensation from the Employer will be
treated as having a larger interest. For purposes of this Article the term
"compensation" shall have the same meaning as provided for in Article XV.
The determination period is the Plan Year containing the determination date
as defined in Section 16.8, and the four (4) preceding Plan Years. The
determination of who is a key employee will be made in accordance with the rules
and regulations under Section 416(i)(1) of the Code.
16.2 Non-key employee. Any Employee who is not a key employee. In addition,
any Beneficiary of a non-key employee will be treated as a non-key employee.
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16.3 Permissive aggregation group. The required aggregation group of plans
plus any other plan or plans of the Employer, which considered as a group with
the required aggregation group, would continue to satisfy the requirements of
Sections 401(a)(4) and 410 of the Code.
16.4 Required aggregation group.
(a) Each qualified plan of the Employer in which at least one key employee
participates or participated at any time during the determination period
(regardless of whether the plan has terminated), and
(b) Any other qualified plan of the Employer which enables a plan described
in (a) to meet the requirements of Sections 401 (a)(4) and 410 of the Code.
16.5 Top-heavy plan. This Plan is top-heavy for any Plan Year if any of the
following conditions exist;
(a) If the top-heavy ratio for this Plan exceeds sixty percent (60%) and
this Plan is not part of any required aggregation group or permissive
aggregation group of plans.
(b) If this Plan is part of a required aggregation group of plans but not
part of a permissive aggregation group and the top-heavy ratio for the required
aggregation group of plans exceeds sixty percent (60%).
(c) If this Plan is a part of a permissive aggregation group of plans and
the top-heavy ratio for the required aggregation group exceeds sixty percent
(60%) and the top-heavy ratio for the permissive aggregation group exceeds sixty
percent (60%).
16.6 Super top-heavy plan. For any Plan Year in which this Plan would be a
Top-Heavy Plan pursuant to Section 16.5 above if "ninety percent (90%)" were
substituted for "sixty percent (60%)" at each place where "sixty percent (60%)"
appears therein.
16.7 Top-heavy ratio.
(a) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and has not maintained any
defined benefit plan which during the five (5) year period ending on the
determination date has or has had accrued benefits, the top-heavy ratio for this
Plan alone or for the required or permissive aggregation group as appropriate is
a fraction, the numerator of which is the sum of the account balances of all key
employees as of the determination date (including any part of any account
balance distributed in the five (5) year period ending on the determination
-40-
<PAGE> 194
date), and the denominator of which is the sum of all account balances
(including any part of any account balance distributed in the five (5) Year
period ending on the determination date), both computed in accordance with
Section 416 of the Code and the regulations thereunder. Both the numerator and
denominator of the top-heavy ratio are increased to reflect any contribution not
actually made as of the determination date, but which is required to be taken
into account on that date under Section 416 of the Code and the regulations
thereunder.
(b) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and maintains or has maintained
one or more defined benefit plans which during the five (5) year period ending
on the Determination Date has or has had any accrued benefits, the top-heavy
ratio for any required or permissive aggregation group as appropriate is a
fraction, the numerator of which is the sum of account balances under the
aggregated defined contribution plan or plans for all key employees determined
in accordance with (2) above, and the present value of accrued benefits under
the aggregated defined benefit plan or plans for all key employees as of the
determination date, and the denominator of which is the sum of the account
balances under the aggregated defined contribution plan or plans for all
Participants, determined in accordance with (a) above, and the present value of
accrued benefits under the aggregated defined benefit plan or plans for all
Participants as of the determination dates, all determined in accordance with
Section 416 of the Code and the regulations thereunder. The accrued benefits
under a defined benefit plan in both the numerator and denominator of the
top-heavy ratio are increased for any distribution of an accrued benefit made in
the five year period ending on the determination date.
(c) For the purposes of (a) and (b) above, the value of account balances
and the present value of accrued benefits will be determined as of the most
recent valuation date that falls within or ends with the twelve (12) month
period ending on the determination date, except as provided in Section 416 of
the Code and the regulations thereunder for the first and second plan years of a
defined benefit plan. The account balances and accrued benefits of a Participant
(1) who is a non-key employee but who was a key employee in a prior year, or (2)
who has not been credited with at least one Hour of Service with any Employer
maintaining the Plan at any time during the five (5) year period ending on the
determination date will be disregarded. The calculation of the top-heavy ratio,
and the extent to which distributions, rollovers, and transfers are taken into
account will be made in accordance with Section 416 of the Code and the
regulations thereunder. When aggregating plans the value of account balances and
accrued benefits will be calculated with reference to the determination dates
that fall within the same calendar year. If any individual has not received
-41-
<PAGE> 195
any compensation from any employer maintaining the plan (other than benefits
under the Plan) at any time during the five (5) year period ending on the
determination date, any accrued benefit for such individual (and the account
of such individual) will not be taken into account.
Effective for Plan Years beginning after December 31, 1986, the accrued
benefit of a Participant other than a key employee shall be determined under (i)
the method, if any, that uniformly applies for accrual purposes under all
defined benefit plans maintained by the Employer or (ii) if there is no such
method, as if such benefit accrued not more rapidly than the slowest accrual
rate permitted under the fractional rule of Section 411(b)(1)(C) of the Code.
16.8 Determination date. With respect to any Plan Year subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that Plan Year.
16.9 Valuation date. The last day of the Plan Year.
16.10 Present value. Present value will be based upon the interest and
mortality rates specified in the Employer's defined benefit plan.
16.11 Minimum Allocation.
(a) If in any Plan Year the Plan is a Top Heavy Plan and the Employer does
not maintain any qualified defined benefit plan in addition to this Plan, except
as provided in (b) and (c) below, the Employer contributions and forfeitures
allocated on behalf of any Participant who is a non-key employee will not be
less than the lesser of three percent (3%) of such Participant's compensation or
the largest percentage of Employer contributions and forfeitures, as a
percentage of the first $200,000 of the key employee's compensation (as defined
in Section 15.2(b)), and as limited by Section 401(a)(17) of the Code, allocated
on behalf of any key employee for that year. The minimum allocation is
determined without regard to any Social Security contributions. This minimum
allocation will be made even though, under other Plan provisions, the
Participant would not otherwise be entitled to receive an allocation, or would
have received a lesser allocation for the year because of the Participant's
failure to complete 1,000 Hours of Service. The minimum allocation (if any)
required under this paragraph (a) shall be made to this Plan only to the extent
such allocation is not made for the Participant under any other defined
contribution plan(s) maintained by the Employer.
-42-
<PAGE> 196
(b) In the event the Employer maintains a qualified defined benefit plan(s)
in addition to this Plan, the Employer will provide a minimum allocation at
least equal to five percent (5%) of compensation (as defined in Section 15.2(b))
to each non-key employee, entitled under (a) above to receive a minimum
allocation, who is covered under this Plan and the qualified defined benefit
plan(s). If this Plan enables a defined benefit plan to meet the requirements of
Section 401(a) or 410 of the Code, the minimum allocation described in (a) above
must be at least three percent (3%) of a Participant's compensation, regardless
of the largest percentage of Employer contributions and forfeitures of a key
employee's compensation.
(c) The provisions in (a) and (b) above will not apply to any Participant
who was not employed by the Employer on the last day of the Plan Year.
(d) The minimum allocation required under this Section 16.11 (to the extent
required to be nonforfeitable under Section 416(b) of the Code) may not be
forfeited under Sections 411(a)(3)(B) or 411(a)(3)(D) of the Code.
IN WITNESS WHEREOF, Delaware Group Delaware Fund, Inc. has caused this
amended and restated Plan, effective April 1, 1989, to be executed by its duly
authorized officers and its corporate seal to be impressed hereon this 17th day
of November, 1994.
Attest: DELAWARE GROUP DELAWARE FUND, INC.
/s/ George M. Chamberlain, Jr. By: /s/Brian F. Wruble
- ------------------------------ -------------------------
George M. Chamberlain, Jr. Brian F. Wruble
Senior Vice President/Secretary President and Chief
Executive Officer
-43-
<PAGE> 197
Consent of Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 34 to the Registration Statement (Form N-1A)
(No. 2-57791) of DMC Tax-Free Income Trust - Pennsylvania of our report dated
April 6, 1995, included in the 1995 Annual Report to Shareholders of DMC
Tax-Free Income Trust - Pennsylvania.
/s/ Ernst & Young LLP
---------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
April 24, 1995
<PAGE> 198
Report of Independent Auditors
To the Trustees and Beneficial Shareholders
DMC Tax-Free Income Trust - Pennsylvania
We have audited the accompanying statement of net assets of DMC Tax-Free
Income Trust - Pennsylvania as of February 28, 1995, and the related
statement of operations for the year then ended, the statement of changes in
net assets for each of the two years in the period then ended, and financial
highlights for each of the ten years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of February 28, 1995, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of DMC
Tax-Free Income Trust - Pennsylvania at February 28, 1995, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and financial highlights for
each of the ten years in the period then ended, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
--------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
April 6, 1995
<PAGE> 199
DELAWARE GROUP
TAX-FREE PA FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS
------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $7.85
Initial Shares 127.389
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
------- --------- ------------ ---------- -----------
1994 127.389 $0.107 1.701 129.090
------- --------- ------------ ---------- -----------
Ending Shares 129.090
Ending NAV x $8.18
----------
$1,055.96
Investment Return $1,055.96
Total Return Performance
------------------------
Investment Return $1,055.96
Less Initial Investment $1,000.00
----------
$55.96 / $1,000.00 x 100
Total Return: 5.60%
<PAGE> 200
DELAWARE GROUP
TAX-FREE PA FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS
------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.32
Initial Shares 120.192
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
------- --------- ------------ ---------- -----------
1994 120.192 $0.213 3.217 123.409
------- --------- ------------ ---------- -----------
Ending Shares 123.409
Ending NAV x $8.18
----------
Investment Return $1,009.49
Investment Return $1,009.49
Total Return Performance
------------------------
Investment Return $1,009.49
Less Initial Investment $1,000.00
----------
$9.49 / $1,000.00 x 100
Total Return: 0.95%
<PAGE> 201
DELAWARE GROUP
TAX-FREE PA FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS
------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.31
Initial Shares 120.337
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
------- --------- ------------ ---------- -----------
1994 120.337 $0.319 4.809 125.146
------- --------- ------------ ---------- -----------
Ending Shares 125.146
Ending NAV x $8.18
----------
Investment Return $1,023.69
Investment Return $1,023.69
Total Return Performance
------------------------
Investment Return $1,023.69
Less Initial Investment $1,000.00
----------
$23.69 / $1,000.00 x 100
Total Return: 2.37%
<PAGE> 202
DELAWARE GROUP
TAX-FREE PA FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.31
Initial Shares 120.337
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
------- --------- ------------ ---------- -----------
1994 120.337 $0.353 5.318 125.655
------- --------- ------------ ---------- -----------
Ending Shares 125.655
Ending NAV x $8.18
----------
Investment Return $1,027.86
Investment Return $1,027.86
Total Return Performance
------------------------
Investment Return $1,027.86
Less Initial Investment $1,000.00
----------
$27.86 / $1,000.00 x 100
Total Return: 2.79%
<PAGE> 203
DELAWARE GROUP
TAX-FREE PA FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $7.85
Initial Shares 127.389
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
------- --------- ------------ ---------- -----------
1994 127.389 $0.107 1.701 129.090
------- --------- ------------ ---------- -----------
Ending Shares 129.090
Ending NAV x $8.18
----------
$1,055.96
Less CDSC $40.00
----------
Investment Return $1,015.96
Total Return Performance
------------------------
Investment Return $1,015.96
Less Initial Investment $1,000.00
----------
$15.96 / $1,000.00 x 100
Total Return: 1.60%
<PAGE> 204
DELAWARE GROUP
TAX-FREE PA FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.32
Initial Shares 120.192
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
------- --------- ------------ ---------- -----------
1994 120.192 $0.213 3.217 123.409
------- --------- ------------ ---------- -----------
Ending Shares 123.409
Ending NAV x $8.18
----------
Investment Return $1,009.49
Less CDSC $39.33
----------
Investment Return $970.16
Total Return Performance
------------------------
Investment Return $970.16
Less Initial Investment $1,000.00
----------
($29.84) / $1,000.00 x 100
Total Return: -2.98%
<PAGE> 205
DELAWARE GROUP
TAX-FREE PA FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.31
Initial Shares 120.337
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
------- --------- ------------ ---------- -----------
1994 120.337 $0.319 4.809 125.146
------- --------- ------------ ---------- -----------
Ending Shares 125.146
Ending NAV x $8.18
----------
Investment Return $1,023.69
Less CDSC $39.37
----------
Investment Return $984.32
Total Return Performance
------------------------
Investment Return $984.32
Less Initial Investment $1,000.00
----------
($15.68) / $1,000.00 x 100
Total Return: -1.57%
<PAGE> 206
DELAWARE GROUP
TAX-FREE PA FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.31
Initial Shares 120.337
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
------- --------- ------------ ---------- -----------
1994 120.337 $0.353 5.318 125.655
------- --------- ------------ ---------- -----------
Ending Shares 125.655
Ending NAV x $8.18
----------
Investment Return $1,027.86
Less CDSC $39.33
----------
Investment Return $988.53
Total Return Performance
------------------------
Investment Return $988.53
Less Initial Investment $1,000.00
----------
($11.47) / $1,000.00 x 100
Total Return: -1.15%
<PAGE> 207
DELAWARE GROUP
TAX-FREE PA FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
-----------
1
$1000(1 - T) = $1,009.09
THREE
YEARS
-----------
3
$1000(1 - T) = $1,206.42
T = 6.46%
FIVE
YEARS
-----------
5
$1000(1 - T) = $1,437.43
T = 7.53%
TEN
YEARS
-----------
10
$1000(1 - T) = $2,378.60
T = 9.05%
FIFTEEN
YEARS
-----------
15
$1000(1 - T) = $3,470.68
T = 8.65%
LIFE OF
FUND
-----------
17.93972603
$1000(1 - T) = $3,141.54
T = 6.59%
<PAGE> 208
DELAWARE GROUP
TAX-FREE PA FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
THREE
YEARS
-----------
3
$1000(1 - T) = $1,149.70
T = 4.76%
FIFTEEN
YEARS
-----------
15
$1000(1 - T) = $3,306.47
T = 8.30%
LIFE OF
FUND
-----------
17.93972603
$1000(1 - T) = $2,991.40
T = 6.30%
<PAGE> 209
DELAWARE GROUP
TAX-FREE PA FUND A
TOTAL RETURN PERFORMANCE
THREE MONTHS
------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.24
Initial Shares 121.359
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
------- --------- ------------ ---------- -----------
1994 121.359 $0.123 1.864 123.223
------- --------- ------------ ---------- -----------
Ending Shares 123.223
Ending NAV x $8.18
----------
Investment Return $1,007.96
Total Return Performance
------------------------
Investment Return $1,007.96
Less Initial Investment $1,000.00
----------
$7.96 / $1,000.00 x 100
Total Return: 0.7964%
<PAGE> 210
DELAWARE GROUP
TAX-FREE PA FUND A
TOTAL RETURN PERFORMANCE
SIX MONTHS
------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.73
Initial Shares 114.548
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
------- --------- ------------ ---------- -----------
1995 114.548 $0.246 3.541 118.089
------- --------- ------------ ---------- -----------
Ending Shares 118.089
Ending NAV x $8.18
----------
Investment Return $965.97
Total Return Performance
------------------------
Investment Return $965.97
Less Initial Investment $1,000.00
----------
($34.03) / $1,000.00 x 100
Total Return: -3.4032%
<PAGE> 211
DELAWARE GROUP
TAX-FREE PA FUND A
TOTAL RETURN PERFORMANCE
NINE MONTHS
------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.72
Initial Shares 114.679
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
------- --------- ------------ ---------- -----------
1995 114.679 $0.369 5.314 119.993
------- --------- ------------ ---------- -----------
Ending Shares 119.993
Ending NAV x $8.18
----------
Investment Return $981.54
Total Return Performance
------------------------
Investment Return $981.54
Less Initial Investment $1,000.00
----------
($18.46) / $1,000.00 x 100
Total Return: -1.8457%
<PAGE> 212
DELAWARE GROUP
TAX-FREE PA FUND A
TOTAL RETURN PERFORMANCE
FIFTEEN YEARS
------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $7.78
Initial Shares 128.535
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
------- --------- ------------ ---------- -----------
1981 128.535 $0.534 10.246 138.781
------- --------- ------------ ---------- -----------
1982 138.781 $0.570 14.554 153.335
------- --------- ------------ ---------- -----------
1983 153.335 $0.585 15.316 168.651
------- --------- ------------ ---------- -----------
1984 168.651 $0.550 14.066 182.717
------- --------- ------------ ---------- -----------
1985 182.717 $0.600 17.005 199.722
------- --------- ------------ ---------- -----------
1986 199.722 $0.716 20.909 220.631
------- --------- ------------ ---------- -----------
1987 220.631 $0.584 16.848 237.479
------- --------- ------------ ---------- -----------
1988 237.479 $0.559 18.242 255.721
------- --------- ------------ ---------- -----------
1989 255.721 $0.554 19.182 274.903
------- --------- ------------ ---------- -----------
1990 274.903 $0.554 20.010 294.913
------- --------- ------------ ---------- -----------
1991 294.913 $0.542 21.344 316.257
------- --------- ------------ ---------- -----------
1992 316.257 $0.532 21.692 337.949
------- --------- ------------ ---------- -----------
1993 337.949 $0.514 21.545 359.494
------- --------- ------------ ---------- -----------
1994 359.494 $0.496 21.076 380.570
------- --------- ------------ ---------- -----------
1995 380.570 $0.494 23.644 404.214
------- --------- ------------ ---------- -----------
Ending Shares 404.214
Ending NAV x $8.18
----------
Investment Return $3,306.47
Total Return Performance
------------------------
Investment Return $3,306.47
Less Initial Investment $1,000.00
----------
$2,306.47 / $1,000.00 x 100
Total Return: 230.6471%
<PAGE> 213
DELAWARE GROUP
TAX-FREE PA FUND A
TOTAL RETURN PERFORMANCE
LIFE OF FUND
------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.03
Initial Shares 99.701
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
------- --------- ------------ ---------- -----------
1978 99.701 $0.363 3.841 103.542
------- --------- ------------ ---------- -----------
1979 103.542 $0.505 5.939 109.481
------- --------- ------------ ---------- -----------
1980 109.481 $0.524 6.804 116.285
------- --------- ------------ ---------- -----------
1981 116.285 $0.534 9.271 125.556
------- --------- ------------ ---------- -----------
1982 125.556 $0.570 13.168 138.724
------- --------- ------------ ---------- -----------
1983 138.724 $0.585 13.858 152.582
------- --------- ------------ ---------- -----------
1984 152.582 $0.550 12.723 165.305
------- --------- ------------ ---------- -----------
1985 165.305 $0.600 15.385 180.690
------- --------- ------------ ---------- -----------
1986 180.690 $0.716 18.917 199.607
------- --------- ------------ ---------- -----------
1987 199.607 $0.584 15.244 214.851
------- --------- ------------ ---------- -----------
1988 214.851 $0.559 16.502 231.353
------- --------- ------------ ---------- -----------
1989 231.353 $0.554 17.354 248.707
------- --------- ------------ ---------- -----------
1990 248.707 $0.554 18.101 266.808
------- --------- ------------ ---------- -----------
1991 266.808 $0.542 19.313 286.121
------- --------- ------------ ---------- -----------
1992 286.121 $0.532 19.625 305.746
------- --------- ------------ ---------- -----------
1993 305.746 $0.514 19.491 325.237
------- --------- ------------ ---------- -----------
1994 325.237 $0.496 19.066 344.303
------- --------- ------------ ---------- -----------
1995 344.303 $0.494 21.394 365.697
------- --------- ------------ ---------- -----------
Ending Shares 365.697
Ending NAV x $8.18
----------
Investment Return $2,991.40
Total Return Performance
------------------------
Investment Return $2,991.40
Less Initial Investment $1,000.00
----------
$1,991.40 / $1,000.00 x 100
Total Return: 199.1401%
<PAGE> 214
Delaware Group Tax-Free PA Fund B
Yield Quotation for the Month Ended February 28, 1995
Interest Earned $49,352
Expenses Accrued $13,120
Net Income $36,232
Average Shares Outstanding 1,160,428
Maximum Offering Price
February 28, 1995 $8.18
Yield 4.62%
Tax-Free PA Fund B Yield 2 (49,352 - 13,120 + 1) 6 - 1) = 4.62%
-----------------
(1,160,428 x 8.18)
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000201670
<NAME> DMC TAX-FREE INCOME TRUST--PENNSYLVANIA
<SERIES>
<NAME> A CLASS
<NUMBER> 01
<S> <C>
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<PERIOD-END> FEB-28-1995
<INVESTMENTS-AT-COST> 929,596,139
<INVESTMENTS-AT-VALUE> 967,657,221
<RECEIVABLES> 22,302,704
<ASSETS-OTHER> 519,097
<OTHER-ITEMS-ASSETS> 8,620
<TOTAL-ASSETS> 990,487,642
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,936,137
<TOTAL-LIABILITIES> 3,936,137
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 951,343,328
<SHARES-COMMON-STOCK> 119,368,970
<SHARES-COMMON-PRIOR> 119,254,723
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,852,904)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 38,061,082
<NET-ASSETS> 976,312,809
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 68,756,510
<OTHER-INCOME> 0
<EXPENSES-NET> 8,973,075
<NET-INVESTMENT-INCOME> 59,783,435
<REALIZED-GAINS-CURRENT> (2,683,926)
<APPREC-INCREASE-CURRENT> (49,900,367)
<NET-CHANGE-FROM-OPS> 7,199,142
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 59,553,344
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,622,689
<NUMBER-OF-SHARES-REDEEMED> 14,828,773
<SHARES-REINVESTED> 4,320,331
<NET-CHANGE-IN-ASSETS> (40,351,959)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (168,978)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,743,977
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,973,075
<AVERAGE-NET-ASSETS> 986,821,544
<PER-SHARE-NAV-BEGIN> 8.61
<PER-SHARE-NII> 0.494
<PER-SHARE-GAIN-APPREC> (0.430)
<PER-SHARE-DIVIDEND> 0.494
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.18
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
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<NAME> DMC TAX-FREE INCOME TRUST--PENNSYLVANIA
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-END> FEB-28-1995
<INVESTMENTS-AT-COST> 929,596,139
<INVESTMENTS-AT-VALUE> 967,657,221
<RECEIVABLES> 22,302,704
<ASSETS-OTHER> 519,097
<OTHER-ITEMS-ASSETS> 8,620
<TOTAL-ASSETS> 990,487,642
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,936,137
<TOTAL-LIABILITIES> 3,936,137
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 951,343,328
<SHARES-COMMON-STOCK> 1,251,835
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,852,904)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 38,061,082
<NET-ASSETS> 10,238,696
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 68,756,510
<OTHER-INCOME> 0
<EXPENSES-NET> 8,973,075
<NET-INVESTMENT-INCOME> 59,783,435
<REALIZED-GAINS-CURRENT> (2,683,926)
<APPREC-INCREASE-CURRENT> (49,900,367)
<NET-CHANGE-FROM-OPS> 7,199,142
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 230,091
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,260,370
<NUMBER-OF-SHARES-REDEEMED> 27,138
<SHARES-REINVESTED> 18,603
<NET-CHANGE-IN-ASSETS> (40,351,959)
<ACCUMULATED-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 5,743,977
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,973,075
<AVERAGE-NET-ASSETS> 5,463,083
<PER-SHARE-NAV-BEGIN> 8.31
<PER-SHARE-NII> 0.353
<PER-SHARE-GAIN-APPREC> (0.130)
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 217
POWER OF ATTORNEY
Each of the undersigned, a member of the Board of Trustees of DMC TAX-FREE
INCOME TRUST-PENNSYLVANIA hereby constitutes and appoints Wayne A. Stork, W.
Thacher Longstreth and Walter P. Babich and any one of them acting singly, his
true and lawful attorneys-in-fact, in his name, place, and stead, to execute and
cause to be filed with the Securities and Exchange Commission and other federal
or state government agency or body, such registration statements, and any and
all amendments thereto as either of such designees may deem to be appropriate
under the Securities Act of 1933, as amended, the Investment Company Act of
1940, as amended, and all other applicable federal and state securities laws.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
this 20th day of April, 1995.
/s/ Walter P. Babich /s/ W. Thacher Longstreth
- -------------------- -------------------------
Walter P. Babich W. Thacher Longstreth
/s/ Anthony D. Knerr /s/ Charles E. Peck
- -------------------- -------------------------
Anthony D. Knerr Charles E. Peck
/s/ Ann R. Leven /s/ Wayne A. Stork
- -------------------- -------------------------
Ann R. Leven Wayne A. Stork
