<PAGE>
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. | |
Post-Effective Amendment No. 35 | X |
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | X |
Amendment No. 35
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 751-2923
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
(Name and Address of Agent for Service)
Approximate Date of Public Offering: November 29, 1995
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
X on November 29, 1995 pursuant to paragraph (b)
_____
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on (date) pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
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 26, 1995.
<PAGE>
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. 35 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>
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
CROSS-REFERENCE SHEET*
PART A
<TABLE>
<CAPTION>
Item No. Description Location in Prospectus
- -------- ----------- ----------------------
Tax-Free Pennsylvania Fund
A Class/B Class/C Class
<S> <C> <C>
1 Cover Page...................................................... Cover
2 Synopsis........................................................ Synopsis, Summary of Expenses
3 Condensed Financial Information................................. Financial Highlights
4 General Description of Registrant .............................. Investment Objective and
Policies, Shares
5 Management of the Trust ........................................ Management of the Trust
6 Capital Stock and Other Securities ............................. Delaware Difference,
Dividends and Distributions,
Taxes, Shares
7 Purchase of Securities Being Offered............................ Cover, Buying Shares,
Calculation of
Offering Price and Net
Asset Value Per Share,
Management of the Trust
8 Redemption or Repurchase........................................ Buying Shares,
Redemption and Exchange
9 Pending Legal Proceedings....................................... None
</TABLE>
* This filing relates to Registrant's Tax-Free Pennsylvania Fund A Class,
Tax-Free Pennsylvania Fund B Class and Tax-Free Pennsylvania Fund C
Class, which are combined in one prospectus. The three classes are
combined in one Statement of Additional Information and Part C.
<PAGE>
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
CROSS-REFERENCE SHEET
PART B
<TABLE>
<CAPTION>
Location in Statement of
Item No. Description of Additional Information
- -------- ----------- -------------------------
<S> <C> <C>
10 Cover Page...................................................... Cover
11 Table of Contents............................................... Table of Contents
12 General Information and History................................. General Information
13 Investment Objectives and Policies.............................. Investment Objective
and Policy
14 Management of the Registrant.................................... Officers and Trustees
15 Control Persons and Principal Holders of Securities............. Officers and Trustees
16 Investment Advisory and Other Services.......................... Plans Under Rule 12b-1
(under Purchasing Shares),
Investment Management
Agreement, Officers and
Trustees, General
Information, Financial
Statements
17 Brokerage Allocation............................................ Trading Practices and
Brokerage
18 Capital Stock and Other Securities.............................. Capitalization and
Noncumulative Voting
(under General
Information)
19 Purchase, Redemption and Pricing of
Securities Being Offered....................................... Purchasing Shares,
Determining Offering
Price and Net Asset
Value, Redemption and
Repurchase, Exchange
Privilege
20 Tax Status...................................................... Taxes
21 Underwriters ................................................... Purchasing Shares
22 Calculation of Performance Data................................. Performance Information
23 Financial Statements............................................ Financial Statements
</TABLE>
<PAGE>
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
CROSS-REFERENCE SHEET
CROSS-REFERENCE SHEET
PART C
<TABLE>
<CAPTION>
Item No. Description Location in Part C
- -------- ----------- ------------------
<S> <C>
24 Financial Statements and Exhibits....................................... Item 24
25 Persons Controlled by or under Common
Control with Registrant.............................................. Item 25
26 Number of Holders of Securities......................................... Item 26
27 Indemnification......................................................... Item 27
28 Business and Other Connections of Investment Adviser.................... Item 28
29 Principal Underwriters.................................................. Item 29
30 Location of Accounts and Records........................................ Item 30
31 Management Services..................................................... Item 31
32 Undertakings............................................................ Item 32
</TABLE>
<PAGE>
TAX-FREE PENNSYLVANIA FUND
A CLASS SHARES
B CLASS SHARES PROSPECTUS
C CLASS SHARES November 29, 1995
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 three classes of
shares (collectively, the "Classes"): Tax-Free Pennsylvania Fund A Class ("Class
A Shares"), Tax-Free Pennsylvania Fund B Class ("Class B Shares") and Tax-Free
Pennsylvania Fund C Class ("Class C Shares") (collectively, the "Classes"). 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. Class B Shares and Class C Shares may be purchased at a price equal to
the next determined net asset value per share. Class A Shares are subject to a
maximum front-end sales charge of 4.75% and annual 12b-1 Plan expenses of up to
0.30%. Class B Shares are subject to a contingent deferred sales charge ("CDSC")
which may be imposed on redemptions made within six years of purchase and annual
12b-1 Plan expenses of 1.00%, which are assessed against the Class B Shares for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Buying Shares. Class C Shares are subject to a CDSC which may be
imposed on redemptions made within twelve months of purchase and annual 12b-1
Plan expenses of 1.00%, which are assessed against the Class C Shares for the
life of the investment. See Summary of Expenses. These alternatives permit an
investor to choose the method of purchasing shares that is most suitable for his
or her needs. In choosing the most suitable Class, an investor should consider
the differences among the Classes, including the effect of sales charges and
12b-1 Plan expenses, given the amount of the purchase, the length of time the
investor expects to hold the shares and other circumstances. See Buying Shares.
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 November 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 for the
fiscal year ended February 28, 1995, and its Semi-Annual Report for the six
months ended August 31, 1995, which will accompany any response to requests for
Part B.
-1-
<PAGE>
TABLE OF CONTENTS
Cover Page Buying Shares
Synopsis Redemption and Exchange
Summary of Expenses Dividends and Distributions
Financial Highlights Taxes
Investment Objective and Policies Calculation of Offering Price and
Suitability Net Asset Value Per Share
Investment Strategy Management of the Trust
The Delaware Difference Appendix A - Investment Illustrations
Plans and Services
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE 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.
-2-
<PAGE>
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., also 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 Charges
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, based on
the net asset value of the Class A Shares as of the end of the Trust's most
recent fiscal year, is equivalent to 5.01% of the amount invested. The sales
charge is reduced on certain transactions of at least $100,000 but under
$1,000,000. For purchases of $1,000,000 or more, the front-end sales charge is
eliminated. Class A Shares are 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 subject to annual 12b-1 Plan
expenses which are assessed against the Class B Shares for approximately eight
years after purchase. See Automatic Conversion of Class B Shares under Buying
Shares.
The price of the Class C Shares is equal to the net asset value per
share. Class C Shares are subject to a CDSC of 1% if shares are redeemed within
twelve months of purchase. Class C Shares are subject to annual 12b-1 Plan
expenses for the life of the investment.
See Buying Shares and Distribution (12b-1) and Service under Management
of the Fund.
Purchase Amounts
Generally, the minimum initial investment is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent investments generally must be at
least $100. Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. An investor may exceed the maximum purchase
limitations for Class B Shares and Class C Shares by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more of Class A
Shares, which are subject to lower annual 12b-1 Plan expenses than Class B
Shares and Class C Shares and generally are not subject to a CDSC. 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.
For further details, see Investment Objective and Policies.
-3-
<PAGE>
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 as defined by the
Investment Company Act of 1940 (the "1940 Act"). See Shares under Management of
the Trust.
Risk Factors and Special Considerations
The Trust is a nondiversified investment company under the 1940 Act 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 paid to the Manager 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
Class A Shares of the Trust may be 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 shares purchased
at net asset value, which may be subject to a CDSC if such purchases triggered
the payment of a dealer's commission. See Front-End Sales Charge Alternative -
Class A Shares under Buying Shares. Class B and Class C Shares may be redeemed
or exchanged at the net asset value calculated after receipt of the redemption
or exchange request subject, in the case of redemptions, to any applicable CDSC.
Neither the Trust nor the Distributor assesses any charges other than the CDSC
for redemptions or exchanges of Class B or Class C Shares. There are certain
limitations on an investor's ability to exchange shares between the various
classes of shares that are offered. See Redemption and Exchange.
-4-
<PAGE>
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to Class A, Class B and Class C Shares follows:
<TABLE>
<CAPTION>
Shareholder Transaction Expenses Class A Shares Class B Shares Class C Shares
-------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering
price)................................................ 4.75% None None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a percentage of
offering price)....................................... None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, whichever is lower).............. 1.00%* None* 4.00%*
Redemption Fees........................................ None** None** None**
Annual Operating Expenses
(as a percentage of average daily net assets) Class A Shares Class B Shares Class C Shares
--------------------------------------------- -------------- -------------- --------------
Management Fees......................................... 0.58% 0.58% 0.58%
12b-1 Expenses (including service fees) 0.17%+*** 1.00%+ 1.00%+
Other Operating Expenses 0.15% 0.15%++ 0.15%++
Total Operating Expenses 0.90%*** 1.73% 1.73%
</TABLE>
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 the financial adviser through whom such
purchase is effected, a CDSC of 1% will be imposed on certain redemptions within
twelve months of purchase ("Limited CDSC"). Class B Shares are subject to a CDSC
of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; (iv) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. Class C Shares are subject to a CDSC of 1% if the shares are
redeemed within twelve months of purchase. See Contingent Deferred Sales Charge
for Certain Purchases of Class A Shares Made at Net Asset Value under Redemption
and Exchange; Deferred Sales Charge Alternative - Class B Shares and Level Sales
Charge Alternative - Class C 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 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 under Management of the Trust.
+Class A Shares, Class B Shares and Class C 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
-5-
<PAGE>
permitted by rules of the National Association of Securities Dealers, Inc. (the
"NASD"). See Distribution (12b-1) and Service under Management of the Trust.
++"Other Operating Expenses" for Class B Shares and Class C Shares are
estimates based upon the actual expenses incurred by Class A Shares for the
fiscal year ended February 28, 1995.
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, (2) redemption at the end of each time period and (3) with
respect to Class B Shares and Class C Shares, payment of a CDSC at the time of
redemption, if applicable.
1 year 3 years 5 years 10 years
------ ------- ------- --------
Class A Shares $56(1) $75 $95 $153
Class B Shares $58 $84 $114 $182(2)
Class C Shares $28 $54 $94 $204
An investor would pay the following expenses on the same $1,000
investment, assuming no redemption at the end of the period.
1 year 3 years 5 years 10 years
------ ------- ------- --------
Class A Shares $56 $75 $95 $153
Class B Shares $18 $54 $94 $182(2)
Class C Shares $18 $54 $94 $204
(1) Generally, the Trust does not assess a redemption charge upon redemption
of Class A Shares. Under certain circumstances, however, a Limited CDSC,
which has not been reflected in this calculation, may be imposed in the
event of certain redemptions within twelve 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 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 the eighth year. However,
the conversion may occur as late as three months after the eighth
anniversary of purchase, during which time the higher 12b-1 Plan fees
payable by Class B Shares will continue to be assessed. Information for the
ninth and tenth years reflects expenses of the Class A Shares. See Automatic
Conversion of Class B Shares under Buying Shares for a description of the
automatic conversion feature.
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.
-6-
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights from the years ended February 28, 1986
through February 28, 1995 for Class A Shares and from May 2, 1994 through
February 28, 1995 for Class B Shares 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. Unaudited financial highlights for the
six months ended August 31, 1995 are also provided below for Class A Shares and
Class B Shares. The data should be read in conjunction with the financial
statements and related notes for the six months ended August 31, 1995, all of
which are incorporated by reference into Part B. Further information about the
Trust's performance is contained in its Annual Report to shareholders for the
fiscal year ended February 28, 1995, and its Semi- Annual Report to shareholders
for the six months ended August 31, 1995. A copy of the Trust's Annual Report
(including the report of Ernst & Young LLP) and its Semi-Annual Report may be
obtained from the Trust upon request at no charge. Information regarding Class C
Shares has not been included in these tables because such shares were not
offered to the public prior to the date of this Prospectus.
- --------------------------------------------------------------------------------
-7-
<PAGE>
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------------------------------------
Period
3/1/95
through
8/31/95 Year Ended
(Unaudited)
(1)(3) 2/28/95(1) 2/28/94(1) 2/28/93(1) 2/29/92 2/28/91 2/28/90 2/28/89
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............. $8.180 $8.610 $8.630 $8.110 $7.800 $7.800 $7.700 $7.730
Income From Investment Operations
Net Investment Income............................ 0.241 0.494 0.496 0.514 0.532 0.542 0.554 0.554
Net Gains (Losses) on Securities
(both realized and unrealized)........ 0.210 (0.430) (0.020) 0.520 0.310 --- 0.100 (0.030
------ ------ ------ ------ ------ ------ ------ ------
Total From Investment Operations........... 0.451 0.064 0.476 1.034 0.842 0.542 0.654 0.524
------ ------ ------ ------ ------ ------ ------ ------
Less Distributions
Dividends from Net Investment Income............. (0.241) (0.494) (0.496) (0.514) (0.532) (0.542) (0.554) (0.554)
Distributions from Capital Gains................. --- --- --- --- --- --- --- ---
Returns of Capital............................... --- --- --- --- --- --- --- ---
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions......................... (0.241) (0.494) (0.496) (0.514) (0.532) (0.542) (0.554) (0.554)
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period................... $8.390 $8.180 $8.610 $8.630 $8.110 $7.800 $7.800 $7.700
====== ====== ====== ====== ====== ====== ====== ======
- -------------------------------------------------
Total Return(2) ................................. 5.59% 0.91% 5.64% 13.20% 11.11% 7.24% 8.67% 7.08%
- -------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted)........ $997,158 $976,313 $1,026,903 $940,616 $766,625 $668,345 $613,223 $534,287
Ratio of Expenses to Average Daily Net Assets.... 0.89% 0.90% 0.88% 0.83% 0.72% 0.72% 0.73% 0.77%
Ratio of Net Investment Income to Average Daily
Net Assets ................................. 5.79% 6.03% 5.70% 6.18% 6.65% 7.00% 7.03% 7.24%
Portfolio Turnover Rate.......................... 26% 18% 14% 11% 7% 31% 22% 8%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2/29/88 2/28/87 2/28/86
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............. $8.210 $7.850 $6.960
Income From Investment Operations
Net Investment Income............................ 0.559 0.584 0.593
Net Gains (Losses) on Securities
(both realized and unrealized)........ (0.480) 0.360 1.013
------ ------ ------
Total From Investment Operations............ 0.079 0.944 1.606
------ ------ ------
Less Distributions
Dividends from Net Investment Income............. (0.559) (0.584) (0.716)
Distributions from Capital Gains................. --- --- ---
Returns of Capital............................... --- --- ---
------ ------ ------
Total Distributions......................... (0.559) (0.584) (0.716)
------ ------ ------
Net Asset Value, End of Period................... $7.730 $8.210 $7.850
====== ====== ======
- -------------------------------------------------
Total Return(2) ................................. 1.39% 12.57% 24.57%
- -------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted)........ $472,648 $419,768 $186,394
Ratio of Expenses to Average Daily Net Assets.... 0.78% 0.75% 0.77%
Ratio of Net Investment Income to Average Daily
Net Assets ................................. 7.38% 7.20% 8.55%
Portfolio Turnover Rate.......................... 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 twelve
months of purchase. See Contingent Deferred Sales Charge for Certain
Purchases of Class A Shares at Net Asset Value.
(3) Ratios have been annualized, but total return has not been annualized.
<PAGE>
Class B Shares
------------------------
Period
3/1/95 Period
through 5/2/94(1)
8/31/95(3) through
(Unaudited) 2/28/95
Net Asset Value, Beginning of Period.......... $8.180 $8.310
Income From Investment Operations
Net Investment Income......................... 0.209 0.353
Net Gains (Losses) on Securities
(both realized and unrealized)..... 0.210 (0.130)
Total From Investment Operations......... 0.419 0.223
Less Distributions
Dividends from Net Investment Income.......... (0.209) (0.353)
Distributions from Capital Gains.............. --- ---
Returns of Capital............................ --- ---
Total Distributions...................... (0.209) (0.353)
Net Asset Value, End of Period................ $8.390 $8.180
Total Return(2) .............................. 5.16%(3) 2.79%(3)
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted)..... $16,830 $10,239
Ratio of Expenses to Average Daily Net Assets. 1.70%(3) 1.73%(3)
Ratio of Net Investment Income to Average Daily
Net Assets................................. 4.98%(3) 5.20%(3)
Portfolio Turnover Rate....................... 26% 18%
- -----------------------
(1) Date of initial public offering.
(2) Does not reflect the CDSC which varies from 1%-4% depending upon the
holding period.
(3) Ratios have been annualized, but total return has not been annualized.
<PAGE>
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 for 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 net assets in debt
obligations that are rated in the top four grades by Moody's Investors Service,
Inc. ("Moody's") or Standard & Poor's Rating Group ("S&P") at the time of
purchase.
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The Trust may include in that 80% portion 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 net 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.
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 the Trust's assets 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 may invest its assets in fewer issuers, the
value of Trust shares may increase or decrease more rapidly than if the Trust
were fully diversified. If the Trust were to invest more than 5% of its assets
in a single issuer, the Trust would be affected more than a fully-diversified
fund in the event that issuer encountered 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 forty-five 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.
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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 to borrow money and invest in repurchase
agreements, the Trust normally does not do so. 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 its net assets in illiquid securities.
While maintaining oversight, the Board of Trustees has delegated to the
Manager the day-to-day function of determining whether or not individual Rule
144A Securities are liquid for purposes of the Trust's 10% limitation on
investments in illiquid assets. The Board has instructed the Manager to consider
the following 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; and (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 to take 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.
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<PAGE>
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 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.
See Part B for a more detailed discussion of the risks attendant to
Pennsylvania obligations.
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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. Our representatives can answer any 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. Delaphone is available seven days a week,
24 hours a day.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of distributions. 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 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 of
other Delaware Group funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of the Trust or of other
Delaware Group funds or into Class C Shares of the Trust or of other Delaware
Group funds are also made without any sales charge and will not be subject to a
CDSC 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.
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Holders of Class A Shares of the Trust may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in the Delaware
Group, including the Trust. Holders of Class B Shares of the Trust may reinvest
their distributions only into Class B Shares of the funds in the Delaware Group
which offer that class of shares (the "Class B Funds"). Similarly, holders of
Class C Shares of the Trust may reinvest their distributions only into Class C
Shares of the funds in the Delaware Group which offer that class of shares (the
"Class C Funds"). See Class B Funds and Class C Funds under Buying Shares for a
list of the funds offering those classes of shares. For more information about
reinvestments, please call the Shareholder Service Center.
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
certain exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption and Exchange.
Wealth Builder Option
You may elect to 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, Class B and Class C Shares. See Redemption and
Exchange.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature allows
you to combine the value of your current holdings of Class A Shares, Class B
Shares and Class C Shares of the Trust with the dollar amount of new purchases
of Class A Shares to qualify for a reduced front-end sales charge. Under the
Combined Purchases Privilege, you may also include certain shares that you own
in other funds in the Delaware Group. See Buying Shares.
Letter of Intention
The Letter of Intention feature permits you to obtain a reduced front-end
sales charge on purchases of Class A Shares by aggregating certain of your
purchases of Delaware Group fund shares over a 13-month period. See Part B.
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<PAGE>
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds of
Class A Shares within one year of the date of redemption, without a front-end
sales charge. See Part B.
Delaware Group Asset Planner
Delaware Group Asset Planner is an asset allocation service that gives
investors, working with a professional financial adviser, the ability to more
easily design and maintain investments in a diversified selection of Delaware
Group mutual funds. The Asset Planner service offers a choice of four
pre-designed Allocation Strategies (each with a different risk/reward profile)
made up of separate investments in predetermined percentages of Delaware Group
funds. With the guidance of a financial adviser, investors may also tailor a
Strategy that meets their personal needs and goals. See How to Buy Shares under
Buying Shares.
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.
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BUYING SHARES
Purchase Amounts
The minimum initial purchase is $1,000 for Class A Shares, Class B Shares
and Class C. Shares. Subsequent purchases must be $100 or more. In addition,
there is a maximum purchase limitation of $250,000 on each purchase of Class B
Shares; for Class C Shares, each purchase must be in an amount that is less than
$1,000,000. An investor may exceed these maximum purchase limitations by making
cumulative purchases over a period of time. In doing so, an investor should keep
in mind that reduced front-end sales charges are available on investments of
$100,000 or more in Class A Shares, and that Class A Shares (i) are subject to
lower annual 12b-1 Plan expenses than Class B Shares and Class C Shares and (ii)
generally are not subject to a CDSC.
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net asset
value per share, subject to a sales charge which may be imposed, at the election
of the purchaser, at the time of the purchase 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") or Class C
Shares ("level sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares. Class A Shares incur a sales charge when
they are purchased but generally are not subject to any sales charge when they
are redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of up to
a maximum of .30% of average daily net assets of such shares. See Contingent
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 are purchased, but 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 to
the Distributor, dealers or others for providing personal service and/or
maintaining shareholder accounts) of average daily net assets of such shares for
approximately eight years after purchase. Class B Shares permit all of the
investor's dollars to work from the time the investment is made. The higher
12b-1 Plan expenses paid by Class B Shares will cause such shares to have a
higher expense ratio and to pay lower dividends than those related to the Class
A Shares. At the end of approximately eight years after purchase, Class B Shares
are automatically converted into Class A Shares of the Trust. See Automatic
Conversion of Class B Shares, below.
Class C Shares. An investor who elects the level sales charge alternative
acquires Class C Shares. Class C Shares do not incur a front-end sales charge
when they are purchased, but are subject to a sales charge if they are redeemed
within twelve months 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 to the
Distributor, dealers or others for providing personal service and/or maintaining
shareholder accounts) of average daily net assets of such shares for the life of
the investment. The higher 12b-1 Plan expenses paid by Class C Shares will cause
such shares to have a higher expense ratio and to pay lower dividends than those
related to the Class A Shares. Unlike Class B Shares, Class C Shares do not
convert to another class.
The alternative purchase arrangements described above permit investors in
the Trust to choose the method of purchasing shares that is most suitable given
the amount of their purchase, the length of time they expect to hold their
shares and other relevant circumstances. Investors should determine whether,
given their particular circumstances, it is more advantageous to purchase Class
A Shares and incur a front-end sales charge, purchase Class B Shares and have
the entire initial purchase amount invested in the Trust with their investment
being subject to a CDSC if they redeem shares within six years of purchase, or
purchase Class C Shares and have the entire initial purchase amount invested in
the Trust with their investment being subject to a CDSC if they redeem shares
within twelve months of purchase. In addition, investors should consider the
level of annual 12b-1 Plan expenses to which each of the Classes is subject and,
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in comparing Class B Shares to Class C Shares, the desirability of an automatic
conversion feature, which is available only for 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 under either the deferred sales charge alternative
or the level 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 Class B Shares acquired under the deferred sales charge
alternative are subject to annual 12b-1 Plan expenses of up to 1% for
approximately eight years after purchase (see Automatic Conversion of Class B
Shares), and Class C Shares acquired under the level sales charge alternative
are subject to annual 12b-1 Plan expenses of up to 1% for the life of the
investment. However, because front-end sales charges are deducted from the
purchase amount at the time of purchase, investors who buy Class A Shares will
not have their full purchase amount invested initially in the Trust.
Certain other investors might determine it to be more advantageous to
purchase Class B Shares and 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 up to 1% until the shares are automatically
converted into Class A Shares. Still other investors might determine it to be
more advantageous to purchase Class C Shares and have all of their funds
invested initially, recognizing that they would be subject to a CDSC for just
twelve months after purchase, but that Class C Shares do not offer a conversion
feature, so their shares would be subject to annual 12b-1 Plan expenses of up to
1% for the life of the investment. The higher 12b-1 Plan expenses on Class B
Shares and Class C Shares will be offset to the extent a return is realized on
the additional money initially invested under the deferred sales charge
alternative or the level sales charge alternative. However, there can be no
assurance as to the return, if any, that will be realized on such additional
money.
Prospective investors should refer to Appendix A to this Prospectus for
an illustration of the potential impact on a long-term shareholder's investment
in the Trust under each of the purchase options.
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 and the Class C Shares,
from the proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred
upon redemption. Sales personnel may receive different compensation for selling
Class A, Class B and Class C Shares. INVESTORS SHOULD UNDERSTAND THAT THE
PURPOSE AND FUNCTION OF THE RESPECTIVE 12b-1 PLANS AND THE CDSCs APPLICABLE TO
CLASS B SHARES AND CLASS C SHARES ARE THE SAME AS THOSE OF THE 12b-1 PLAN AND
THE FRONT-END SALES CHARGE APPLICABLE TO CLASS A SHARES IN THAT SUCH FEES AND
CHARGES PROVIDE FOR THE FINANCING OF THE DISTRIBUTION OF THE RESPECTIVE CLASSES.
See 12b-1 Distribution Plans - Class A, Class B and Class C Shares.
Dividends paid by the Trust with respect to the Class A, Class B and
Class C 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 and the Class C Shares will be borne exclusively by such shares. See
Calculation of Offering Price and Net Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. The Fund and the Distributor intend to operate in compliance with these
rules.
Front-End Sales Charge Alternative - Class A Shares
Class A Shares may be purchased at the offering price which reflects a
maximum front-end sales charge of 4.75%. See Calculation of Offering Price and
Net Asset Value Per Share.
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Purchases of $100,000 or more carry a reduced front-end sales charge as
shown in the following table.
Tax-Free Pennsylvania A Class
- --------------------------------------------------------------------------------
Front-End Sales Charge as % of Dealer's
------------------------------ 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 Class A Shares of $1
million or more but, under certain limited circumstances, a 1% Limited CDSC
may apply upon redemption of such shares.
** Based on the net asset value of the Class A Shares as of the end of the
Trust's most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
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 or 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 to dealers up to the full amount of the
front-end sales charge shown above. In addition, certain dealers who enter
into an agreement to provide extra training and information on Delaware
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 Securities Act of 1933.
- --------------------------------------------------------------------------------
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For initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through whom
such purchases are made in accordance with the following schedule:
Dealer's
Commission
----------
(as a percent-
Amount age of amount
of Purchase 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
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 also may be eligible for a dealer's commission
in connection with certain purchases made under a Letter of Intention or
pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.
An exchange from other Delaware 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 of Class A Shares with your holdings of Class
B Shares and/or Class C Shares of the Trust and shares of the other funds in the
Delaware Group, except those noted below, you can reduce the front-end sales
charges on any additional purchases of Class A Shares. Shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with ownership of variable
insurance products may be combined with other Delaware Group fund holdings.
Shares of other funds that do not carry a front-end sales charge or CDSC may not
be included unless they were acquired through an exchange from a Delaware Group
fund that does carry a front-end sales charge or CDSC.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under twenty-one years of age and any trust,
fiduciary or retirement account for the benefit of such family members.
It also permits you to use these combinations under a Letter of
Intention. A Letter of Intention allows you to make purchases over a 13-month
period and qualify the entire purchase for a reduction in front-end sales
charges on Class A Shares.
Combined purchases of $1,000,000 or more, including certain purchases
made at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may trigger the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative - Class A Shares under Buying
Shares.
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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 information.
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 registered representatives and employees of
authorized investment dealers and by employee 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 CDSC or
other redemption charge. Purchases of Class A Shares also may be made at net
asset value by bank employees who provide services in connection with agreements
between the bank and unaffiliated brokers or dealers concerning sales of Class A
Shares. 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.
Beginning December 1, 1994, Class A Shares of the Trust may be purchased
at net asset value by any investor within ninety 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 and, as a result, 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 assets 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 redeemed within six years of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees facilitates the ability of the Trust to
sell the Class B Shares without deducting a front-end sales charge at the time
of purchase.
Shareholders of the Trust's Class B Shares exercising the exchange
privilege described below will continue to be subject to the CDSC schedule for
the Trust's Class B Shares described in this Prospectus, even after exchange.
Such CDSC schedule may be higher than the CDSC schedule relating to the Class B
Shares acquired as a result of the exchange. See Redemption and Exchange.
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Automatic Conversion of Class B Shares
Except for shares acquired through a reinvestment of dividends, Class B
Shares held for eight years after purchase are eligible for automatic conversion
into Class A Shares. The Trust will 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 three additional months after the eighth anniversary of purchase before the
shares will automatically convert into Class A Shares.
Class B shares of a fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without the imposition
of a front-end sales charge and, as a result, the Trust will invest the full
amount of the investor's purchase payment. The Distributor currently anticipates
compensating dealers or brokers for selling Class C Shares at the time of
purchase from its own assets in an amount equal to no more than 1% of the dollar
amount purchased. As discussed below, however, Class C Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within twelve months of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Shareholders of the Trust's Class C Shares who exercise the exchange
privilege described below will continue to be subject to the CDSC schedule for
the Trust's Class C Shares as described in this Prospectus. See Redemption and
Exchange.
Contingent Deferred Sales Charge - Class B Shares
and Class C Shares
Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below and Class C Shares redeemed within twelve
months of purchase may be subject to a CDSC of 1%. CDSCs are charged as a
percentage of the dollar amount subject to the CDSC. The charge will be assessed
on an amount equal to the lesser of the net asset value at the time of purchase
of the shares being redeemed or the net asset value of those shares at the time
of redemption. No CDSC will be imposed on increases in net asset value above the
initial purchase price. In addition, no CDSC will be assessed on redemptions of
shares received through reinvestments of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of the Class B Shares or the
Class C Shares of the Trust, even if those shares are later exchanged for shares
of another Delaware Group fund. In the event of an exchange of the shares, the
"net asset value of such shares at the time of redemption" will be the net asset
value of the shares that were acquired in the exchange.
The following table sets forth the rates of the CDSC for Class B Shares
of the Trust:
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Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After 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, Class B Shares will still be
subject to the annual 12b-1 Plan expenses of up to 1% of average daily net
assets of those shares. See Automatic Conversion of Class B Shares, above.
Investors are reminded that the Class A Shares into which 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 of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than twelve months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for
twelve months or less. All investments made during a calendar month, regardless
of what day of the month the investment occurred, will age one month on the last
day of that month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of CDSC - Class B Shares and Class C Shares under Redemption
and Exchange.
12b-1 Distribution Plans - Class A, Class B and
Class C Shares
Under the distribution plans adopted by the Trust in accordance with Rule
12b-1 under the 1940 Act, the Trust is permitted to pay the Distributor annual
distribution fees of up to .30% of the average daily net assets of the Class A
Shares, 1% of the average daily net assets of the Class B Shares and 1% of the
average daily net assets of the Class C Shares. These fees, which are payable
monthly, compensate the Distributor for providing distribution and related
services and bearing certain expenses of each of the Classes. The 12b-1 Plans
applicable to Class B Shares and Class C Shares are designed to permit an
investor to purchase Class B Shares or Class C Shares through dealers or brokers
without the assessment of a front-end sales charge while enabling the
Distributor to compensate dealers and brokers for the sale of such shares. For a
more detailed discussion of the 12b-1 Plans relating to the Class A, Class B and
Class C Shares, see Distribution (12b-1) and Service under Management of the
Trust.
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Other Payments to Dealers -- Class A, Class B
and Class C 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.
Subject to pending amendments to the NASD's Rules of Fair Practice, 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. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Rules of Fair Practice will be amended such that
the ability of the Distributor to pay non-cash compensation as described above
will be restricted in some fashion. The Distributor intends to comply with the
NASD's Rules of Fair Practice as they may be amended. In addition, as noted
above, the Distributor may pay dealers a commission in connection with net asset
value purchases.
Class B Funds and Class C Funds
The following funds currently offer Class B Shares and Class C Shares:
Delaware Group Delchester High-Yield Bond Fund, Inc., Delaware Group Government
Fund, Inc., Limited-Term Government Fund of Delaware Group Limited-Term
Government Funds, Inc., Delaware Group Cash Reserve, 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 Devon 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
You may have the dividends earned in one fund automatically invested in
another Delaware Group fund with a different investment objective. For more
information, 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, Tax-Free
Pennsylvania Fund B Class or Tax-Free Pennsylvania Fund C Class at 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, Tax-Free Pennsylvania
Fund B Class or Tax-Free Pennsylvania Fund C Class. 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. Use of this investment
slip can help expedite processing of your check when making additional
purchases. Your investment may be delayed if you send additional purchases by
certified mail.
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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, processing of
your investment may be delayed. In addition, you must promptly send your
Investment Application to Tax-Free Pennsylvania Fund A Class, Tax-Free
Pennsylvania Fund B Class or Tax-Free Pennsylvania Fund C Class at 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.
Delaware Group Asset Planner
To invest in Delaware Group funds using the Asset Planner service, you
should complete a Delaware Group Asset Planner Account Registration Form, which
is available only from a financial adviser. The sales charge on the investment
is determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. The minimum initial investment
per Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available for use inside the Asset
Planner service; however, only "like" class shares may be used within the same
Strategy.
An annual maintenance fee, currently $35 per Strategy, is due at the time
of initial investment and by September 30th of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of your Fund accounts if not paid by September 30th. See the Statement of
Additional Information.
Investors will receive a customized quarterly Strategy Report summarizing
all Delaware Group Asset Planner investment performance and account activity
during the prior period. Confirmation statements will be sent following all
transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
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. All exchanges are subject to
the eligibility and minimum purchase requirements set forth in each fund's
prospectus.
Shareholders of Class A Shares may exchange all or part of their shares
for certain of the shares of other funds in the Delaware Group, including other
Class A Shares, but may not exchange their Shares for Class B Shares or Class C
Shares of the Trust or for Class B Shares or Class C Shares of any other fund in
the Delaware Group. 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. Similarly, shareholders of Class C Shares of the
Trust are permitted to exchange all or part of their Class C Shares only into
the corresponding class of shares of the Class C Funds. Class B Shares of the
Trust and Class C Shares of the Trust acquired by exchange will continue to
carry the CDSC and, in the case of Class B Shares, the automatic conversion
schedule of the fund from which the exchange is made. The holding period of
Class B Shares of the Trust acquired by exchange will be added to that of the
shares that were exchanged for purposes of determining the time of the automatic
conversion into Class A Shares of the Trust.
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Permissible exchanges into Class A Shares of the Trust will be made
without a front-end sales charge imposed by the Trust, except for exchanges 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). Permissible exchanges into Class B
Shares or Class C Shares of the Trust will be made without the imposition of a
CDSC by the fund from which the exchange is being made at the time of the
exchange.
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 have your employer or bank 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 Trust
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
account, you are obligated to reimburse the Trust.
Purchase Price and Effective Date
The offering price and net asset value of the Class A, Class B and Class
C 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 the 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. Purchase orders 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 order. If a purchase
is canceled 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 to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to additional bank
charges for clearance and currency conversion.
The Trust also reserves the right, following shareholder notification, to
charge a service fee on accounts that have remained below the minimum stated
account balance for a period of three or more consecutive months. Holders of
such accounts may be notified of their insufficient account balance and advised
that they have until the end of the current calendar quarter to raise their
balance to the stated minimum. If the account has not reached the minimum
balance requirement by that time, the Trust will charge a $9 fee for that
quarter and each subsequent calendar quarter until the account is brought up to
the minimum balance. The service fee will be deducted from the account during
the first week of each calendar quarter for the previous quarter, and will be
used to help defray the cost of maintaining low-balance accounts. No fees will
be charged without proper notice and no CDSC will apply to such assessments.
The Trust also reserves the right, upon sixty days' written notice, to
redeem accounts that remain under a Class' minimum initial purchase amount as a
result of redemptions. An investor making the minimum initial investment may be
subject to involuntary redemption without the imposition of a CDSC or Limited
CDSC if he or she redeems any portion of his or her account.
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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. Further, in order for an
exchange to be processed, shares of the fund being acquired must be registered
in the state where the acquiring shareholder resides. You may want to consult
your financial adviser or investment dealer to discuss which funds in the
Delaware Group will best meet your changing objectives and the consequences of
any exchange transaction. You may also call the Delaware Group directly for fund
information.
Your shares will be redeemed or exchanged at a price 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. A shareholder
submitting a redemption request may indicate that he or she wishes to receive
redemption proceeds of a specific dollar amount. In the case of such a request,
and in the case of certain redemptions from retirement plan accounts, the Trust
will redeem the number of shares necessary to deduct the applicable CDSC in the
case of Class B or Class C Shares or, if applicable, the Limited CDSC in the
case of Class A shares and tender to the shareholder the requested amount,
assuming the shareholder holds enough shares in his or her account for the
redemption to be processed in this manner. Otherwise, the amount tendered to the
shareholder upon redemption will be reduced by the amount of the applicable CDSC
or Limited CDSC.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund 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 may suspend, terminate, or amend the terms of the exchange privilege
upon sixty 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 that the purchase check has cleared, which may take up to
fifteen days from the purchase date. The Trust will not honor telephone
redemptions for 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.
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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.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for Class B shares of other Class B Funds or Class C shares
of other Class C Funds, as applicable (in each case, "New Shares"), will not be
subject to a CDSC that might otherwise be due upon redemption of the Original
Shares. However, such shareholders will continue to be subject to the CDSC and,
in the case of Class B Shares, the automatic conversion schedule of the Original
Shares as described in this Prospectus and any CDSC assessed upon redemption
will be charged by the Trust. In an exchange of Class B Shares, the Trust's CDSC
schedule may be higher than the CDSC schedule relating to the New Shares
acquired as a result of the exchange. For purposes of computing the CDSC that
may be payable upon a disposition of the New Shares, the period of time that an
investor held the Original Shares is added to the period of time that an
investor held the New Shares. With respect to Class B Shares, the automatic
conversion schedule of the Original Shares may be longer than that of the New
Shares. Consequently, an investment in New Shares by exchange may subject an
investor to the higher 12b-1 fees applicable to Class B Shares of the Trust for
a longer period of time than if the investment in New Shares were made directly.
Various redemption and exchange methods are outlined below. Except for
the CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the Trust or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares redeemed
or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the 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 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.
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Payment is normally mailed the next business day, but no later than seven
days, after receipt of your redemption request. If your Class A Shares are in
certificate form, the certificate must accompany your request and also be in
good order. The Trust issues certificates for Class A Shares if a shareholder
submits a specific request. The Trust does not issue certificates for Class B
Shares or Class C Shares.
Written Exchange
You may also write to the Trust (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your 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 may only
redeem or exchange by written request and you must return your certificates.
The Telephone Redemption Check to Your Address of Record service and the
Telephone Exchange service, both of which are described below, are automatically
provided unless you notify the Trust in writing that you do not wish to have
such service available with respect to your account. The Trust reserves the
right to modify, terminate or suspend these procedures upon sixty 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.
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. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address
of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day, but no later 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 Class
B and Class C Shares and the Limited CDSC which may be applicable to certain
Class A Shares, there are no fees for this redemption 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.
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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
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 Plans
This plan provides shareholders 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 withdrawals 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. 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 two business days after the
payment date. Except for the Limited CDSC which may be applicable to Class A
Shares and the CDSC which may be applicable to Class B Shares and Class C Shares
as noted below, there are no fees for this redemption method. You can initiate
the MoneyLine 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 via a Systematic
Withdrawal Plan may be subject to a Limited CDSC if the original purchase was
made at net asset value within the twelve months prior to the withdrawal 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,
below.
With respect to Class B Shares and Class C Shares redeemed via a
Systematic Withdrawal Plan, any applicable CDSC will be waived if, on the date
that the Plan is established, the annual selected to be withdrawn is less than
12% of the account balance. If the annual amount selected to be withdrawn
exceeds 12% of the account balance on the date that the Systematic Withdrawal
Plan is established, all redemptions under the Plan will be subject to the
applicable CDSC. Whether a waiver of the CDSC is available or not, the first
shares to be redeemed for each Systematic Withdrawal Plan payment will be those
not subject to a CDSC because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions. The 12%
annual limit will be reset on the date that any Systematic Withdrawal Plan is
modified (for example, a change in the amount selected to be withdrawn or the
frequency or date of withdrawals), based on the balance in the account on that
date. See Waiver of CDSC - Class B and Class C Shares, below.
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For more information on Systematic Withdrawal Plans, call the Shareholder
Service Center.
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
an account in one or more Delaware Group funds. If, in connection with the
Wealth Builder Option, a shareholder wishes to open a new account in such other
fund or funds to receive the automatic investment, such new account must meet
such other fund's minimum initial purchase requirements. Investments under this
option are exchanges and are therefore subject to the same conditions and
limitations as other exchanges noted above.
Shareholders can 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
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 twelve 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
acquired in the exchange.
Redemptions of such Class A Shares held for more than twelve 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 acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed that
shares not subject to the Limited CDSC are the first redeemed followed by other
shares held for the longest period of time. The Limited CDSC will not be imposed
upon shares representing reinvested dividends or capital gains distributions, or
upon amounts representing share appreciation. All investments made during a
calendar month, regardless of what day of the month the investment occurred,
will age one month on the last day of that month and each subsequent month.
Waiver of Limited CDSC -- Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from the 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 under Buying Shares).
Waiver of CDSC -- Class B Shares and Class C Shares
The CDSC on certain redemptions of Class B Shares is waived in connection
with the following redemptions: (i) redemptions that result from 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) distributions from an account if the redemption results from the
death of all registered owners of the account (in the case of accounts
established under the Uniform Gifts to Minors or Uniform Transfers to Minors
Acts or trust accounts, the waiver applies upon the death of all beneficial
owners) or a total and permanent disability (as defined in Section 72 of the
Internal Revenue Code) of all registered owners occurring after the purchase of
the shares being redeemed.
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The CDSC on certain redemptions of Class C Shares is waived in connection
with the following redemptions: (i) redemptions that result from 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) distributions from an account if the redemption results from the
death of all registered owners of the account (in the case of accounts
established under the Uniform Gifts to Minors or Uniform Transfers to Minors
Acts or trust accounts, the waiver applies upon the death of all beneficial
owners) or a total and permanent disability (as defined in Section 72 of the
Internal Revenue Code) of all registered owners occurring after the purchase of
the shares being redeemed.
In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual amount
selected to be withdrawn under the Plan does not exceed 12% of the value of the
account on the date that the Systematic Withdrawal Plan was established or
modified.
DIVIDENDS AND DISTRIBUTIONS
The Trust declares a dividend to all shareholders of record 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 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 from net
investment income on the Class A Shares, the Class B Shares and the Class C
Shares will vary due to the expenses under the 12b-1 Plan applicable to each
Class. Generally, the dividends per share on Class B Shares and Class C Shares
can be expected to be lower than the dividends per share on Class A Shares
because the expenses under the 12b-1 Plans relating to Class B and Class C
Shares will be higher than the expenses under the 12b-1 Plan relating to Class A
Shares. See Distribution (12b-1) and Service under Management of the Trust.
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 United
States Post Office or which remains uncashed for a period of more than one year
may be reinvested in the shareholder's account at the then-current net asset
value and the dividend option may be changed from cash to reinvest. If you elect
to take your dividends and distributions in cash and such dividends and
distributions are in an amount of $25 or more, you may choose Delaware Group's
MoneyLine service and have such payments 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 are no fees for the
MoneyLine service. See Systematic Withdrawal Plan for Class A Shares, Class B
Shares and Class C Shares under Redemption and Exchange for information
regarding authorization of this service. (See The Delaware Difference for more
information on reinvestment options.)
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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. Class C Shares were not offered prior to
the date of this Prospectus.
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.
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 acquiring Trust shares will be excluded
from the federal tax basis of any of such shares sold or exchanged within ninety
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 charge
excluded from the tax basis of the shares sold will be added to the tax basis of
the shares acquired in the reinvestment.
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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 approximately eight years after purchase will be tax-free for federal tax
purposes. 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 to 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.
CALCULATION OF OFFERING PRICE AND
NET ASSET VALUE PER SHARE
Class A Shares are purchased at the offering price per share, while Class
B Shares and Class C Shares are purchased at the net asset value ("NAV") per
share. The offering price per share of Class A Shares consists of the NAV per
share next computed after the order is received, plus any applicable front-end
sales charges. The offering price and NAV are computed as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.
The 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 sixty 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 three 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.
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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. DMH and the Manager are now wholly-owned subsidiaries, and subject to
the ultimate control, of Lincoln National. Lincoln National, with headquarters
in Fort Wayne, Indiana, is a diversified organization with operations in many
aspects of the financial services industry, including insurance and investment
management. In connection with the merger, a new Investment Management Agreement
between the Trust and the Manager was executed following shareholder approval.
The Manager manages the Trust's portfolio and makes investment decisions
which are implemented by the Trust's Trading Department. The Manager also
administers the Trust's affairs and 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 0.58% of average daily net assets.
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J. Michael Pokorny has primary responsibility for making day-to-day
investment decisions for the Trust. He has been the Trust's senior portfolio
manager since 1980. A graduate of William and Mary, Mr. Pokorny joined Delaware
Group in 1978 and has over twenty-nine years of fixed income experience.
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. 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.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value and: (i) in
the case of Class A Shares, the impact of the maximum front-end sales charge at
the beginning of each specified period; and (ii) in the case of Class B Shares
and Class C Shares, the deduction of any applicable CDSC at the end of the
relevant period. Each presentation will include the average annual total return
for one-, five- and ten- year 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 that includes deductions of the maximum
front-end sales charge or any applicable CDSC.
Yield and net asset value fluctuate and are not guaranteed. Past
performance is not an indication of future results.
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, as amended on
November 29, 1995.
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The Trust has adopted a separate distribution plan under Rule 12b-1 for
each of the Class A Shares, the Class B Shares and the Class C Shares (the
"Plans"). The Plans 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, Class B and Class C 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 Plan expenses relating to each of the Class B Shares and the Class C
Shares are also used to pay the Distributor for advancing the commission costs
to dealers with respect to the initial sale of such shares.
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' and the Class C Shares' average daily net assets in any year. The
Class A, Class B and Class C 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, regardless 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.
While payments pursuant to the Plans may not exceed .30% annually with
respect to the Class A Shares and 1% annually with respect to each of the Class
B Shares and the Class C Shares, the Plans do not limit fees to amounts actually
expended by the Distributor. It is therefore possible that the Distributor may
realize a profit in any particular year. However, the Distributor currently
expects that its distribution expenses will likely equal or exceed payments to
it under the 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 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 trustees annually review service
fees paid to the Transfer Agent.
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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 Class A Shares for the fiscal year ended February
28, 1995 was 0.90%. Based on expenses incurred by Class A Shares during its
fiscal year ended February 28, 1995, the expenses of Class B Shares are expected
to be 1.73% for the fiscal year ending February 29, 1996. The Trust anticipates
that the expense ratio for Class C Shares will be identical to the expense ratio
for Class B Shares. The ratio of each Class reflects the impact of its Plan.
Shares
The Trust is an open-end management investment company. The Trust's
portfolio of assets is nondiversified as defined by the 1940 Act. 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, as a general matter, the shareholders of Class A Shares, Class B Shares
and Class C Shares may vote only on matters affecting the Plan that relates to
the class of shares that they hold. However, Class B Shares may vote on a
proposal to increase materially the fees to be paid by the Trust under the Rule
Plan relating to 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.
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<TABLE>
<CAPTION>
APPENDIX A
Illustrations of the Potential Impact on Investment Based on Purchase Option
$10,000 Purchase
Scenario 1 Scenario 2 Scenario 3 Scenario 4
No Redemption Redeem 1st Year Redeem 3rd Year Redeem 5th Year
----------------------------- ---------------------------- ---------------------------- -----------------------------
Year Class A Class B Class C Class A Class B Class C Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000 9,525 10,000 10,000 9,525 10,000 10,000
1 10,192 10,630 10,630 10,192 10,230 10,530+ 10,192 10,630 10,630 10,192 10,630 10,630
2 10,905 11,300 11,300 10,905 11,300 11,300 10,905 11,300 11,300
3 11,669 12,012 12,012 11,669 11,712 12,012+ 11,669 12,012 12,012
4 12,485 12,768 12,768 12,485 12,768 12,768
5 13,359 13,573 13,573 13,359 13,373 13,573+
6 14,294 14,428 14,428
7 15,295 15,337 15,337
8 16,366+ 16,303 16,303
9 17,511 17,444* 17,330
10 18,737 18,665* 18,442
*This assumes that Class B Shares were converted to Class A Shares at the end of the eighth year.
$250,000 Purchase
Scenario 1 Scenario 2 Scenario 3 Scenario 4
No Redemption Redeem 1st Year Redeem 3rd Year Redeem 5th Year
----------------------------- ----------------------------- ---------------------------- -----------------------------
Year Class A Class B Class C Class A Class B Class C Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000 243,750 250,000 250,000 243,750 250,000 250,000
1 260,813 265,750 265,750 260,813 255,750 263,250+ 260,813 265,750 265,750 260,813 265,750 265,750
2 279,069 282,492 282,492 279,069 282,492 282,492 279,069 282,492 282,492
3 298,604 300,289 300,289 298,604 292,789 300,289+ 298,064 300,289 300,289
4 319,507 319,207 319,207 319,507 319,207 319,207
5 341,872 339,318 339,318 341,872+ 334,318 339,318
6 365,803 360,695 360,695
7 391,409 383,418 383,418
8 418,808 407,574 407,574
9 448,124 436,104* 433,251
10 479,493 466,631* 460,546
*This assumes that Class B Shares were converted to Class A Shares at the end of the eighth year.
Assumes a hypothetical return for Class A of 7% per year, a hypothetical return
for Class B of 6.3% for years 1-8 and 7% for years 9-10, and a hypothetical
return for Class C of 6.3% per year. Hypothetical returns vary due to the
different expense structure for each Class and do not represent actual
performance. Class A purchase subject to appropriate sales charge breakpoint
(4.75% @ $10,000; 3.75% @ $100,000; 2.50% @ $250,000). Class B purchase assessed
appropriate CDSC upon redemption (4%-4%-3%-3%-2%-1% in years 1-2-3-4-5-6). Class
C purchase assessed 1% CDSC upon redemption in year 1. Figures marked "+"
identify which class offers the greater return potential based on investment
amount and holding period.
</TABLE>
-39-
<PAGE>
-----------------------------
TAX-FREE PENNSYLVANIA FUND
-----------------------------
A CLASS
-----------------------------
B CLASS
-----------------------------
C CLASS
-----------------------------
The Delaware Group includes funds with a
wide range of investment objectives. Stock
funds, income funds, tax-free funds, money
market funds, global and international funds
and closed-end equity funds give investors the
ability to create a portfolio that fits
their personal financial goals. For more
information, contact your financial
adviser or call Delaware Group at 800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc. P R O S P E C T U S
One Commerce Square
Philadelphia, PA 19103 ----------------------------
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P. November 29, 1995
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
--------
<PAGE>
- -------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
November 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
- -------------------------------------------------------------------------------
Investment Objective and Policy
- -------------------------------------------------------------------------------
Performance Information
- -------------------------------------------------------------------------------
Trading Practices and Brokerage
- -------------------------------------------------------------------------------
Purchasing Shares
- -------------------------------------------------------------------------------
Investment Plans
- -------------------------------------------------------------------------------
Determining Offering Price and
Net Asset Value
- -------------------------------------------------------------------------------
Redemption and Repurchase
- -------------------------------------------------------------------------------
Dividends and Distributions
- -------------------------------------------------------------------------------
Taxes
- -------------------------------------------------------------------------------
Investment Management Agreement
- -------------------------------------------------------------------------------
Officers and Trustees
- -------------------------------------------------------------------------------
Exchange Privilege
- -------------------------------------------------------------------------------
General Information
- -------------------------------------------------------------------------------
Appendix A--Description of Ratings
- -------------------------------------------------------------------------------
Appendix B--Tax Exempt vs Taxable Yields
- -------------------------------------------------------------------------------
Financial Statements
- -------------------------------------------------------------------------------
-1-
<PAGE>
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 November 29, 1995, as it 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 three classes of shares (individually, a "Class" and
collectively, the "Classes"): Tax-Free Pennsylvania Fund A Class ("Class A
Shares"), Tax-Free Pennsylvania Fund B Class ("Class B Shares") and Tax-Free
Pennsylvania Fund C Class ("Class C Shares"). Class B Shares and Class C Shares
may be purchased at a price equal to the next determined net asset value per
share. Class A Shares may be purchased at the public offering price, which is
equal to the next determined net asset value per share, plus a front-end sales
charge. Class A Shares are subject to a maximum front-end sales charge of 4.75%
and annual 12b-1 Plan expenses of up to 0.30%. Class B Shares are subject to a
contingent deferred sales charge ("CDSC") which may be imposed on redemptions
made within six years of purchase and annual 12b-1 Plan expenses of up to 1%
which are assessed against Class B Shares for approximately eight years after
purchase. See Automatic Conversion of Class B Shares under Buying Shares in the
Classes' Prospectus. Class C Shares are subject to a CDSC which may be imposed
on redemptions made within twelve months of purchase and annual 12b-1 Plan
expenses of up to 1%, which are assessed against Class C Shares for the life of
the investment. All references to "shares" in this Part B refer to all Classes
of shares of the Trust, except where noted.
-2-
<PAGE>
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
Rating Group ("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.
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 forty-five
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.
-3-
<PAGE>
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.
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 (the "1940 Act") 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.
-4-
<PAGE>
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.
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.
-5-
<PAGE>
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.
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.
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.
-6-
<PAGE>
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 1940 Act, 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 1933 Act (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.
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.
-7-
<PAGE>
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.
-8-
<PAGE>
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, in
the case only of Class A
Shares, the maximum front-end
sales charge, 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
and Class C 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 and Class C Shares, reflects the deduction of 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 Class A Shares, as shown below, is the average
annual total return quotations for the one-, three-, five-, ten- and fifteen
year periods ended August 31, 1995, and for the life of the Trust. The average
annual total return for Class A Shares at offer reflects the maximum front-end
sales charges paid on the purchase of shares. The average annual total return
for Class A Shares at net asset value (NAV) does not reflect the payment of the
maximum front-end sales charge of 4.75%. Securities prices fluctuated during the
periods covered and past results should not be considered as representative of
future performance.
In the case of Class A Shares, the Limited CDSC, applicable only to
certain redemptions of those shares, will not be deducted from any computation
of total return. See the Prospectus for the Classes for a description of the
Limited CDSC and the limited instances in which it applies. All references to a
CDSC will apply to Class B Shares or Class C Shares.
Average Annual Total Return
Class A Shares(1) Class A Shares(1)
(at Offer) (at NAV)
1 year
ended
8/31/95 2.00% 7.03%
3 years
ended
8/31/95 4.46% 6.18%
5 years
ended
8/31/95 7.28% 8.33%
10 years
ended
8/31/95 8.24% 8.77%
15 years
ended
8/31/95 8.64% 9.00%
Period
3/23/77(2)
through
8/31/95 6.43% 6.72%
-9-
<PAGE>
(1) Performance figures for periods after May 31, 1992 reflect applicable Rule
12b-1 distribution expenses. Future performance will be affected by such
expenses.
(2) Date of initial public offering.
The performance of Class B Shares, as shown below, is the average
annual total return quotation for the one year period ended August 31, 1995, and
for the period May 2, 1994 (date of initial public offering) through August 31,
1995. The average annual total return for Class B Shares (including deferred
sales charge) reflects the deduction of the applicable CDSC that would be paid
if the shares were redeemed at August 31, 1995. The average annual total return
for Class B Shares (excluding deferred sales charge) assumes the shares were not
redeemed at August 31, 1995 and therefore does not reflect the deduction of a
CDSC.
Average Annual Total Return
Class B Shares Class B Shares
(Including (Excluding
Deferred Sales Deferred Sales
Charge) Charge)
1 year ended
8/31/95 2.16% 6.16%
Period 5/2/94(1)
through 8/31/95 3.05% 6.01%
(1) Date of initial public offering of Class B Shares.
Information regarding the performance of Class C Shares is not shown
because such shares were not offered to the public prior to the date of this
Part B.
As stated in the Prospectus, the Trust may also quote its current yield
for each Class in advertisements and investor communications.
The yield computation is determined by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period and annualizing the resulting figure,
according to the following formula:
a -- b
------- 6
YIELD = 2[( 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 Class A Shares and Class B Shares as of August 31, 1995
using this formula were 4.77% and 4.18%, respectively. Yield calculations assume
the maximum front-end sales charge, if any, and does not reflect to deduction of
any CDSC or Limited CDSC. 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 any 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 August 31, 1995, the tax-equivalent yield of
Class A Shares and Class B Shares was 6.91% and 6.06%, 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.
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<PAGE>
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.
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.
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.
-11-
<PAGE>
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 tables are examples, for purposes of illustration only,
of cumulative total return performance of (a) Class A Shares for the three-,
six- and nine-month periods ended August 31, 1995, for the one-, three-, five-,
ten- and fifteen-year periods ended August 31, 1995 and for the life of the
Trust and (b) Class B Shares for the three-, six- and nine-month periods ended
August 31, 1995, for the one-year period ended August 31, 1995, and for the life
of the Class. Information regarding the performance of Class C Shares is not
shown because such shares were not offered to the public prior to the date of
this Part B. Comparative information on the Consumer Price Index is also
included.
The performance of the Class A Shares and Class B Shares as shown
below, reflects maximum front-end sales charges, if any, but not any income
taxes payable by shareholders on the reinvested distributions included in the
calculations. The net asset value of a Class fluctuates so shares, when
redeemed, may be worth more or less than the original investment, and a Class'
results should not be considered as representative of future performance. The
performance of the Class B Shares is calculated both with the applicable CDSC
included and excluded.
Cumulative Total Return
Class A Shares(1) Consumer
(at Offer) Price Index(2)
3 months
ended
8/31/95 (3.61)% 0.46%
6 months
ended
8/31/95 0.55% 1.33%
9 months
ended
8/31/95 6.43% 2.14%
1 year
ended
8/31/95 2.00% 2.62%
3 years
ended
8/31/95 13.98% 8.52%
5 years
ended
8/31/95 42.12% 16.19%
10 years
ended
8/31/95 120.72% 41.59%
15 years
ended
8/31/95 246.77% 151.04%
3/23/77(3)
through
8/31/95 215.87% 158.63%
(1) Performance figures for periods after May 31, 1992 reflect applicable Rule
12b-1 distribution expenses. Future performance will be affected by such
expenses.
(2) Source--Department of Labor.
(3) Date of initial public offering of Class A Shares.
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<PAGE>
Cumulative Total Return
Class B Shares Class B Shares
(Including (Excluding Consumer
Deferred Sales Deferred Sales Price
Charge) Charge) Index(1)
3 months
ended
8/31/95 (2.99)% 1.00% 0.46%
6 months
ended
8/31/95 1.16% 5.16% 1.33%
9 months
ended
8/31/95 7.05% 11.05% 2.14%
1 year
ended
8/31/95 2.16% 6.16% 2.62%
Period
5/2/94(2)
through
8/31/95 4.10% 8.10% 3.73%
(1) Source---Department of Labor.
(2) Date of initial public offering of Class B Shares.
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 seeking 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.
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 at various assumed fixed rates of return on a $10,000
investment compounded quarterly tax-free for 10 years:
5% Rate 6% Rate 7% Rate 8% Rate
of Return of Return of Return of Return
12-'85 $10,512 $10,617 $10,723 $10,830
12-'86 $11,049 $11,272 $11,498 $11,729
12-'87 $11,615 $11,967 $12,330 $12,702
12-'88 $12,209 $12,705 $13,221 $13,757
12-'89 $12,833 $13,488 $14,177 $14,898
12-'90 $13,490 $14,320 $15,201 $16,135
12-'91 $14,180 $15,203 $16,300 $17,474
12-'92 $14,906 $16,141 $17,479 $18,924
12-'93 $15,668 $17,137 $18,743 $20,495
12-'94 $16,470 $18,194 $20,097 $22,196
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 any sales charges or any
actual performance results of any of the Classes.
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<PAGE>
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. 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. When a commission is paid, 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.
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.
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<PAGE>
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 1940 Act, 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%.
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.
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<PAGE>
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 is $1,000 for Class A Shares, Class B Shares
and Class C Shares. Subsequent purchases must be at least $100. The initial and
subsequent investment minimums for Class A Shares will be waived for purchases
by officers, directors and employees of any Delaware Group fund, the Manager or
any of the Manager's affiliates if the purchases are made pursuant to a payroll
deduction program. Accounts opened under a Delaware Group Asset Planner Service
are subject to a minimum initial investment of $2,000 per Asset Planner Strategy
selected.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that does not exceed $1,000,000. The Trust will reject any order for purchase of
more than $250,000 of Class B Shares and $1,000,000 or more of Class C Shares.
An investor may exceed these limitations by making cumulative purchases over a
period of time. In doing so, an investor should keep in mind, however, that
reduced front-end sales charges apply to investments of $100,000 or more in
Class A Shares, which are subject to a lower annual 12b-1 Plan expenses than
Class B Shares and Class C Shares and generally are not subject to a CDSC.
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.
* 1 moved from here; text not shown
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 table below. Class A Shares are also subject
to annual 12b-1 Plan expenses.
Class B Shares are purchased at net asset value and are subject to a CDSC
of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
also subject to annual 12b-1 Plan expenses which are higher than those to which
Class A Shares are subject and are assessed against Class B Shares approximately
eight years after purchase. Class C Shares are purchased at net asset value and
are subject to a CDSC of 1% if shares are redeemed within twelve months
following purchase. Class C Shares are also subject to annual 12b-1 Plan
expenses for the life of the investment which are equal to those to which Class
B Shares are subject.
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.
Certificates representing shares purchased are not ordinarily issued
unless a shareholder submits a specific request. Certificates are not issued in
the case of Class B Shares or Class C Shares. 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.
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<PAGE>
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A, Class B and Class C
Shares permit investors to choose the method of purchasing shares that is most
suitable for his or her needs given the amount of their purchase, the length of
time they expect to hold their shares and other relevant circumstances.
Investors should determine whether, given their particular circumstances, it is
more advantageous to purchase Class A Shares 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 Class A Shares or to purchase either Class B or Class C Shares
and have the entire initial purchase amount invested in the Trust with the
investment thereafter subject to a CDSC and annual 12b-1 Plan expenses. Class B
Shares are subject to a CDSC if the shares are redeemed within six years of
purchase, and Class C Shares are subject to a CDSC if the shares are redeemed
within twelve months of purchase. Class B and Class C Shares are each subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
the respective Class. Class B Shares will automatically convert to Class A
Shares at the end of approximately eight years after purchase and, thereafter,
be subject to annual 12b-1 Plan expenses of up to a maximum of .30% of average
daily net assets of such shares. Unlike Class B Shares, Class C Shares do not
convert into another class.
Class A Shares
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the 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, below, for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
Class A Shares
- --------------------------------------------------------------------------------
Dealer's
Front-End Sales 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 Class A Shares of $1
million or more but, under certain limited circumstances, a 1% CDSC may
apply upon redemption of such shares (the "Limited CDSC"). The Limited CDSC
that may be applicable arises only in the case of certain net asset value
purchases which have triggered the payment of a dealer's commission.
** Based upon the net asset value per share of Class A Shares as of the end of
the Trust's most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- -------------------------------------------------------------------------------
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 or 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.
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<PAGE>
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which
the Distributor may reallow to dealers up to the full amount of the
front-end sales charge shown above. Dealers who receive 90% or more of the
sales charge may be deemed to be underwriters under the 1933 Act.
* 2 moved from here; text not shown
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<PAGE>
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 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
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are effected in accordance with the following schedule:
Dealer's
Commission
(as a percent-
Amount age of amount
of Purchase 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
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 also may be
eligible for a dealer's commission in connection with certain purchases made
under a Letter of Intention or pursuant to an investor's Right of Accumulation.
Financial advisers should contact the Distributor concerning the applicability
and calculation of the dealer's commission in the case of combined purchases.
An exchange from other Delaware 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.
Contingent Deferred Sales Charge - Class B Shares
and Class C Shares
Class B and Class C Shares are purchased without the imposition of a
front-end sales charge. Class B Shares redeemed within six years of purchase may
be subject to a CDSC at the rates set forth below and Class C Shares redeemed
within twelve months of purchase may be subject to a CDSC of 1%. CDSC fees are
charged as a percentage of the dollar amount subject to the CDSC. The charge
will be assessed on an amount equal to the lesser of the net asset value at the
time of purchase of the shares being redeemed or the net asset value of those
shares at the time of redemption. No CDSC will be imposed on increases in net
asset value above the initial purchase price. In addition, no CDSC will be
assessed on redemption of shares received through reinvestment of dividends or
capital gains distributions. See Waiver of CDSC - Class B and Class C Shares
under Redemption and Exchange in the Prospectus for a list of the instances in
which the CDSC is waived.
The following table sets forth the rates of the CDSC for Class B Shares
of the Trust:
Contingent Deferred
Sales Charge (as a
Percentage of Dollar
Amount Subject
Year After Purchase Made to Charge)
- ------------------------ ---------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
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<PAGE>
During the seventh year after purchase, and thereafter, until converted
automatically into Class A Shares of the Trust, Class B Shares will still be
subject to the annual 12b-1 Plan expenses of up to 1% of average daily net
assets of those shares. At the end of approximately eight years after purchase,
the investor's Class B Shares will be automatically converted into Class A
Shares of the Trust. See Automatic Conversion of Class B Shares under Buying
Shares in the Prospectus. Such conversion will constitute a tax-free exchange
for federal income tax purposes. See Taxes in the Prospectus.
Plans Under Rule 12b-1
Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a
separate plan for each of Class A Shares, Class B Shares and Class C Shares of
the Trust (the "Plans"). Each Plan permits the Trust to pay for certain
distribution, promotional and related expenses involved in the marketing of only
the Class to which the Plan applies.
The Plans permit the Trust, pursuant to the Distribution Agreement, to
pay out of the assets of Class A Shares, Class B Shares and Class C Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to securities
brokers and dealers who enter into agreements with the Distributor. The Plan
expenses relating to Class B and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, the Trust may make payments out of the assets of Class A,
Class B and Class C Shares directly to other unaffiliated parties, such as
banks, who either aid in the distribution of shares of, or provide services to,
such classes.
The maximum aggregate fee payable by the Trust under the Plans, and the
Trust's Distribution Agreement, is on an annual basis up to .30% of Class A
Shares' average daily net assets for the year, and up to 1% (.25% of which are
service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of Class B
Shares' and Class C Shares' average daily net assets for the year. The Trust's
Board of Trustees may reduce these amounts at any time.
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 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 Class A Shares
that were acquired before June 1, 1992. While this is the method for calculating
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 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 Class A Shares, such Plan permits the Trust to pay a
full .30% on all assets of Class A Shares at any time.
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All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A, Class B and Class C Shares would 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 and the Distribution Agreement, as amended, have been
approved by the Board of Trustees, including a majority of the trustees who are
not "interested persons" (as defined in the 1940 Act) of the Trust and who have
no direct or indirect financial interest in the Plans, by vote cast in person at
a meeting duly called for the purpose of voting on the Plans and such
Distribution Agreement. Continuation of the Plans and the Distribution
Agreement, as amended, 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, Class B Shares and Class C Shares and that there is a reasonable
likelihood of the Plan relating to a Class providing a benefit to that Class.
The Plans and the Distribution Agreement, as amended, 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." With respect to the Class A Shares'
Plan, any material increase in the maximum percentage payable thereunder must
also be approved by a majority of the outstanding voting Class B Shares. 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.
During the fiscal year ended February 28, 1995, payments from Class A
Shares pursuant to its Plan amounted to $1,734,143 and such amount was used for
the following purposes: Annual and SemiAnnual 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 Class B Shares pursuant to its Plan amounted to
$43,258 and such amount was 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.
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.
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Other Payments to Dealers - Class A, Class B and
Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits as set
by the Distributor, may receive from the Distributor an additional payment of up
to .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.
Payments to dealers made in connection with seminars, conferences or
contests relating to the promotion of fund shares may be in an amount up to 100%
of the expenses incurred or awards made. 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
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 or any of the Manager's affiliates
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 CDSC or other redemption charges. Purchases of Class A Shares
also may be made at net asset value by bank employees who provide services in
connection with agreements between the bank and unaffiliated brokers or dealers
concerning sales of Class A Shares. 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.
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<PAGE>
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 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 ninety 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
twenty 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 CDSC or Limited CDSC, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
a Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC) previously purchased and still held as of the date of their Letter of
Intention toward the completion of such Letter. For purposes of satisfying an
investor's obligation under a Letter of Intention, Class B Shares and Class C
Shares of the Trust and the corresponding class of shares of other Delaware
Group funds which offer such shares may be aggregated with 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 Class A Shares, purchasers may combine the
total amount of any combination of Class B Shares and/or Class C Shares of the
Trust, as well as shares of 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, CDSC or Limited CDSC, other than shares of Delaware Group Premium
Fund, Inc. beneficially owned in connection with the ownership of variable
insurance products, unless they were acquired through an exchange from a
Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC).
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
twenty-one years of age; or a trustee or other fiduciary of trust estates or
fiduciary accounts for the benefit of such family members (including certain
employee benefit programs).
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<PAGE>
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of the Trust, as
well as shares of any other class of any of the other Delaware Group funds which
offer such classes (except shares of any Delaware Group fund which do not carry
a front-end sales charge, CDSC or Limited CDSC, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
shares from a Delaware Group fund which carried a front-end sales charge, CDSC
or Limited CDSC). If, for example, any such purchaser has previously purchased
and still holds Class A Shares and/or shares of any other of the classes
described in the previous sentence with a value of $40,000 and subsequently
purchases $60,000 at offering price of additional shares of Class A Shares, the
charge applicable to the $60,000 purchase would currently be 3.75%. For the
purpose of this calculation, the shares presently held shall be valued at the
public offering price that would have been in effect were the shares purchased
simultaneously with the current purchase. Investors should refer to the table of
sales charges for Class A Shares to determine the applicability of the Right of
Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Share 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 shares of such
other funds may be sold, at net asset value without the payment of a front-end
sales charge. This privilege does not extend to Class A Shares where the
redemption of the shares triggered the payment of a Limited CDSC. Persons
investing redemption proceeds from direct investments in mutual funds in the
Delaware 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 a redemption of either Class B or Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is 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.
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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. Such purchases, which must meet the minimum subsequent purchase
requirements set forth in the Prospectus and this Part B, are made for Class A
Shares at the public offering price and for Class B and Class C 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 initial purchase
requirements of each fund and the limitations set forth below, holders of Class
A, Class B and Class C 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 Class
A Shares may not be directed to Class B or Class C Shares of another fund in the
Delaware Group. Dividends from Class B Shares may only be directed to Class B
Shares of another fund in the Delaware Group that offers such class of shares.
Dividends from Class C Shares may only be directed to Class C Shares of another
fund in the Delaware Group that offers such class of shares. See Class B Funds
and Class C Funds under Buying Shares in the Prospectus for the funds in the
Delaware Group that are eligible for investment by holders of Trust shares.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for the Trust to
accept for investment in Class A, Class B or Class C Shares, through an agent
bank, preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates lost, stolen and delayed
checks.
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Automatic Investing Plan--Shareholders of Class A, Class B and Class C
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Trust
account. 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 for Class A Shares and $100 or more for Class
B and Class C 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.
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.
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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 and Class C 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 Class A Shares consists of the net asset value
per share plus any applicable front-end sales charges. Offering price and net
asset value are computed as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open. The New York Stock Exchange is scheduled to be open Monday through Friday
throughout the year except for 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 sixty 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 the Class A, Class B and Class C Shares alone will bear the
12b-1 Plan expenses 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.
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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 or Class C
Shares. If stock certificates have been issued for shares being redeemed, they
must accompany the written request. For redemptions of $50,000 or less paid to
the shareholder at the address of record, the 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 CDSC or Limited CDSC. This is
computed and effective at the time the offering price and net asset value are
determined. See Determining Offering Price and Net Asset Value. The 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 (subject to any applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain 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. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within twelve months following purchase. See Contingent Deferred Sales
Charge under Buying Shares in the Trust's Prospectus. Except for the applicable
CDSC or Limited CDSC, and with respect to the expedited payment by wire
described below, for which there is currently a $7.50 bank wiring cost, neither
the 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.
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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.
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
Before the Trust involuntarily redeems shares from an account that,
under the circumstances noted in the Prospectus, has remained below the minimum
amounts required by the Trust's Prospectus and sends the proceeds to the
shareholder, the shareholder will be notified in writing that the value of the
shares in the account is less than $1,000 and will be allowed sixty days from
that date of notice to make an additional investment to meet the required
minimum of $1,000. See The Conditions of Your Purchase under Buying Shares in
the Prospectus. Any redemption in an inactive account established with a minimum
investment may trigger mandatory redemption. No CDSC or Limited CDSC will apply
to the redemptions described in this paragraph.
* * *
The Trust has available certain redemption privileges, as described
below. The Trust reserves the right to suspend or terminate these expedited
payment procedures upon sixty days' written notice to shareholders.
Expedited Telephone Redemptions
Shareholders or their investment dealers of record wishing to redeem
any amount of shares of $50,000 or less for which certificates have not been
issued may call the 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.
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<PAGE>
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
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 later than seven days, from the date of the
telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and
the account number it will be necessary to send a written request to the 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 Plans
Shareholders of Class A Shares, Class B Shares and Class C Shares who
own or purchase $5,000 or more of shares at the offering price or net asset
value, as applicable for which certificates have not been issued may establish a
Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or quarterly
withdrawals of $75 or more, although the 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.
-30-
<PAGE>
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend) and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital and the share balance
may in time be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated.
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 of Class A Shares pursuant to a Systematic Withdrawal Plan may be
subject to a Limited CDSC if the purchase was made at net asset value and a
dealer's commission has been paid on that purchase.
Redemptions of Class B Shares or Class C Shares pursuant to a
Systematic Withdrawal Plan may be subject to a CDSC, unless the annual amount
selected to be withdrawn is less than 12% of the account balance on the date
that the Systematic Withdrawal Plan was established. See Waiver of CDSC - Class
B And Class C Shares and Waiver of Limited CDSC - Class A Shares under
Redemption and Exchange in the Prospectus.
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.
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 Prospectus.
See Wealth Builder Option and Redemption and Exchange in the Prospectus.
The investment will be made on the 20th day of each month (or, if the
fund selected is not open that day, the next business day) at the public
offering price or net asset value, as applicable, of the fund selected on the
date of investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.
-31-
<PAGE>
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.
-32-
<PAGE>
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.
Each Class of the Trust will share proportionately in the investment
income and expenses of the Trust, except that each Class will alone incur
distribution fees under its 12b-1 Plan.
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 United States Post
Office or which remains uncashed for a period of more than one year may be
reinvested in the shareholder's account at the then-current net asset value and
the dividend option may be changed from cash to reinvest. The 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 Class A Shares and Class B Shares were paid from net
investment income.
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<PAGE>
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.
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.
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<PAGE>
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.
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<PAGE>
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 sixty 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 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 or 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 Class A Shares for the fiscal
year ended February 28, 1995 was 0.90%. Based on the actual expenses incurred by
Class A Shares during the fiscal year ended February 28, 1995, the expenses of
each of Class B Shares and Class C 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. The Trust anticipates that the ratio of expenses
to average daily net assets of Class C Shares will be identical to that of the
Class B Shares.
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, as amended on November 29, 1995. The Distributor
is an affiliate of the Manager and bears all of the costs of promotion and
distribution, except for payments by Class A Shares, Class B Shares and Class C
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.
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<PAGE>
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.
-37-
<PAGE>
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 October
31, 1995, the Trust's officers and trustees, as a group, owned less than 1% of
the outstanding Class A Shares and Class B Shares, respectively.
As of October 31, 1995, the Trust believes Merrill, Lynch, Pierce,
Fenner & Smith Inc., Mutual Fund Operations, P.O. Box 41621, Jacksonville, FL
32203 held of record for the benefit of others 7,274,364 shares (6.10%) of the
outstanding shares of the Class A Shares. As of the same date, the Trust
believes Merrill, Lynch, Pierce, Fenner & Smith Inc., Mutual Fund Operations,
Attention Book Entry, 4800 Deer Lake Drive East, 3rd Fl., Jacksonville, FL 32246
held of record for the benefit of others 134,325 shares (6.15%) 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.
DMH and the Manager are now wholly-owned subsidiaries, and subject to the
ultimate control of, Lincoln National. Lincoln National, with headquarters in
Fort Wayne, Indiana, is a diversified organization with operations in many
aspects of the financial services industry, including insurance and investment
management.
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.
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<PAGE>
*Wayne A. Stork (58)
Chairman, President, Chief Executive Officer, Director and/or Trustee
of the Trust, each of the other 16 funds in the Delaware Group,
Delaware Management Holdings, Inc. and Delaware Investment
Counselors, Inc.
Chairman, Chief Executive Officer, Chief Investment Officer and
Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of DMH Corp., Delaware
International Advisers Ltd., Delaware International Holdings Ltd.
and Founders Holdings, Inc.
Director of Delaware Distributors, Inc. and Delaware Service Company,
Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
Winthrop S. Jessup (50)
Executive Vice President of the Trust and 15 other funds in the
Delaware Group (which excludes Delaware Pooled Trust, Inc.) and
Delaware Management Holdings, Inc.
President and Chief Executive Officer of Delaware Pooled Trust, Inc.
President and Director of Delaware Investment Counselors, Inc.
Executive Vice President and Director of DMH Corp., Delaware Management
Company, Inc., Delaware International Holdings Ltd. and Founders
Holdings, Inc.
Vice Chairman and Director of Delaware Distributors, Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc., Delaware International
Advisers Ltd. and Delaware Management Trust Company.
During the past five years, Mr. Jessup has served in various executive
capacities at different times within the Delaware organization.
-39-
<PAGE>
Richard G. Unruh, Jr. (56)
Executive Vice President of the Trust and each of the other 16 funds in
the Delaware Group. Executive Vice President and Director of
Delaware Management Company, Inc.
Senior Vice President of Delaware Management Holdings, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
Walter P. Babich (68)
Director and/or Trustee 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.
- ---------------------------------
*Trustee affiliated with the investment manager of the Trust and considered an
"interested person" as defined in the 1940 Act.
-40-
<PAGE>
Anthony D. Knerr (56)
Director and/or Trustee 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.
Ann R. Leven (55)
Director and/or Trustee 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 (75)
Director and/or Trustee 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)
Director and/or Trustee 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.
-41-
<PAGE>
David K. Downes (55)
Senio 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.
Chairman 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 and Director of Founders Holdings, Inc.
Director of Delaware International Advisers Ltd.
Beforejoining 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.
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.,
Delaware Distributors, L.P. and Delaware Investment Counselors,
Inc.
Executive Vice President, Secretary and Director of Delaware Management
Trust Company.
Senior Vice President, Secretary and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc. and Delaware
Service Company, Inc.
Corporate Vice President, Secretary and Director of Founders Holdings,
Inc.
Secretary and Director of Delaware International Holdings Ltd.
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.
-42-
<PAGE>
Paul E. Suckow (48)
Senior Vice President/Chief Investment Officer, Fixed Income of the
Trust, each of the other 16 fundsn the Delaware Group, Delaware
Management Holdings, Inc. and Delaware Management Company, Inc.
Senior Vice President and Director of Founders Holdings, Inc.
Director of Founders CBO Corporation.
Before returning to the Delaware Group in 1993, Mr. Suckow was
Executive Vice President and Director of Fixed Income for
Oppenheimer Management Corporation, New York, NY from 1985 to
1992. Prior to that, Mr. Suckow was a fixed income portfolio
manager for the Delaware Group.
J. Michael Pokorny (56)
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 capacities
within the Delaware organization.
-43-
<PAGE>
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., Delaware Investment Counselors, Inc. and Founders
Holdings, Inc.
Executive Vice President/Treasurer/Chief Financial Officer of Delaware
Management Trust Company.
Assistant Treasurer of Founders CBO Corporation.
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.
Michael P. Bishof (33)
Vice President/Treasurer of the Trust, each of the other 16 funds in
the Delaware Group, Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P., Delaware Service
Company, Inc., Founders Holdings, Inc. and Founders CBO
Corporation.
Before joining the Delaware Group in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995, a
Vice President for CS First Boston Investment Management, New
York, NY from 1993 to 1994 and an Assistant Vice President for
Equitable Capital Management Corporation, New York, NY from 1987
to 1993.
-44-
<PAGE>
The following is a compensation table listing for each trustee entitled
to receive compensation, the aggregate compensation received from the Trust and
the total compensation received from all Delaware Group funds for the fiscal
year ended February 28, 1995 and an estimate of annual benefits to be received
upon retirement under the Delaware Group Retirement Plan for Directors/Trustees
as of February 28, 1995.
* 3 moved from here; text not shown
<TABLE>
<CAPTION>
Pension or
Retirement Estimated Total
Benefits Annual Compensation
Aggregate Accrued Benefits from all 17
Compensation as Part of Upon Delaware
Name from Fund Fund Expenses Retirement* Group Funds
<S> <C> <C> <C> <C>
W. Thacher Longstreth $2,568.00 None $18,100 $43,187.94
Ann R. Leven $3,075.35 None $18,100 $51,323.90
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
</TABLE>
* Under the terms of the Delaware Group Retirement Plan for Directors/Trustees,
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 each fund in the
Delaware Group for a period equal to the lesser of the number of years that
such person served as a director or the remainder of such person's life. The
amount of such payments will be equal, on an annual basis, to the amount of
the annual retainer that is paid to directors of each fund at the time of such
person's retirement. If an eligible 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.
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<PAGE>
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.)
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.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Trust will refuse any new Timing
Arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Group funds from Timing Firms. The Trust reserves the right to temporarily or
permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Trust within two weeks of an earlier
exchange request out of the Trust, or (ii) makes more than two exchanges out of
the Trust per calendar quarter, or (iii) exchanges shares equal in value to at
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<PAGE>
least $5 million, or more than 1/4 of 1% of the Trust's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing Timing Agreements may only
execute exchanges between the following eight Delaware Group funds: (1) Decatur
Income Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4) Limited-Term
Government Fund, (5) Tax-Free USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) the Trust. No other Delaware Group funds will be
available for Timed Exchanges. Assets redeemed or exchanged out of Timing
Accounts in Delaware Group funds not listed above may not be reinvested back
into that Timing Account. The Trust reserves the right to apply these same
restrictions to the account(s) of any person whose transactions seem to follow a
time pattern (as described above).
The Trust also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Trust would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if the
Trust receives or anticipates simultaneous orders affecting significant portions
of the Trust's assets. In particular, a pattern of exchanges that coincide with
a "market timing" strategy may be disruptive to the Trust and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
-47-
<PAGE>
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. Devon Fund
seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend increases over time.
Trend Fund seeks long-term growth by investing in common 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 primarily
in long-term debt obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
Limited-Term Government Fund seeks high, stable income by investing
primarily in a portfolio of short- and intermediate-term securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
instruments secured by such securities. U.S. Government Money Fund seeks maximum
current income with preservation of principal and maintenance of liquidity by
investing only in short-term securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities, while maintaining a
stable net asset value.
Delaware Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
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.
-48-
<PAGE>
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 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).
-49-
<PAGE>
GENERAL INFORMATION
The Manager is the investment manager of the Trust. The Manager or its
affiliate, Delaware International Advisers Ltd., also 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 the Manager, Delaware International Advisers Ltd. or their
affiliates, are permitted to engage in personal securities transactions subject
to the exceptions set forth in Rule 17j-1 and the following general restrictions
and procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for the 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 Class A Shares after reallowances to dealers, as follows:
Fiscal Total Amount Amounts Net
Year of 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.
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 the Distributor.
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.
-50-
<PAGE>
Shareholder and Trustee Liability
Under Pennsylvania law, shareholders of the 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.
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, registered
pursuant to Rule 24f-2 under the 1940 Act, has been passed upon for the Trust by
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 three classes of
shares, Class A Shares, Class B Shares and Class C 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. Class A
Shares, Class B Shares and Class C 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, Class B Shares and
Class C Shares may vote only on matters affecting the 12b-1 Plan that relates to
the class of shares that they hold. However, Class B Shares may vote on a
proposal to increase materially the fees to be paid by the Trust under the Plan
relating to Class A Shares. General expenses of the Trust will be allocated on a
pro-rata basis to the Classes according to asset size, except that expenses of
the Plans of Class A, Class B Shares and Class C Shares will be allocated solely
to those classes.
Prior to May 2, 1994, Tax-Free Pennsylvania Fund A Class was known as
Tax-Free Pennsylvania Fund class.
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.
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<PAGE>
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 marked 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.
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<PAGE>
SAI-PA-CHT
APPENDIX B--TAX EXEMPT vs TAXABLE YIELDS
<TABLE>
<CAPTION>
1995 Rates Tax Free Yield--5.0%
--------------------------- ----------------------------------------------------------------------
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% 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%
----------------------------------------------------
Taxable Income Federal Federal
Federal State State
State County County
Federal County Pittsburgh Philadelphia
Taxable Taxable Taxable Taxable
Joint Return Single Reurn 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>
-53-
<PAGE>
<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 Reurn 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 39.6%+ 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.
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<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for the Trust and,
in its capacity as such, audits the financial statements contained in the
Trust's Annual Report. 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. Unaudited financial statements and the notes
relating thereto for the six month period ended August 31, 1995 are also
incorporated by reference from the Trust's Semi-Annual Report into this Part B.
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<PAGE>
---------------------------------
TAX-FREE PENNSYLVANIA FUND
---------------------------------
A CLASS
The Delaware Group includes funds with ---------------------------------
a wide range of investment objectives.
Stock funds, income funds, tax-free funds, B CLASS
money market funds, global and
international funds and closed-end equity ---------------------------------
funds give investors the ability to create
a portfolio that fits their personal C CLASS
financial goals. For more information,
contact your financial adviser or call ---------------------------------
Delaware Group at 800-523-4640, in
Philadelphia call 215-988-1333. CLASS OF TAX-FREE PENNSYLVANIA
FUND
---------------------------------
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square PART B
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR STATEMENT OF
Delaware Distributors, L.P. ADDITIONAL INFORMATION
1818 Market Street
Philadelphia, PA 19103 ---------------------------------
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING November 29, 1995
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 DELAWARE
60 Wall Street GROUP
New York, NY 10260 --------
<PAGE>
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
CROSS-REFERENCE SHEET
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 into Part B from the
Registrant's Annual Report for the fiscal year ended February
28, 1995. The Registrant's Annual Report was electronically
filed with the Commission on May 1, 1995. In addition, the
unaudited financial statements for the six-month period ended
August 31, 1995 are incorporated by reference into Part B from
the Registrant's SemiAnnual Report. The Registrant's
Semi-Annual Report was electronically filed with the
Commission on November 3, 1995.
(b) Exhibits:
(1) Declaration of Trust. Declaration of Trust, as amended to
date, attached as Exhibit.
(2) Procedural Guidelines.
(a) Procedural Guidelines, as amended through January 28,
1995, incorporated into this filing by reference to
Post-Effective Amendment No. 34 filed April 28, 1995.
(b) Amendment to Procedural Guidelines (April 1995)
attached as Exhibit.
(3) Voting Trust Agreement. Inapplicable.
i
<PAGE>
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
(4) Copies of All Instruments Defining the Rights of Holders.
(a) Declaration of Trust. Articles V and IX of the
Declaration of Trust (February 28, 1977) and Article
V, as amended (February 17, 1994), of the Declaration
of Trust attached as Exhibit 24(b)(1).
(b) Procedural Guidelines. Articles II, IV, as amended,
and VII of the Procedural Guidelines incorporated
into this filing by reference to Post-Effective
Amendment No. 34 filed April 28, 1995.
(5) Investment Management Agreement. Investment Management
Agreement between Delaware Management Company, Inc. and
the Registrant dated April 3, 1995 incorporated into this
filing by reference to Post-Effective Amendment No. 34
filed April 28, 1995.
(6) (a) Distribution Agreement.
(i) Form of Distribution Agreement (April 1995)
included as Module.
(ii) Form of Amendment No. 1 to Distribution
Agreement (November 1995) included as Module.
(b) Administration and Service Agreement. Form of
Administration and Service Agreement (as amended
November 1995) included as Module.
(c) Dealer's Agreement. Form of Dealer's Agreement (as
amended November 1995) included as Module.
(d) Form of Mutual Fund Agreement for the Delaware Group
of Funds incorporated into this filing by reference
to Post-Effective Amendment No. 34 filed April 28,
1995.
(7) Bonus, Profit Sharing, Pension Contracts. Incorporated
into this filing by reference to Post-Effective Amendment
No. 34 filed April 28, 1995.
(8) Custodian Agreement. Incorporated into this filing by
reference to Post-Effective Amendment No. 24 filed
February 28, 1989 and Post-Effective Amendment No. 26
filed April 27, 1990.
ii
<PAGE>
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
(9) Other Material Contracts. Shareholders Services
Agreement incorporated into this filing 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 26, 1995.
(11) Consent of Auditors. Attached as Exhibit.
(12-14) Inapplicable.
(15) Plans under Rule 12b-1.
(a) Form of Plan under Rule 12b-1 for Class A (November
1995) included as Module.
(b) Form of Plan under Rule 12b-1 for Class B (November
1995) included as Module.
(c) Form of Plan under Rule 12b-1 for Class C (November
1995) included as Module.
(16) Schedules of Computation for each Performance Quotation.
Incorporated into this filing by reference to
Post-Effective Amendment No. 34 filed April 28, 1995.
Standardized Performance Quotations attached as Exhibit.
(17) Financial Data Schedules. Incorporated into this filing
by reference to Post-Effective Amendment No. 34 filed
April 28, 1995.
Financial Data Schedules for the six-month period ended
August 31, 1995 attached as Exhibit.
(18) Inapplicable.
(19) Other: Trustees' Power of Attorney. Incorporated into
this filing by reference to Post-Effective Amendment No.
34 filed April 28, 1995.
Item 25. Persons Controlled by or under Common Control with Registrant. None.
iii
<PAGE>
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
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 28,982 Accounts as of
with No Par Value Per Share October 31, 1995
Tax-Free Pennsylvania Fund B Class
Shares of Beneficial Interest 684 Accounts as of
with No Par Value Per Share October 31, 1995
Tax-Free Pennsylvania Fund C Class
Shares of Beneficial Interest 0 Accounts as of
with No Par Value Per Share October 31, 1995
* Class C Shares were not offered prior to the effective date of this
Registration Statement.
Item 27. Indemnification. Incorporated into this filing 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 Limited-Term Government Funds, 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.
iv
<PAGE>
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 during the past two years:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
Wayne A. Stork Chairman of the Board, Chief Executive Officer, Chief Investment Officer
and Director of Delaware Management Company, Inc.; President, Chief
Executive Officer, Chairman of the Board and Trustee of the Registrant;
President, Chief Executive Officer, Chairman of the Board and Director of
each of the other funds in the Delaware Group, with the exception of
Delaware Pooled Trust, Inc., and Delaware Management Holdings, Inc.;
Chairman of the Board and Director of Delaware Pooled Trust, Inc. and
Delaware Investment Counselors, Inc.; Chairman, Chief Executive Officer and
Director of DMH Corp., Delaware International Advisers Ltd., Delaware
International Holdings Ltd. and Founders Holdings, Inc.; and Director of
Delaware Distributors, Inc. and Delaware Service Company, Inc.
Winthrop S. Jessup Executive Vice President and Director of Delaware Management Company,
Inc., DMH Corp., Delaware International Holdings Ltd. and Founders
Holdings, Inc.; Executive Vice President of the Registrant and, with the
exception of Delaware Pooled Trust, Inc., each of the other funds in the
Delaware Group and Delaware Management Holdings, Inc.; President and
Chief Executive Officer of Delaware Pooled Trust, Inc.; Vice Chairman of
Delaware Distributors, L.P.; Vice Chairman and Director of Delaware
Distributors, Inc.; Director of Delaware Service Company, Inc., Delaware
Management Trust Company and Delaware International Advisers Ltd.; and
President and Director of Delaware Investment Counselors, Inc.
Richard G. Unruh, Jr. Executive Vice President and Director of Delaware Management Company, Inc.;
Executive Vice President of the Registrant and each of the other
funds in the Delaware Group; Senior Vice President of Delaware
Management Holdings, Inc.; and Director of Delaware International
Advisers Ltd.
Board of Directors, Chairman of Finance Committee, Keystone Insurance
Company since 1989, 2040 Market Street, Philadelphia, PA; Board of
Directors, Chairman of Finance Committee, Mid Atlantic, Inc., since 1989,
2040 Market Street, Philadelphia, PA
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
v
<PAGE>
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
Paul E. Suckow Senior Vice President/Chief Investment Officer, Fixed Income of Delaware
Management Company, Inc., the Registrant and each of the other funds in
the Delaware Group and Delaware Management Holdings, Inc.; Senior Vice
President and Director of Founders Holdings, Inc.; and Director of Founders
CBO Corporation
David K. Downes Senior Vice President, Chief Administrative Officer and Chief Financial
Officer of Delaware Management Company, Inc., the Registrant and each of
the other funds in the Delaware Group; Chairman and Director of Delaware
Management Trust Company; Senior Vice President, Chief Administrative
Officer, Chief Financial Officer and 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 and 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 and Treasurer of Delaware Investment Counselors, Inc.; Senior Vice
President and Director of Founders Holdings, Inc.; and Director of Delaware
International Advisers Ltd.
George M. Chamberlain, Jr. Senior Vice President, Secretary and Director of Delaware Management
Company, Inc., DMH Corp., Delaware Distributors, Inc. and Delaware
Service Company, Inc.; Senior Vice President and Secretary of the
Registrant, each of the other funds in the Delaware Group, Delaware
Distributors, L.P., Delaware Investment Counselors, Inc. and Delaware
Management Holdings, Inc.; Executive Vice President, Secretary and
Director of Delaware Management Trust Company; Corporate Vice
President, Secretary and Director of Founders Holdings, Inc.; Secretary and
Director of Delaware International Holdings Ltd.; and Director of Delaware
International Advisers Ltd.
Director of ICI Mutual Insurance Co. since 1992, P.O. Box 730, Burlington,
VT
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
vi
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
Richard J. Flannery Managing Director/Corporate Tax & Affairs of Delaware Management
Company, Inc., Delaware Management Holdings, Inc., DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company,
Inc., Delaware Management Trust Company, Delaware International Holdings
Ltd., Delaware Investment Counselors, Inc. and Founders CBO Corporation;
Vice President of the Registrant and each of the other funds in the Delaware
Group; Managing Director/Corporate Tax & Affairs and Director of Founders
Holdings, Inc.; and Director of Delaware International Advisers Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverton,
PA; Director and Member of Executive Committee of Stonewall Links, Inc.
since 1991, Bulltown Rd., Elverton, PA
Michael P. Bishof/1 Vice President and Treasurer of Delaware Management
Company, Inc., the Registrant, each of the other funds in the
Delaware Group, Delaware Management Holdings, Inc., DMH Corp.,
Delaware Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Founders Holdings, Inc. and
Founders CBO Corporation
Eric E. Miller Vice President and Assistant Secretary of Delaware
Management Company, Inc., the Registrant, each of the other
funds in the Delaware Group, Delaware Management Holdings, Inc.,
DMH Corp., Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust
Company, Delaware Investment Counselors, Inc. and
Founders Holdings, Inc.
Richelle S. Maestro Vice President and Assistant Secretary of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., DMH Corp., Delaware
Management Trust Company, Delaware Investment Counselors, Inc. and
Founders Holdings, Inc.; and Assistant Secretary of Founders CBO
Corporation
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Ln.,
Philadelphia, PA
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
vii
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
Joseph H. Hastings Vice President/Corporate Controller of Delaware Management Company, Inc.,
the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Investment Counselors, Inc. and Founders Holdings, Inc.; Executive Vice
President, Chief Financial Officer and Treasurer of Delaware Management
Trust Company; and Assistant Treasurer of Founders CBO Corporation
Bruce A. Ulmer Vice President/Director of Internal Audit of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp. and Delaware Management Trust
Company
Lisa O. Brinkley/2 Vice President/Compliance of Delaware Management Company, Inc.,
the Registrant, each of the other funds in the Delaware Group,
DMH Corp., Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust
Company and Delaware Investment Counselors, Inc.
Rosemary E. Milner Vice President/Legal of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group,
Delaware Distributors, L.P. and Delaware Distributors, Inc.
Douglas L. Anderson/3 Vice President/Operations of Delaware Management Company, Inc. and
Delaware Service Company, Inc.; and Vice President/Operations and Director
of Delaware Management Trust Company
Michael T. Taggart/4 Vice President/Facilities Management and Administrative Services of
Delaware Management Company, Inc.
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management
Company, Inc., the Registrant, each of the tax-exempt funds, the
fixed income funds and the closed-end funds in the Delaware
Group; Vice President of Founders Holdings, Inc.; and Treasurer
and Director of Founders CBO Corporation
J. Michael Pokorny Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant, each of the tax-exempt funds and the fixed income funds
in the Delaware Group
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
viii
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management
Company, Inc., the Registrant, each of the tax-exempt funds and
the fixed income funds in the Delaware Group and Delaware
Investment Counselors, Inc.
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management
Company, Inc., the Registrant, each of the tax-exempt funds, the
fixed income funds and the closed-end funds in the Delaware
Group; Vice President of Founders Holdings, Inc.; and Secretary
and Director of Founders CBO Corporation
James R. Raith, Jr. Vice President/Senior Portfolio Manager of Delaware Management
Company, Inc., the Registrant, each of the tax-exempt funds, the
fixed income funds and the closed-end funds in the Delaware
Group; Vice President of Founders Holdings, Inc.; and President
and Director of Founders CBO Corporation
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management
Company, Inc., the Registrant, each of the tax-exempt funds and
the fixed income funds in the Delaware Group
Roger A. Early/5 Vice President/Senior Portfolio Manager of Delaware Management
Company, Inc., the Registrant, each of the tax-exempt funds and
the fixed income funds in the Delaware Group
Edward N. Antoian Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant and each of the equity funds in the Delaware Group
George H. Burwell Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant and each of the equity funds in the Delaware Group
John B. Fields Vice President/Senior Portfolio Manager of Delaware Management
Company, Inc., the Registrant and each of the equity funds in
the Delaware Group and Delaware Investment Counselors, Inc.
Edward A. Trumpbour Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant and each of the equity funds in the Delaware Group
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
ix
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
David C. Dalrymple Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant and each of the equity funds in the Delaware Group
</TABLE>
1 VICE PRESIDENT/GLOBAL INVESTMENT MANAGEMENT OPERATIONS, Bankers Trust and
VICE PRESIDENT, CS First Boston Investment Management prior to June 1995.
2 VICE PRESIDENT AND COMPLIANCE OFFICER, Banc One Securities Corporation
prior to June 1994 and ASSISTANT VICE PRESIDENT AND COMPLIANCE OFFICER,
Aetna Life and Casualty prior to March 1993.
3 VICE PRESIDENT OF OPERATIONS, Supervised Service Company prior to March
1994.
4 ASSISTANT VICE PRESIDENT/ADMINISTRATIVE SERVICES, United Pacific Life
Insurance prior to January 1994.
5 SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER, Federated Investors prior to
July 1994.
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 Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Management
Company, Inc. Limited Partner Investment Manager
Delaware Investment
Counselors, Inc. Limited Partner None
Winthrop S. Jessup Vice Chairman Executive Vice President
Keith E. Mitchell President and Chief None
Executive Officer
David K. Downes Senior Vice President and Senior Vice President/Chief
Chief Administrative Officer Administrative Officer/Chief
Financial Officer
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
x
<PAGE>
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
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/ None
Wholesaler
William F. Hostler Senior Vice President/ None
Marketing Services
Minette van Noppen Senior Vice President/ None
Retirement Services
Richard J. Flannery Managing Director/Corporate Vice President
& Tax Affairs
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
Michael P. Bishof Vice President/Treasurer Vice President/Treasurer
Lisa O. Brinkley Vice President/ Vice President/
Compliance Compliance
Rosemary E. Milner Vice President/Legal Vice President/Legal
Diane M. Anderson Vice President/ None
Retirement Services
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xi
<PAGE>
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
Denise F. Guerriere Vice President/Client Services None
Julia R. Vander Els Vice President/ None
Retirement Services
Jerome J. Alrutz Vice President/ None
Retirement Services
Martin J. Cole Vice President/ None
Retirement Services
Joanne A. Mettenheimer Vice President/ None
National Accounts
Christopher H. Price Vice President/Annuity None
Marketing & Administration
Thomas S. Butler Vice President/ None
DDI Administration
Frank Albanese Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William S. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Robert M. Frank Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Alan D. Kessler Vice President/Wholesaler None
William M. Kimbrough Vice President/Wholesaler None
Mac McAuliffe Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xii
<PAGE>
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
Patrick L. Murphy Vice President/Wholesaler None
Henry W. Orvin Vice President/Wholesaler None
Philip G. Rickards 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.
(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>
Form N-1A
File No. 2-57791
DMC Tax-Free Income Trust-Pennsylvania
(d) The Registrant hereby undertakes to promptly call a meeting
of shareholders for the purpose of voting upon the question
of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding
shares.
xiv
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia and Commonwealth of Pennsylvania on
this 22nd day of November, 1995.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
By/s/Wayne A. Stork
------------------------------------
Wayne A. Stork
Chairman of the Board, President,
Chief Executive Officer and Trustee
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>
Chairman of the Board, President,
/s/Wayne A. Stork Chief Executive Officer and Trustee November 22, 1995
- --------------------------------------------
Wayne A. Stork
Senior Vice President/Chief Financial
Officer/Chief Administrative Officer
(Principal Financial Officer and
/s/David K. Downes Principal Accounting Officer) November 22, 1995
- -------------------------------------------
David K. Downes
/s/Walter P. Babich * Trustee November 22, 1995
- -------------------------------------------
Walter P. Babich
/s/Anthony D. Knerr * Trustee November 22, 1995
- -------------------------------------------
Anthony D. Knerr
/s/Ann R. Leven * Trustee November 22, 1995
- -------------------------------------------
Ann R. Leven
/s/W. Thacher Longstreth * Trustee November 22, 1995
- -------------------------------------------
W. Thacher Longstreth
/s/Charles E. Peck * Trustee November 22, 1995
- -------------------------------------------
Charles E. Peck
*By/s/Wayne A. Stork
-----------------------------
Wayne A. Stork
as Attorney-in-Fact
for each of the persons indicated
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.B1 Declaration of Trust, as amended to date
EX-99.B2 Amendment to Procedural Guidelines
EX-99.B6AI Form of Distribution Agreement (April 1995)
(Module Name
DIS_AGR_NON_MON)
EX-99.B6AII Form of Amendment No. 1 to Distribution Agreement (November 1995)
(Module Name
AMD_DIS_AGR_NON)
EX-99.B6B Form of Administration and Service Agreement (as amended November 1995)
(Module Name
ADMIN_SER_AGREE)
EX-99.B6C Form of Dealer's Agreement (as amended November 1995)
(Module Name
DEALERS_AGREE)
EX-99.B11 Consent of Auditors
EX-99.B15A Form of Plan under Rule 12b-1 for Class A (November 1995)
(Module Name
CL_A_SHARE_NON)
EX-99.B15B Form of Plan under Rule 12b-1 for Class B (November 1995)
(Module Name
CL_B_SHARE_ALL)
EX-99.B15C Form of Plan under Rule 12b-1 for Class C (November 1995)
(Module Name
CL_C_SHARE_ALL)
EX-99.B16 Standardized Performance Quotations
EX-27 Financial Data Schedules
</TABLE>
DELAWARE GROUP PENNSYLVANIA TAX-FREE TRUST
At a meeting of the Board of Trustees held April 20, 1995, the
following resolution amending the Procedural Guidelines was adopted:
RESOLVED, that Article III, Section 3.2 of the Fund's Procedural
Guidelines be amended to read in its entirety as follows:
Section 3.2. Tenure. 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.
I, George M. Chamberlain, Jr., Secretary of Delaware Group Pennsylvania
Tax-Free Trust, 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 April
20, 1995.
/s/ George M. Chamberlain, Jr.
---------------------------------
George M. Chamberlain, Jr.
<PAGE>
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
At a meeting of the Board of Trustees held February 17, 1994, the
following resolution amending the Amended and Restated Declaration of Trust (the
"Declaration of Trust") was adopted:
RESOLVED, that Article V, Section 5.1 of the Declaration of Trust be
amended to read as follows:
5.1 Shares of Beneficial Interest: The beneficial interest in the Trust
shall at all times be divided into an unlimited number of transferable
beneficial shares. The Trustees may authorize the division of
beneficial shares into separate series and the division of series into
separate classes or sub-series of beneficial shares (subject to any
applicable rule, regulation or order of the Securities and Exchange
Commission or other applicable law or regulation). The different series
and classes shall be established and designated and shall have such
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, terms and conditions of
redemption and other characteristics as the Trustees may determine in
the absence of contrary determination set forth herein. Each share of a
series (or class) shall have equal rights with each other share of that
series with respect to the assets of the Trust pertaining to that
series (or class). The dividends payable to the holders of any series
(subject to any applicable rule, regulation or order of the Securities
and Exchange Commission or any other applicable law or regulation)
shall be determined by the Trustees and need not be individually
declared, but may be declared and paid in accordance with a formula
adopted by the Trustees. Except as otherwise provided herein, all
references in this Declaration of Trust to beneficial shares or series
of shares shall apply without discrimination to the shares of each
series of beneficial interest.
I, George M. Chamberlain, Jr., 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 February
17, 1994.
/s/ George M. Chamberlain, Jr.
- ------------------------------
George M. Chamberlain, Jr.
<PAGE>
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
At a meeting of the Board of Trustees held November 17, 1983, the
following Resolution amending the Trust Agreement was adopted:
RESOLVED, that Section 9.2 of the Trust Agreement be amended to read as
follows:
Section 9.2. Meetings. Beneficial Shareholders' meetings shall be held
at such places as are designated by the Trustees. Meetings of the
shareholders may be called at any time by the Chairman, or by the
Secretary, upon the written request of a majority of the members of the
Board of Trustees. Meetings of the Beneficial Shareholders shall be
called by the Trustees upon the written request of shareholders owning
at least twenty percent of the outstanding shares entitled to vote, at
a time and place specified in the request or, if not so specified, at a
time and place determined by the Trustees. Beneficial Shareholders
shall be entitled to at least ten days' notice of a meeting.
/s/ Donald M. Allen
---------------------
Donald M. Allen
Secretary
<PAGE>
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
At a meeting of the Board of Trustees held December 16, 1982, the
following Resolution amending the Trust Agreement was adopted:
RESOLVED, that Article VII, Section 12, be added to the Fund's Trust
Agreement to provide as follows. Upon the retirement of a Trustee, the
Board may elect him or her to the position of Trustee Emeritus. Said
Trustee Emeritus shall serve for one year and may be re-elected by the
Board from year to year thereafter. Said Trustee Emeritus shall not
vote at meetings of Trustees and shall not be held responsible for
actions of the Board but shall receive fees paid to Board members for
serving as such.
I, Donald M. Allen, Secretary of Delaware 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>
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
AMENDED AND RESTATED DECLARATION OF TRUST
Dated February 28, 1977
DECLARATION OF TRUST, made as of February 28, 1977 by W.
Linton Nelson, James P. Schellenger and John H. Durham (the "Trustees");
WHEREAS, the Trustees desire to establish a trust fund for the
investment and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and
property contributed to the trust fund hereunder shall be held and managed under
this DECLARATION OF TRUST as herein set forth below.
I.
NAME
This Trust shall be known as DMC TAX-FREE INCOME TRUST -
PENNSYLVANIA (hereinafter called the "Trust").
II.
PURPOSE OF TRUST
The purpose of the Trust is to establish the relationship of
Trustee and beneficiary between the Trustees and Shareholders defined herein.
This Declaration of Trust shall not be construed so as to create any other type
of relationship or entity, including but not limited to, a general or limited
partnership, corporation, or joint stock association. The Trust shall be of the
type commonly called a revocable trust, the shareholders being permitted to
revoke or redeem their interest in the Trust pursuant to the provisions of
Article V hereof, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust.
III.
DEFINITIONS
3.1 Definition of Certain Terms. As used in this Declaration
of Trust, the terms set forth below shall mean:
A. "Beneficial Shareholder" means a record owner of Beneficial
Shares of the Trust.
B. "Beneficial Shares" means the equal proportionate units of
interest into which the beneficial interest in the Trust shall be divided
<PAGE>
from time to time and includes fractions of beneficial shares as well as whole
beneficial shares.
C. "Person" shall mean a natural person, a corporation, a
partnership, an association, a joint-stock company, a trust, a fund or any
organized group of persons whether incorporated or not.
D. The "Trustees" refers to the individual trustees in their
capacity as trustees hereunder of the Trust and their successor or successors
for the time being in office as such trustees.
E. The "Act" refers to the Investment Company Act of 1940, as
amended.
F. The terms "assignment", "interested person", a "majority
vote of shareholders" and "Principal Underwriter" shall have the respective
meanings set forth in Section 2(a)(4), Section 2(a)(19), Section 2(a)(42) and
Section 2(a)(29) of the Act.
IV.
OWNERSHIP OF ASSETS OF THE TRUST
The assets of the Trust shall be held separate
and apart from any assets now or hereafter held in any capacity other than as
Trustee hereunder by the Trustees or any successor Trustees. All the assets of
the Trust shall at all times be considered as vested in the Trustees. No
Beneficial Shareholder shall be deemed to have severable ownership in any
individual asset of the Trust or any right of partition or possession thereof,
but each Shareholder shall have a proportionate undivided beneficial interest in
the Trust.
V.
SHAREHOLDERS: BENEFICIAL INTEREST IN THE TRUST:
PURCHASE AND REDEMPTION OF SHARES
5.1 Shares of Beneficial Interest: The beneficial interest
in the Trust shall at all times be divided into an unlimited number of
transferable beneficial shares, each of which shall represent an equal
proportionate interest in the Trust with each other beneficial share
outstanding, none having priority or preference over another. The Trustees may,
from time to time, divide or combine the beneficial shares into a greater or
lesser number without thereby changing the proportionate beneficial interests in
the Trust.
5.2 Purchase of Beneficial Shares in the Trust. The
Trustees shall accept investments in the Trust from such persons and on such
terms as they may from time to time authorize. Each investment shall be
<PAGE>
credited to the individual beneficial shareholder's account in the form of full
and fractional beneficial shares of the Trust at the net asset value per
beneficial share next determined after receipt of the investment; provided,
however that the Trustees may, in their sole discretion, impose a sales charge
upon investments in the Trust.
5.3 Net Asset Value Per Share. The Trust's net asset value
shall be determined not less frequently than the close of each business day in
accordance with applicable statutes, regulations and rulings applicable to
regulated investment companies and Procedural Guidelines of the Trust.
5.4 Ownership of Beneficial Shares. The ownership of
Beneficial Shares shall be recorded on the books of the Trust or its transfer
agent. The Trustees may make such rules as they consider appropriate for the
transfer of Beneficial Shares and similar matters. The record books of the Trust
or any transfer agent, shall be conclusive as to who are the holders of
Beneficial Shares and to the number of Beneficial Shares held by each Beneficial
Shareholder. The Trustees, in their discretion, may authorize the issuance of
beneficial share certificates and promulgate appropriate rules and regulations
as to their use.
5.5 Preemptive Rights. Beneficial Shareholders shall have
no preemptive or other right to subscribe to any additional Beneficial Shares or
other securities issued by the Trust or the Trustees.
5.6 Redemption of Beneficial Shares. A Beneficial
Shareholder of the Trust shall have the right, subject to the provisions of
Section 5.8 herein, to require the Trust to redeem his full and fractional
Beneficial Shares at a redemption price equal to the net asset value per
Beneficial Share next determined after receipt of a request to redeem. The
Trustees shall establish such rules and procedures as they deem appropriate for
the redemption of Beneficial Shares provided that all redemptions are made in
accordance within the provision of the Act, as amended.
5.7 Option to Redeem Small Accounts. The Trust reserves
the right to redeem Beneficial Shares in any account for their then current
value (which will be paid to the Beneficial Shareholder), if the value of such
account is less than $1,000. Provided, however, that each Beneficial Shareholder
shall first be notified in writing that his account has a value of less than
$1,000 and allowed thirty days to make an additional investment before the
redemption is processed by the Trust.
<PAGE>
5.8 Suspension of Right of Redemption. The Trustees may
suspend the right of redemption or postpone the date of payment for the whole or
part (i) during any period that the New York Stock Exchange is closed (other
than for customary weekend or holiday closings), or trading on the Exchange is
restricted as determined by the Securities and Exchange Commission (the
"Commission"), (ii) during any period when an emergency exists as defined by the
rules of the Commission, as a result of which it is not reasonably practicable
for the Fund to dispose of securities owned by it, or fairly to determine the
value of its assets, and (iii) for such other periods as the Commission may
permit. Such suspension shall take effect at such time as the Trustees shall
specify but not later than the close of business on the business day following
the declaration of suspension, and thereafter there shall be no right of
redemption or payment until the Trustees shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said Stock Exchange shall have reopened or the period specified in (i) or
(ii) shall have expired. In the case of suspension of the right of redemption, a
Beneficial Shareholder may either withdraw his request for redemption or receive
payment based on the net asset value existing after the termination of the
suspension.
5.9 Redemption in Kind. Payment for Beneficial Shares may,
at the option of the Trustees, or such delegate or agent as they may duly
authorize for the purpose, in their discretion be made in cash, or in kind, or
partially in cash and partially in kind. In case of payment in kind, the
Trustees, or their delegate, shall have absolute discretion as to what security
or securities shall be distributed in kind and the amount of the same, and the
securities shall be valued for purposes of distribution at the figure at which
they were appraised in computing the asset value of the Beneficial Shares,
provided that any Beneficial Shareholder who cannot legally acquire securities
so distributed in kind by reason of the prohibitions of the 1940 Act shall
receive cash.
VI.
LIMITATION OF SHAREHOLDER LIABILITY
The Trustees shall have no power to bind any Beneficial
Shareholder personally or to call upon any Beneficial Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Beneficial Shareholder may at any time personally agree to pay by way of
subscription to any Beneficial Shares or otherwise. Every note, bond, contract
or other undertaking issued by or on behalf of the Trust or the Trustees
relating to the Trust shall include a recitation limiting the obligation
represented thereby to the Trust and its assets (but the omission of such a
recitation shall not operate to bind any Beneficial Shareholder).
<PAGE>
VII.
THE TRUSTEES
7.1 Administration of the Trust. The Trustees shall have
exclusive and absolute control over the Trust property and over the
administration of the affairs of the Trust and may exercise all powers of the
Trust, except such as are by statute, or the Procedural Guidelines or by this
Declaration of Trust conferred upon or reserved to Beneficial Shareholders.
7.2 Quorum. At all meetings of the Trustees, three
Trustees shall constitute a quorum for the transaction of business and the
action of a majority of the Trustees present at any meeting at which a quorum is
present shall be the action of the Trustees unless the concurrence of a greater
proportion is required for such action by the laws of Pennsylvania, the
Procedural Guidelines this Declaration of Trust or other applicable law. If a
quorum shall not be present at any meeting of Trustees, the Trustees present
thereat may by a majority vote adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
7.3 Powers. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Beneficial
Shareholders. The Trustees shall have full power and authority to do any and all
acts and to make and execute any and all contracts and instruments that they may
consider necessary or appropriate in connection with the administration of the
Trust. The Trustees shall not in anywise be bound or limited by present or
future laws or customs in regard to Trust investments, but shall have full
authority and power to make any and all investments which they, in their
uncontrolled discretion, shall deem proper to accomplish the purpose of this
Trust. Subject to any applicable limitation in this Declaration of Trust or the
Procedural Guidelines of the Trust, the Trustees shall have power and authority:
A. To buy, and invest funds in their hands, in securities
including, but not limited to, common stock, preferred stock, bonds, debentures,
warrants and rights to purchase securities, certificates of beneficial interest,
notes or other evidences of indebtedness issued by corporations, trusts or
associations, domestic or foreign, or issued and guaranteed by the United States
of America or any agency thereof, by the government of any foreign country, by
any State of the United States, or by any political subdivision or agency of any
State or foreign country, or in "when-issued" contracts for any such securities,
or retain such proceeds in cash, and from time to time change the investments of
its funds.
<PAGE>
B. To adopt Procedural Guidelines not inconsistent with
this Declaration of Trust providing for the conduct of the business of the Trust
and to amend and repeal them to the extent that they do not reserve that right
to the Beneficial Shareholders.
C. To elect and remove such employees or delegates and
appoint and terminate such agents as they consider appropriate.
D. To employ a bank or trust company as custodian of any
assets of the Trust subject to any conditions set forth in this Declaration of
Trust or in the Procedural Guidelines.
E. To retain a transfer agent and servicing agent, or
both.
F. To provide for the distribution of interests of the
Trust either through a principal underwriter in the manner hereinafter provided
for or by the Trust itself, or both.
G. To delegate such authority as they consider desirable
to any employee of the Trust and to any agent, custodian or underwriter.
H. To sell or exchange any or all of the assets of the
Trust, subject to the provisions of Article XII, Section 12.4 thereof.
I. To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and to execute
and deliver powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper.
J. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities.
K. To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or other negotiable form;
or either in its own name or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the usual
practice of investment companies.
<PAGE>
L. To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or concern, and to
pay calls or subscriptions with respect to any security held in the Trust.
M. To compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust or any matter in controversy including, but not
limited to claims for taxes.
N. To make distributions of income and of capital gains to
Beneficial Shareholders in the manner hereinafter provided for.
O. To 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 per centum
is required. In the event that such asset coverage shall at any time fall below
300 percentum, 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.
No one dealing with the Trustees shall be under
any obligation to make any inquiry concerning the authority of the Trustees, or
to see to the application of any payments made or property transferred to the
Trustees or upon their order.
7.4 Unanimous Consent. Any action required or permitted to
be taken at any meeting of the Trustees or of any Committee thereof may be taken
without a meeting, if a written consent to such action is signed by all members
of the Trustees or of such Committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the Trustees or Committee.
7.5 Principal Transactions. The Trustees shall not on
behalf of the Trust buy an securities (other than Beneficial Shares of the
Trust) from or sell any securities (other than Beneficial Shares of the Trust)
to, or lend any assets of the Trust to, any Trustee or officer of the Trust or
any firm which any such Trustee or officer is a member acting as principal, or
have any such dealings with the other party to any contract entered into
pursuant to Article VIII hereof or with any person interested in such
<PAGE>
other party; but the Trust may employ any such other party or any such person or
firm or company in which any such person is interested as broker, legal counsel,
registrar, transfer agent, dividend disbursing agent or custodian upon customary
terms.
7.6 Trustees and Employees as Shareholders. Any Trustee,
employee or other agent of the Trust may acquire, own and dispose of Beneficial
Shares of the Trust to the same extent as if he were not a Trustee, employee or
agent; and the Trustee may issue and sell or cause to be issued and sold
Beneficial Shares of the Trust to and buy such Beneficial Shares from any such
person or any firm or company in which he is interested, subject only to the
general limitations herein contained as to the sale and purchase of such
Beneficial Shares; and all subject to any restriction which may be contained in
the Procedural Guidelines.
7.7 Number and Term of Office. The number of Trustees
shall be determined from time to time by the Trustees themselves, but shall not
be less than three, nor more than twelve. The Trustees shall hold office during
the lifetime of the Trust, and until its termination as hereinafter provided;
except that (a) any Trustee may resign his trust by written instrument signed by
him and delivered to the other Trustees, which shall take effect upon such
delivery or upon such later date as is specified herein; (b) any Trustee may be
removed at any time by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date when such removal
shall become effective; (c) any Trustee who requests in writing to be retired or
who has become incapacitated by illness of injury may be retired by written
instrument signed by a majority of the other Trustees.
7.8 Initial Trustees. At the first annual or special
meeting of Beneficial Shareholders of the Trust, which shall be held no later
than the third Tuesday of April 1978, on a date fixed by the Trustees, the
Beneficial Shareholders shall elect not less than three Trustees. The initial
Trustees who shall serve until this election and until their successors are
elected and qualified shall be W. Linton Nelson, James P. Schellenger and John
H. Durham. These trustees are authorized to elect additional trustees up to the
number of twelve.
7.9 Appointment of Trustees. In case of the declination,
death, resignation, retirement, removal, or inability of any of the Trustees, or
in case a vacancy shall, by reason of an increase in number, or for any other
reason, exist, the remaining Trustees shall fill such vacancy by appointing such
other person as they, in their discretion, shall see fit. Such appointment
<PAGE>
shall be evidenced by a written instrument signed by a majority of the Trustees
in office whereupon the appointment shall take effect. Within three months of
such appointment the Trustees shall cause notice of such appointment to be
mailed to each Beneficial Shareholder at his address as recorded on the books of
the Trust. An appointment of a Trustee may be made by the Trustees then in
office and notice thereof mailed to Beneficial Shareholders as aforesaid in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee so appointed shall have accepted this Trust, the Trust estate shall vest
in the new Trustee or Trustees, together with the continuing Trustees, without
any further act or conveyance, and he shall be deemed a Trustee hereunder. The
power of appointment is subject to the provisions of Section 16(a) of the Act.
7.10 Effect of Death, Resignation, etc. of Trustee. The
death, declination, resignation, retirement, removal, or incapacity of the
Trustees, or any one of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this Declaration of Trust.
7.11 Trustee Reimbursement. The Trustees shall be
reimbursed from the Trust estate for their expenses and disbursements, including
without limitation fees and expenses of Trustees who are not interested persons
of the Trust or its adviser, interest expenses, taxes, fees and commissions of
every kind, expenses of issue, repurchase and redemption of shares including
expenses attributable to a program of periodic repurchases or redemptions,
expenses of registering and qualifying the Trust and its Beneficial Shares under
Federal and State laws and regulations, charges of custodians, transfer agents,
disbursing agents and registrars, expenses of preparing and setting up in type
prospectuses, expenses of printing and distributing prospectuses sent annually
to existing Beneficial Shareholders, auditing and legal expenses, reports to
Beneficial Shareholders, expenses of meetings of Beneficial Shareholders and
proxy solicitations therefor, insurance expense, association membership dues,
salaries, rent, stationery, printing and such non-recurring items as may arise,
including litigation to which the Trust is a party and for all losses and
liabilities, by them incurred in administering the Trust, and for the payment of
such expenses, disbursements, losses and liabilities, the Trustees shall have a
lien on the Trust estate prior to any rights or interests of the Beneficial
Shareholders thereto. This section shall not preclude the Trust from directly
paying any of the aforementioned fees and expenses.
<PAGE>
VIII.
AGREEMENTS WITH: INVESTMENT ADVISER;
PRINCIPAL UNDERWRITER, SERVICE COMPANY;
TRANSFER AGENT; AND CUSTODIAN
8.1 Investment Adviser. Subject to a majority vote of the
Beneficial Shareholder, the Trustees may enter into a written investment
advisory agreement or agreements with any person whereby such person shall
undertake to furnish the Trustees such management, investment advisory,
statistical and research facilities and other services upon such terms and
conditions as the Trustees may, in their discretion, determine. Notwithstanding
any provisions of this Declaration of Trust, the Trustees may authorize the
investment adviser (subject to such general or specific instructions as the
Trustees may adopt) to effect purchases, sales or exchanges of portfolio
securities of the Trust on behalf of the Trustees or may authorize any employee
or Trustee to effect such purchases, sales or exchanges pursuant to the
recommendations of the investment adviser (and all without further action by the
Trustees). Any such purchases, sales and exchanges shall have been deemed to
have been authorized by all the Trustees.
Any investment advisory agreement or agreements
shall in all respects be consistent with and subject to the requirements of the
Act as then in effect and the regulations of the Commission promulgated
thereunder.
8.2 Principal Underwriter. The Trustees may, in their
discretion, enter into a distribution agreement, providing for the sale of
Beneficial Shares of the Trust to net the Trust at least the net asset value per
Beneficial Share, whereby the Trust may either agree to sell the Beneficial
Shares to the other party to the agreement or appoint such other party its sales
agent for such Beneficial Shares. Such distribution agreement shall be on such
terms and conditions as the Trustees may, in their discretion, determine. Such
agreement may also provide for the repurchase of Beneficial Shares of the Trust
by such other party as principal or agent of the Trust.
Any distribution agreement shall in all respects be
consistent with and subject to the requirements of the Act as then in effect and
the regulations of the Commission promulgated thereunder.
8.3 Transfer Agent. The Trustees may, on such terms and
conditions as the Trustees may in their discretion determine, enter into an
agreement with any person to provide transfer agency, disbursing and other
services to the Trust. Such services may be provided by one or more entities.
<PAGE>
8.4 Custodian. The Trustees may employ such custodian or
custodians for the safekeeping of the property of the Trust and may make such
contracts for this purpose as in the opinion of the Trustees may be reasonable,
necessary or proper for the conduct of the affairs of the Trust. Such contracts
shall be subject to such restrictions, limitations and other requirements, as
may be contained in the Act, regulations of the Commission and Procedural
Guidelines of the Trust.
8.5 Parties to the Amendment. The same person,
partnership, association, trust or corporation may be employed in any multiple
capacity under Sections 8.1 through 8.5 of this Article VIII and may receive
compensation from the Trust in as many capacities in which such persons,
partnerships, associations, trusts or corporations shall serve the Trust. The
Trustees may enter into any agreement of the character described in this Article
VIII with any person, including any firm, corporation, trust, partnership or
association in which any Trustee, agent, employee or Beneficial Shareholder of
the Trust may be interested, and no such agreement shall be invalidated or
rendered voidable by reason of the existence of any such relationship, nor shall
any person holding such relationship be liable merely by reason of such
relationship for any loss or expense to the Trust under or by reason of said
agreement or accountable for any profit realized directly or indirectly
therefrom, provided that the agreement when entered into was reasonable and fair
and not inconsistent with the provisions of this Article of the Procedural
Guidelines.
IX.
BENEFICIAL SHAREHOLDERS' VOTING POWERS AND MEETINGS
9.1 Voting Powers. The Beneficial Shareholders shall have
power to vote (i) for the election of Trustees as provided in Article VII,
Section 7.7 (ii) with respect to any investment adviser as provided in Article
VIII., Section 8.1 (iii) Article IX, Article XI and Section 12.4 of Article XII;
and (iv) with respect to such additional matters relating to the Trust as may be
required or authorized by law, or the Procedural Guidelines of the Trust, or any
registration of the Trust with the Commission or any State, or as the Trustees
may consider desirable. Each whole Beneficial Share shall be entitled to one
vote as to any matter on which it is entitled to vote, and each fractional
Beneficial Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Beneficial Shares may
be voted in person or by proxy. Until Beneficial Shares are issued, the Trustees
may exercise all rights of Beneficial Shareholders and may take any action
required or permitted by law, this Declaration of Trust or any By-Laws of the
Trust to be taken by Beneficial Shareholders.
<PAGE>
9.2 Meetings. Beneficial Shareholders' meetings shall be
held at such places as are designated by the Trustees. Special meetings of the
Beneficial Shareholders may be called by any one or more of the Trustees
designated in writing, pursuant to a majority vote of the Trustees at the annual
meeting.
9.3 Quorum and Required Vote. At any meeting of the
Beneficial Shareholders a quorum for the transaction of business shall consist
of one or more persons appearing in person or by proxy and owning or
representing a majority of the Beneficial Shares of the Trust then outstanding
and entitled to vote, provided that a less number may make reasonable
adjournment of such meeting until a quorum is obtained. Subject to any
applicable requirements of law or of this Declaration of Trust or the Procedural
Guidelines a majority of the Beneficial Shares voted shall decide any question
and a plurality shall elect a Trustee.
9.4 By-Laws. The Procedural Guidelines may include further
provisions for Beneficial Shareholders votes and meetings and related matters.
X.
DISTRIBUTIONS AND DETERMINATION
OF NET INCOME
10.1 Distributions. The Trustees may, from time to time,
declare and pay distributions on the beneficial shares.
XI.
LIMITATION OF LIABILITY AND INDEMNIFICATION
11.1 Limitation of Liability. Every act or thing done or
omitted, and every power exercised or obligation incurred by the Trustees or any
of them in the administration of this Trust or in connection with any business,
property or concerns of the Trust, whether ostensibly in their own names or in
their Trust capacity, shall be done, omitted, exercised or incurred by them as
Trustees and not as individuals; and every person contracting or dealing with
the Trustees or having any debt, claim or judgment against them or any of them
shall look only to the funds and property of the Trust for payment or
satisfaction; and no Trustee or Trustees and no employee or agent of the Trust
shall ever be personally liable for or on account of any contract, debt, tort,
claim, damage, judgment or decree arising out of or connected with the
administration or preservation of the Trust estate or the conduct of any
<PAGE>
business of the Trust. A stipulation or notice to this effect may be inserted in
any contract, order or other instrument made by the Trustees or their employees
or agents, and on stationery used by them; but the omission thereof shall not be
construed as a waiver of the foregoing provision, and shall not render the
Trustees, employees or agents personally liable.
Provided they have exercised reasonable care and
have acted under the reasonable belief that their actions are in the best
interest of the Trust, the Trustees shall not be responsible for or liable in
any event for the neglect or wrongdoing of them or any employee, agent, or
investment adviser of the Trust, but nothing contained herein shall protect any
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.
11.2 Indemnification of Trustees. Subject to the
exceptions and limitations contained in the second paragraph of this Section
11.2, (i) every person who is, or has been, a Trustee of the Trust shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtues of his being or having been a
Trustee and against amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim", "action", "suit", or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal or other, including
appeals), actual or threatened, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
No indemnification shall be provided hereunder
to a Trustee (i) against any liability to the Trust or its Beneficial
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office; (ii)
with respect to any matter as to which he shall have been finally adjudicated
not to have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; (iii) in the event of a settlement unless there
has been a determination that such Trustee did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
<PAGE>
A. by the court or other body approving the settlement; or
B. by vote a majority of the outstanding Beneficial Shares
of the Trust not including any Beneficial Shares owned by any affiliated person
of the Trust; or
C. by vote of two-thirds (2/3) of those Trustees of the
Trust, constituting at least a majority of such Trustees, who are not themselves
involved in the claim, action, suit or proceeding; or
D. by written opinion of independent counsel, provided,
however that any Beneficial Shareholder may, by appropriate legal proceedings,
challenge any such determination by the Trustees, or by independent counsel. The
rights of indemnification herein provided may be insured against by policies
maintained by the Trust, shall be severable, shall not affect any other rights
to which any Trustee may now or hereafter be entitled, shall continue as to a
person who has ceased to be such Trustee and shall inure to the benefit of the
heirs, executors and administrators of such a person. Nothing contained herein
shall affect any rights to indemnification to which Trust personnel other than
Trustees may be entitled by contract or otherwise under law.
Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or proceeding of the
character described in this Section may be paid by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
Trustee to repay such amount unless it shall ultimately be determined that such
Trustee is entitled to be indemnified as provided in this Section.
11.3 Indemnification of Beneficial Shareholders. In case
any Beneficial Shareholder or former Beneficial Shareholder shall be held to be
personally liable solely by reason of his being or having been a Beneficial
Shareholder and not because of his act or omissions or for some other reason,
the Beneficial Shareholder or former Beneficial Shareholder (or his heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the trust estate to be held harmless from and indemnified
against all loss and expense arising from such liability. The Trust shall upon
request by the Beneficial Shareholder, assume the defense of any claim made
against any Beneficial Shareholder for any act or obligation of the Trust and
satisfy any judgment thereon. The rights of indemnification herein provided may
be insured against by policies maintained by the Trust.
<PAGE>
XII.
MISCELLANEOUS
12.1 Trustee's Liability. No Trustee hereunder shall have
any power to bind personally the remaining Trustees, Trust's employees or any
Beneficial Shareholders. All persons extending credit to, contracting with or
having any claim against the Trust or the Trustees shall look only to the assets
of the Trust for payment under such credit, contract or claim; and neither the
Beneficial Shareholders nor the Trustees nor any of their agents, whether past,
present or future, shall be personally liable therefor. Nothing in t his
Declaration of Trust shall protect the Trustee against any liability to which
the Trustee would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee hereunder.
12.2 Trustees' Good Faith, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
in good faith and with reasonable care under the circumstances then prevailing,
shall be binding upon everyone interested. Subject to the provisions of Section
12.1 of this Article XII the Trustees shall not be liable for errors of judgment
or mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust,
and subject to the provisions of Section 12.1 of this Article XII shall be under
no liability for any act or omission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.
12.3 Closing of Record Books. The Trustees may close the
Record Books of Beneficial Shares of the Trust for a period not exceeding sixty
(60) days preceding the date of any meeting of Beneficial Shareholders, or the
date for the payment of any distributions, or the date for the allotment of
rights, or the date when any change or conversion or exchange of Beneficial
Shares shall go into effect; or in lieu of closing Record Books as aforesaid,
the Trustees may fix in advance a date, not exceeding sixty (60) days preceding
the date of any meeting of Beneficial Shareholders, or the date for payment of
any distribution or the date for the allotment of rights, or the date when any
change or conversion or exchange of Beneficial Shares shall go into effect, as a
date for the determination of the Beneficial Shareholders entitled to notice of,
and to vote at, any such meeting, or entitled to receive payment of any such
distribution, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of Beneficial Shares, and in
such case such Beneficial Shareholders and only such Beneficial Shareholders as
shall be Beneficial Shareholders listed in the record books on the date so fixed
shall be entitled to such notice of, and to vote at such meeting, or to receive
<PAGE>
payment of such distribution, or to receive such allotment or rights, or to
exercise such rights, as the case may be notwithstanding any transfer of any
Beneficial Shares on the books of the Trust after any such closing date fixed or
aforesaid.
12.4 Termination of Trust. This Trust shall continue until
either:
A. The Trustees, with the approval of the holders of at
least a majority of the outstanding Beneficial Shares, may sell and convey the
assets of the Trust to another trust or corporation organized under the laws of
any State of the United States, which is a diversified open-end management
investment company as defined in the 1940 Act, for an adequate consideration
which may include the assumption of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of the Trust and which may include shares of
beneficial interest or stock of such trust or corporation. Upon making provision
for the payment of all such liabilities, by such assumption or otherwise, the
Trustees shall distribute the remaining proceeds ratably among the holders of
the Beneficial Shares of the Trust then outstanding.
B. Subject to a Majority vote of the Beneficial
Shareholders, the Trustees may at any time sell and convert into money all the
assets of the Trust. Upon making provision for the payment of all outstanding
obligations, taxes and other liabilities, accrued or contingent of the Trust,
the Trustees shall distribute the remaining assets of the Trust ratably among
the holders of the outstanding Shares.
C. Upon completion of the distribution of the remaining
proceeds or the remaining assets as provided in sub-sections A and B, the Trust
shall terminate and the Trustees shall be discharged of any and all further
liabilities and duties hereunder and the right, title and interest of all
parties shall be cancelled and discharged.
12.5 Filing of Copies, References, Headings. The original
or a copy of this instrument and of each Declaration of Trust supplemental
hereto shall be kept at the office of the Trust where it may be inspected by any
Beneficial Shareholder. Anyone dealing with the Trust may rely on a certificate
by a Trustee of the Trust as to whether or not any such supplemental
Declarations of Trust have been made and as to any matters in connection with
the Trust hereunder, and with the same effect as if it were the original, may
rely on a copy certified by a Trustee of the Trust to be a copy of this
instrument or of any such supplemental Declaration of Trust. In this instrument
or in any such supplemental Declaration of Trust, references to this
<PAGE>
instrument, and all expressions like "herein", "hereof" and "hereunder", shall
be deemed to refer to this instrument as amended or affected by any such
supplemental Declaration of Trust. Headings are placed herein for convenience of
reference only and in case of any conflict, the text of this instrument, rather
than the headings, shall control. This instrument may be executed in any number
of counterparts each of which shall be deemed an original.
12.6 Applicable Law. The purpose of the Trust is to
establish the relationship of Trustee and beneficiary between the Trustees and
Beneficial Shareholders defined herein. This Declaration of Trust shall not be
construed so as to create any other type of relationship or entity, including
but not limited to, a general or limited partnership, corporation, or joint
stock association. The Trust shall be of the type commonly called a revocable
trust, the Beneficial Shareholders being permitted to revoke or redeem their
interest in the Trust pursuant to the provisions of Article V hereof, and
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a trust.
12.7 Amendments. The Trust may be amended by the Trustees
at any time except for those provisions which cannot be amended without
Beneficial Shareholders approval.
IN WITNESS WHEREOF, the undersigned have executed this
amended and restated Declaration of Trust as of the 28th day of February 1977.
\s\ W. Linton Nelson
---------------------------
W. Linton Nelson
\s\ James P. Schellenger
---------------------------
James P. Schellenger
\s\ John H. Durham
---------------------------
John H. Durham
<PAGE>
The following persons having been elected Trustees, with
such election to take effect with the public offering of shares of the Trust on
March 23, 1977, signify their acceptance of the office of Trustee.
\s\ J. Ebert Butterworth
----------------------------
J. Ebert Butterworth
\s\ E. Dorsey Foster
-----------------------------
E. Dorsey Foster
\s\ Milton Fritsche
-----------------------------
Milton Fritsche
\s\ William B. Gold, Jr.
-----------------------------
William B. Gold, Jr.
\s\ Theodore Roosevelt, III
-----------------------------
Theodore Roosevelt, III
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
At a meeting of the Board of Trustees held April
20, 1995, the following resolution amending the Amended and Restated Declaration
of Trust (the "Declaration of Trust") was adopted:
RESOLVED, that Article III, Section 3.2 of the Fund's
Procedural Guidelines be amended to read in its entirety
as follows:
Section 3.2. Tenure. 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.
I, George M. Chamberlain, Jr., 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 April 20, 1995.
/s/ George M. Chamberlain, Jr.
---------------------------------
George M. Chamberlain, Jr.
<PAGE>
[FORM OF DISTRIBUTION AGREEMENT]
[FUND NAME]
[SERIES NAME, IF APPLICABLE]
DISTRIBUTION AGREEMENT
Distribution Agreement (the "Agreement") made as of this 3rd
day of April, 1995 by and between [FUND NAME], a [Maryland
corporation/Pennsylvania common law trust] (the "Fund")[, for the [SERIES NAME]
(the "Series")] and DELAWARE DISTRIBUTORS, L.P. (the "Distributor"), a Delaware
limited partnership.
WITNESSETH
WHEREAS, the Fund is an investment company regulated by
Federal and State regulatory bodies, and
WHEREAS, the Distributor is engaged in the business of
promoting the distribution of the securities of investment companies and, in
connection therewith and acting solely as agent for such investment companies
and not as principal, advertising, promoting, offering and selling their
securities to the public, and
WHEREAS, the Fund and the Distributor (or its predecessor)
were the parties to a contract under which the Distributor acted as the national
distributor of the shares of the [Fund/Series], which contract was amended and
restated as of the [date] and subsequently readopted as of January 3, 1995 (the
"Prior Distribution Agreement"), and
WHEREAS, Delaware Management Holdings, Inc. ("Holdings"),
the indirect parent company of the Distributor, completed on the
date of this Agreement a merger transaction with a newly-formed
subsidiary of Lincoln National Corporation, pursuant to which
Holdings became a wholly-owned subsidiary of Lincoln National
Corporation, and
<PAGE>
WHEREAS, the merger transaction resulted in a change of
control of the Distributor and an automatic termination of the Prior
Distribution Agreement, and
WHEREAS, the Board of [Directors/Trustees] of the Fund has
determined to enter into a new agreement with the Distributor as of the date
hereof, pursuant to which the Distributor shall continue to be the national
distributor of the [Fund's/Series'] ____________ class (now doing business as
___________ A Class and hereinafter referred to as the "Class A Shares"), the
Fund's ___________ B Class (the "Class B Shares") and the Fund's ______________
(Institutional) class (now doing business as _____________ Institutional Class
and hereinafter referred to as the "Institutional Class Shares"), which classes
may do business under these or such other names as the Board of
[Directors/Trustees] may designate from time to time, on the terms and
conditions set forth below,
NOW, THEREFORE, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. The Fund hereby engages the Distributor to promote the distribution of
the [Fund's/Series'] shares and, in connection therewith and as agent
for the Fund and not as principal, to advertise, promote, offer and
sell the [Fund's/Series'] shares to the public.
<PAGE>
2. (a) The Distributor agrees to serve as distributor of the
[Fund's/Series'] shares and, as agent for the Fund and
not as principal, to advertise, promote and use its best
efforts to sell the [Fund's/Series'] shares wherever
their sale is legal, either through dealers or otherwise,
in such places and in such manner, not inconsistent with
the law and the provisions of this Agreement and the
Fund's Registration Statement under the Securities Act of
1933, including the Prospectus contained therein and the
Statement of Additional Information contained therein, as
may be mutually determined by the Fund and the
Distributor from time to time.
(b) For the Institutional Class Shares, the Distributor will bear
all costs of financing any activity which is primarily
intended to result in the sale of that class of shares,
including, but not necessarily limited to, advertising,
compensation of underwriters, dealers and sales personnel, the
printing and mailing of sales literature and distribution of
that class of shares.
(c) For its services as agent for the Class A Shares and Class B
Shares, the Distributor shall be entitled to compensation on
each sale or redemption, as appropriate, of shares of such
classes equal to any front-end or deferred sales charge
described in the Prospectus from time to time and may allow
concessions to dealers in such amounts and on such terms as
are therein set forth.
<PAGE>
(d) For the Class A Shares and Class B Shares, the Fund
shall, in addition, compensate the Distributor for its
services as provided in the Distribution Plan as adopted
on behalf of the Class A Shares and Class B Shares,
respectively, pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Plans"), copies of
which as presently in force are attached hereto as,
respectively, Exhibit "A" and "B".
3. (a) The Fund agrees to make available for sale by the Fund
through the Distributor all or such part of the authorized but
unissued shares [of the Series] as the Distributor shall
require from time to time, and except as provided in Paragraph
3(b) hereof, the Fund will not sell [its/the Series'] shares
other than through the efforts of the Distributor.
(b) The Fund reserves the right from time to time (1) to sell
and issue shares other than for cash; (2) to issue shares
in exchange for substantially all of the assets of any
corporation or trust, or in exchange of shares of any
corporation or trust; (3) to pay stock dividends to its
shareholders, or to pay dividends in cash or stock at the
option of its stockholders, or to sell stock to existing
stockholders to the extent of dividends payable from time
to time in cash, or to split up or combine its
outstanding shares of common stock; (4) to offer shares
for cash to its stockholders as a whole, by the use of
transferable rights or otherwise, and to sell and issue shares
pursuant to such offers; and (5) to act as its own distributor
in any jurisdiction in which the Distributor is not registered
as a broker-dealer.
<PAGE>
4. The Fund warrants the following:
(a) The Fund is, or will be, a properly registered investment
company, and any and all [Series] shares which it will sell
through the Distributor are, or will be, properly registered
with the Securities and Exchange Commission ("SEC").
(b) The provisions of this Agreement do not violate the terms of
any instrument by which the Fund is bound, nor do they violate
any law or regulation of any body having jurisdiction over the
Fund or its property.
5. (a) The Fund will supply to the Distributor a conformed copy
of the Registration Statement, all amendments thereto,
all exhibits, and each Prospectus and Statement of
Additional Information.
(b) The Fund will register or qualify the shares for sale in
such states as is deemed desirable.
(c) The Fund, without expense to the Distributor,
(1) will give and continue to give such financial
statements and other information as may be required
by the SEC or the proper public bodies of the
states in which the [Fund's/Series'] shares may be
qualified;
(2) from time to time, will furnish the Distributor as
soon as reasonably practicable true copies of its
periodic reports to stockholders;
<PAGE>
(3) will promptly advise the Distributor in person or by
telephone or telegraph, and promptly confirm such
advice in writing, (a) when any amendment or
supplement to the Registration Statement becomes
effective, (b) of any request by the SEC for
amendments or supplements to the Registration
Statement or the Prospectus or for additional
information, and (c) of the issuance by the SEC of
any Stop Order suspending the effectiveness of the
Registration Statement, or the initiation of any
proceedings for that purpose;
(4) if at any time the SEC shall issue any Stop Order
suspending the effectiveness of the Registration
Statement, will make every reasonable effort to
obtain the lifting of such order at the earliest
possible moment;
(5) will from time to time, use its best effort to keep a
sufficient supply of [Series] shares authorized, any
increases being subject to approval of the Fund's
shareholders as may be required;
(6) before filing any further amendment to the
Registration Statement or to the Prospectus, will
furnish the Distributor copies of the proposed
amendment and will not, at any time, whether before
or after the effective date of the Registration
Statement, file any amendment to the Registration
Statement or supplement to the Prospectus of which
the Distributor shall not previously have been
advised or to which the Distributor shall reasonably
object (based upon the accuracy or completeness
thereof) in writing;
(7) will continue to make available to its stockholders
(and forward copies to the Distributor) of such
periodic, interim and any other reports as are now,
or as hereafter may be, required by the provisions of
the Investment Company Act of 1940; and
(8) will, for the purpose of computing the offering price
of [its/the Series'] shares, advise the Distributor
within one hour after the close of the New York Stock
Exchange (or as soon as practicable thereafter) on
each business day upon which the New York Stock
Exchange may be open of the net asset value per share
of [its/the Series'] shares of common stock outstand-
ing, determined in accordance with any applicable
provisions of law and the provisions of the Articles
of Incorporation, as amended, of the Fund as of the
close of business on such business day. In the event
that prices are to be calculated more than once
daily, the Fund will promptly advise the Distributor
of the time of each calculation and the price
computed at each such time.
<PAGE>
6. The Distributor agrees to submit to the Fund, prior to its
use, the form of all sales literature proposed to be generally
disseminated by or for the Distributor, all advertisements
proposed to be used by the Distributor, all sales literature
or advertisements prepared by or for the Distributor for such
dissemination or for use by others in connection with the sale
of the [Fund's/Series'] shares, and the form of dealers' sales
contract the Distributor intends to use in connection with
sales of the [Fund's/Series'] shares. The Distributor also
agrees that the Distributor will submit such sales literature
and advertisements to the NASD, SEC or other regulatory agency
as from time to time may be appropriate, considering practices
then current in the industry. The Distributor agrees not to
use such form of dealers' sales contract or to use or to
permit others to use such sales literature or advertisements
without the written consent of the Fund if any regulatory
agency expresses objection thereto or if the Fund delivers to
the Distributor a written objection thereto.
7. The purchase price of each share sold hereunder shall be the offering
price per share mutually agreed upon by the parties hereto, and as
described in the Fund's Prospectus, as amended from time to time,
determined in accordance with any applicable provision of law, the
provisions of its Articles of Incorporation and the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
<PAGE>
8. The responsibility of the Distributor hereunder shall be
limited to the promotion of sales of [Fund/Series] shares. The
Distributor shall undertake to promote such sales solely as
agent of the Fund, and shall not purchase or sell such shares
as principal. Orders for [Series] shares and payment for such
orders shall be directed to the Fund's agent, Delaware Service
Company, Inc. for acceptance on behalf of the Fund. The
Distributor is not empowered to approve orders for sales of
shares or accept payment for such orders. Sales of [Fund/
Series] shares shall be deemed to be made when and where
accepted by Delaware Service Company, Inc. on behalf of the
Fund.
9. With respect to the apportionment of costs between the Fund
and the Distributor of activities with which both are
concerned, the following will apply:
(a) The Fund and the Distributor will cooperate in preparing
the Registration Statements, the Prospectus, the
Statement of Additional Information, and all amendments,
supplements and replacements thereto. The Fund will pay
all costs incurred in the preparation of the Fund's
Registration Statement, including typesetting, the costs
incurred in printing and mailing Prospectuses and Annual,
Semi-Annual and other financial reports to its own
shareholders and fees and expenses of counsel and
accountants.
<PAGE>
(b) The Distributor will pay the costs incurred in printing
and mailing copies of Prospectuses to prospective
investors.
(c) The Distributor will pay advertising and promotional
expenses, including the costs of literature sent to
prospective investors.
(d) The Fund will pay the costs and fees incurred in
registering or qualifying the shares with the various
states and with the SEC.
(e) The Distributor will pay the costs of any additional copies of
Fund financial and other reports and other Fund literature
supplied to the Distributor by the Fund for sales promotion
purposes.
10. The Distributor may engage in other business, provided such other
business does not interfere with the performance by the Distributor of
its obligations under this Agreement.
11. The Fund agrees to indemnify, defend and hold harmless the
Distributor and each person, if any, who controls the
Distributor within the meaning of Section 15 of the Securities
Act of 1933, from and against any and all losses, damages, or
liabilities to which, jointly or severally, the Distributor or
such controlling person may become subject, insofar as the
losses, damages or liabilities arise out of the performance of
its duties hereunder except that the Fund shall not be liable
<PAGE>
for indemnification of the Distributor or any controlling person
thereof for any liability to the Fund or its security holders to which
they would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of their duties under
this Agreement.
12. Copies of financial reports, Registration Statements and
Prospectuses, as well as demands, notices, requests, consents,
waivers, and other communications in writing which it may be
necessary or desirable for either party to deliver or furnish
to the other will be duly delivered or furnished, if delivered
to such party at its address shown below during regular
business hours, or if sent to that party by registered mail or
by prepaid telegram filed with an office or with an agent of
Western Union or another nationally recognized telegraph
service, in all cases within the time or times herein
prescribed, addressed to the recipient at 1818 Market Street,
Philadelphia, Pennsylvania 19103, or at such other address as
the Fund or the Distributor may designate in writing and
furnish to the other.
13. This Agreement shall not be assigned, as that term is defined in the
Investment Company Act of 1940, by the Distributor and shall terminate
automatically in the event of its attempted assignment by the
Distributor. This Agreement shall not be assigned by the Fund without
the written consent of the Distributor signed by its duly authorized
officers and delivered to the Fund. Except as specifically provided in
<PAGE>
the indemnification provision contained in Paragraph 11 herein, this
Agreement and all conditions and provisions hereof are for the sole and
exclusive benefit of the parties hereto and their legal successors and
no express or implied provision of this Agreement is intended or shall
be construed to give any person other than the parties hereto and their
legal successors any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provisions herein contained.
14. (a) This Agreement shall remain in force for a period of two
years from the date hereof and from year to year
thereafter, but only so long as such continuance is
specifically approved at least annually by the Board of
[Directors/Trustees] or by vote of a majority of the
outstanding voting securities of the Fund and only if the
terms and the renewal thereof have been approved by the
vote of a majority of the [Directors/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.
(b) The Distributor may terminate this Agreement on written notice
to the Fund at any time in case the effectiveness of the
Registration Statement shall be suspended, or in case Stop
Order proceedings are initiated by the SEC in respect of the
Registration Statement and such proceedings are not withdrawn
or terminated within thirty days. The Distributor may also
<PAGE>
terminate this Agreement at any time by giving the Fund
written notice of its intention to terminate the Agreement at
the expiration of three months from the date of delivery of
such written notice of intention to the Fund.
(c) The Fund may terminate this Agreement at any time on at
least thirty days prior written notice to the Distributor
(1) if proceedings are commenced by the Distributor or
any of its stockholders for the Distributor's liquidation
or dissolution or the winding up of the Distributor's
affairs; (2) if a receiver or trustee of the Distributor
or any of its property is appointed and such appointment
is not vacated within thirty days thereafter; (3) if, due
to any action by or before any court or any federal or
state commission, regulatory body, or administrative
agency or other governmental body, the Distributor shall
be prevented from selling securities in the United States
or because of any action or conduct on the Distributor's
part, sales of the shares are not qualified for sale. The
Fund may also terminate this Agreement at any time upon
prior written notice to the Distributor of its intention
to so terminate at the expiration of three months from
the date of the delivery of such written notice to the
Distributor.
<PAGE>
15. The validity, interpretation and construction of this
Agreement, and of each part hereof, will be governed by the
laws of the Commonwealth of Pennsylvania.
16. In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect
the remainder of the Agreement, which shall continue to be in
force.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
----------------------------------------
General Partner
Attest:
By:
- -------------------------------- --------------------------------------
Name: Name:
Title: Title:
[FUND NAME]
[for the SERIES NAME]
Attest:
By:
- -------------------------------- --------------------------------------
Name: Name:
Title: Title:
<PAGE>
[FORM OF 12b-1 PLAN FOR CLASS A SHARES]
Exhibit A
12b-1 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 [FUND NAME]
(the "Fund")[, for the [SERIES NAME] (the "Series")] on behalf of the _________
class [(now doing business as __________ A Class and] hereinafter referred to as
the "Class"), which Fund[, Series] and Class may do business under these or such
other names as the Board of [Directors/Trustees] of the Fund may designate from
time to time. The Plan has been approved by a majority of the Board of
[Directors/Trustees], including a majority of the [Directors/Trustees] 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/Trustees] 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 Class and its
shareholders. If the Plan has not yet been approved by a majority of the
outstanding voting securities as required in the Act, the Plan will be presented
to the public shareholders at the next regular annual or special meeting.
<PAGE>
The Fund is a [corporation/common law trust] organized under the laws of
the [State of Maryland/Commonwealth of Pennsylvania], 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")/Delaware International Advisers Ltd. ("DIA Ltd.")] serves as the
[Fund's/Series'] investment adviser and manager pursuant to an Investment
Management Agreement. Delaware Service Company, Inc. serves as the
[Fund's/Series'] shareholder servicing, dividend disbursing and transfer agent.
Delaware Distributors, L.P. ("the Distributor") is the principal underwriter and
national distributor for the [Fund's/Series'] shares, including shares of the
Class, pursuant to the Distribution Agreement between the Distributor and the
[Fund/Series] ("Distribution Agreement").
The Distributor may enter into agreements with other registered
broker-dealers substantially in the form of the Dealer Agreement approved by the
Fund in the implementation of this Plan and of the Distribution Agreement
between it and the [Fund/Series]. The [Fund/Series] may, in addition, enter into
arrangements with persons other than broker-dealers which are not "affiliated
persons" or "interested persons" of the Fund, [DMC/DIA Ltd.] or the Distributor
to provide to the [Fund/Series] services in the [Fund's/Series'] marketing of
the shares of the Class, such arrangements to be reflected by Service
Agreements.
<PAGE>
The Plan provides that:
l. The Fund shall pay a monthly fee not to exceed 0.3% (3/10
of 1%) per annum of the [Fund's/Series'] average daily net assets represented by
shares of the Class (the "Maximum Amount") as may be determined by the Fund's
Board of [Directors/Trustees] from time to time. Such monthly fee shall be
reduced by the aggregate sums paid by the Fund to persons 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 l 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 (l)
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.
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 Agreements and the Plan; both the Distributor and the
<PAGE>
Service Providers shall furnish the Board of [Directors/Trustees] 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/Trustees] 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 at such time as the Distributor
shall notify the Fund in writing of the commencement of the Plan, which time
shall not be before the first annual or special meeting of the public
shareholders at which the Plan is or was approved by the vote of a majority of
the outstanding voting securities as required in the Act (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/Trustees] of the Fund, and of the [Directors/Trustees] 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/Trustees]"), cast in person at a meeting called for
the purpose of voting on such Plan.
<PAGE>
6. (a) The Plan may be terminated at any time by vote
of a majority of the non-interested [Directors/Trustees] 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 l
thereof without approval by the shareholders of the Class.
7. The Distribution Agreement between the [Fund/Series] and
the Distributor, and the Service Agreements between the [Fund/ Series] 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/Trustees] 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/Trustees] shall be committed
to the discretion of such non-interested [Directors/Trustees].
10. The definitions contained in Sections 2(a)(3), 2(a)(4),
2(a)(l9) 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.
<PAGE>
[FORM OF 12b-1 PLAN FOR CLASS B SHARES]
Exhibit B
12b-1 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 [FUND NAME]
(the "Fund"), [for the [SERIES NAME] (the "Series")] on behalf of the _________
B Class (the "Class"), which Fund[, Series] and Class may do business under
these or such other names as the Board of [Directors/Trustees] of the Fund may
designate from time to time. The Plan has been approved by a majority of the
Board of [Directors/Trustees], including a majority of the [Directors/Trustees]
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/Trustees] 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 Class
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/common law trust] organized under the laws of
the [State of Maryland/Commonwealth of Pennsylvania], 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./Delaware International Advisers Ltd.] serves as the [Fund's/Series']
investment adviser and manager pursuant to an Investment Management Agreement.
Delaware Service Company, Inc. serves as the [Fund's/Series'] shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the [Fund's/Series'] shares, including shares of the Class, pursuant to the
Distribution Agreement between the Distributor and the [Fund/Series]
("Distribution Agreement").
<PAGE>
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/ Series'] average daily net
assets represented by shares of the Class as may be determined by the Fund's
Board of [Directors/Trustees] from time to time.
(b) In addition to the amounts described in (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/Series'] 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/Trustees].
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.
<PAGE>
(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 Class.
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/Trustees] 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.
<PAGE>
4. The officers of the Fund shall furnish to the Board of
[Directors/Trustees] 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 at such time as the Distributor
shall notify the Fund 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/Trustees] of the
Fund, and of the [Directors/Trustees] 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/Trustees]"), 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/Trustees] 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.
<PAGE>
7. The Distribution Agreement between the [Fund/Series] and
the Distributor, and any dealers or servicing agreements between the Distributor
and brokers or others or between the [Fund/Series] 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/Trustees] 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/Trustees] shall be committed
to the discretion of such non-interested [Directors/Trustees].
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.
<PAGE>
[Form of Amendment to Distribution Agreement]
[FUND NAME]
[SERIES NAME, IF APPLICABLE]
AMENDMENT NO. 1 TO DISTRIBUTION AGREEMENT
This Amendment No. 1 to Distribution Agreement (this "Agreement") is
made as of the_____day of___________, 1995, by and between____________(the
"Fund"),[for the____________(the "Series"),] and DELAWARE DISTRIBUTORS, L.P.
(the "Distributor").
WITNESSETH
WHEREAS, the Fund[, for the Series,] and the Distributor are parties to
that certain Distribution Agreement made as of the 3rd day of April, 1995 (the
"Distribution Agreement"); and
WHEREAS, the Board of Directors of the Fund has established [CLASS C
SHARES NAME] (the "Class C Shares") as an additional class of [the Series]
[shares of the Fund] and the Fund and the Distributor desire to amend the
Distribution Agreement to provide that the Distributor shall act as the national
distributor of the Class C Shares pursuant thereto;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. The Class C Shares are hereby included among the shares to which the
Distribution Agreement relates and the Distributor shall act as distributor for
the Class C Shares pursuant to and in accordance with the Distribution
Agreement, as amended hereby.
2. Hereafter, each reference to "Class A Shares and Class B Shares" in
Section 2 (c) and (d) of the Distribution Agreement [compensation of the
Distributor] shall be deemed to include the Class C Shares, provided that the
<PAGE>
Distribution Plan adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940 for the Class C Shares and presently in force is attached hereto as
Exhibit "A."
DELAWARE DISTRIBUTORS, L.P.
By: Delaware Distributors, Inc.,
General Partner
ATTEST:
By:
- ------------------------------ --------------------------------
Name: Name:
Title: Title:
[FUND NAME][,for the [SERIES NAME]]
ATTEST:
By:
- ------------------------------ ---------------------------------
Name: Name:
Title: Title:
<PAGE>
EXHIBIT A
[FORM OF 12b-1 PLAN
C CLASS SHARES]
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's C 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/business trust] organized under the laws of
the [State of Maryland/Commonwealth of Pennsylvania], 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.
A-1
<PAGE>
("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.
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
A-2
<PAGE>
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.
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.
A-3
<PAGE>
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. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
A-4
<PAGE>
8. 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.
9. The definitions contained in Sections 2(a)(3), 2(a)(19) and
2(a)(42) of the Act shall govern the meaning of "affiliated person,"
"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.
November 29, 1995
A-5
<PAGE>
DELAWARE GROUP
Administration and Service Agreement
Gentlemen:
We are the national distributor of the shares of all of the classes
(now existing or hereafter added) of all of the Funds in the Delaware Group of
Funds. The term "Fund" as used in this Agreement refers to each fund in the
Delaware Group which retains the Distributor to promote and sell its shares, and
any fund which may hereafter be added to the Delaware Group and retain us as
national distributor. You have indicated that you wish to provide certain
services to your customers relating to their ownership of Fund shares, in
accordance with the terms of this Agreement.
TERMS
1. With respect to any Fund that offers shares of classes for which
Distribution Plans have been adopted under Rule 12b-1 (individually a "12b-1
Plan") of the Investment Company Act of 1940 (the "1940 Act"), which 12b-1 Plans
provide for the payment of service fees, we expect you to provide administrative
and other services, including, but not limited to, furnishing personal and other
services and assistance to your customers who own Fund shares, answering routine
inquiries regarding a Fund, assisting in changing dividend options, account
designations and addresses, maintaining such accounts, or such other services as
a Fund may require, to the extent permitted by applicable statutes, rules, or
regulations. For such services, we shall pay you a fee, as established by us
from time to time, based on the value of the shares of each class of each Fund
which are attributable to customers of your firm. We are permitted to make this
payment under the terms of the 12b-1 Plans adopted by certain of the Funds, as
such Plans may be in effect from time to time.
2. You shall furnish us and each Fund with such information as shall
reasonably be requested by the Board of Directors or Trustees with respect to
the fees paid to you pursuant to this Agreement.
3. We shall furnish to the Board of Directors or Trustees, for their
review, on a quarterly basis, a written report of the amounts expended under
<PAGE>
the Plan by us with respect to the relevant Fund and the purposes for which
such expenditures were made.
4. This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon any act of
insolvency by you. Notwithstanding the termination of this Agreement, you shall
remain liable for any amounts otherwise owing to the Distributor or the Funds
and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Distributor or the Fund, or upon any one or
more of the Distributor's dealers, based upon a claim that you and such dealers
or any of them constitute a partnership, an unincorporated business or other
separate entity.
5. Any obligation assumed by a Fund pursuant to this Agreement shall be
limited in all cases to the assets of such Fund and no person shall seek
satisfaction thereof from shareholders of a Fund.
6. The 12b-1 Plans in effect on the date of this Agreement are
described in the Funds' Prospectuses. Each Fund reserves the right to terminate
or suspend its 12b-1 Plan(s) at any time as specified in such Plan(s) and we
reserve the right, at any time, without notice, to modify, suspend or terminate
payments hereunder in connection with such 12b-1 Plan(s).
7. This Agreement shall take effect on the date set forth below.
8. The terms and provisions of the current Prospectus and Statement of
Additional Information for each relevant Fund are hereby accepted and agreed to
by the parties hereto as evidenced by our execution hereof.
GENERAL
9. Governing Law. This Agreement will be governed by and construed in
accordance with the law of the State of Pennsylvania, without reference to that
state's choice of law doctrine.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one Agreement.
11. Severability. In the event that any provision of this Agreement,
or the application of any such provision to any person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
<PAGE>
to persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
12. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto and supersedes all prior agreements and
understandings between the parties hereto relating to the subject matter hereof.
13. Headings. The underlined headings contained herein are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the interpretation
hereof.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
General Partner
By:
--------------------------------
Agreed and Accepted:
- ------------------------------
(Name)
By:
---------------------------
(Authorized Officer)
Date:
-------------------------
<PAGE>
DEALER'S AGREEMENT
We invite you, as a selected dealer, to participate as principal in the
distribution of the shares of all of the classes (now existing or hereafter
added) of all of the Funds in the Delaware Group of Investment Companies which
retain us, Delaware Distributors, L.P., to act as exclusive national
distributor. The term "Fund" as used in this Agreement, refers to each Fund in
the Delaware Group which retains us to promote and sell its shares, and any Fund
which may hereafter be added to the Delaware Group and retain us as national
distributor. Such additional Funds will be included in this Agreement upon our
providing you with written notice of such inclusion.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by a
Fund or its agent, Delaware Service Company, Inc., will be at the public
offering price applicable to each order as set forth in that Fund's Prospectus.
The manner of computing the net asset value of shares, the public offering price
and the effective time of orders received from you are described in the
Prospectus for each Fund. We reserve the right, at any time and without notice,
to suspend the sale of Fund shares.
CONCESSIONS TO YOU: You will be entitled to deduct the applicable concession as
set forth in the then current Prospectus of a Fund from the purchase price of
certain purchase orders placed by you for shares of a Fund having a sales
charge. We reserve the right from time to time, without prior notice, to modify,
suspend or eliminate such concessions by amendment, sticker or supplement to the
Prospectus for the Fund. If any shares confirmed to you under the terms of this
Agreement are redeemed or repurchased by the Fund or by us as agent for the
Fund, or are tendered for redemption or repurchase, within seven business days
after the date of our confirmation of the original purchase order, you shall
promptly refund to us the concession allowed to you on such shares.
PURCHASE PLANS: The purchase price on all orders placed by you and any
concessions or other fees otherwise due to you under this Agreement will be
subject to the then current terms and provisions of any applicable special plans
and accounts (e.g., volume purchases, letters of intent, rights of accumulation,
combined purchases privilege, exchange and reinvestment privileges and
<PAGE>
retirement plan accounts) as set forth from time to time in the Prospectus. We
must be notified when an order is placed if it qualifies for a reduced sales
charge under any of these plans. We reserve the right, at any time, without
prior notice, to modify, suspend or eliminate any such plans or accounts by
amendment, sticker or supplement to the Prospectus for the Fund.
SALES, ORDERS AND CONFIRMATIONS: In offering Fund shares to the public or
otherwise, you shall act as dealer for your own account, and in no transaction
shall you have any authority to act as agent for the Fund, for any other
selected dealer or for us. No person is authorized to make any representations
concerning the shares to the Fund except those contained in the Prospectus and
in written information issued by the Fund or by us as a supplement to such
Prospectus. In purchasing Fund shares, you shall rely only on such
representations.
All sales must be made subject to confirmation and orders are subject
to acceptance or rejection by the Fund in its sole discretion. Your orders must
be wired, telephoned or written to the Fund or its agent. You agree to place
orders for the same number of shares sold by you at the price at which such
shares are sold. You agree that you will not purchase Fund shares except for
investment or for the purpose of covering purchase orders already received and
that you will not, as principal, sell Fund shares unless purchased by you from
the Fund under the terms hereof. You also agree that you will not withhold
placing with us orders received from your customers so as to profit yourself
from such withholding. Each of your orders shall be confirmed by you in writing
on the same day.
PAYMENT AND ISSUANCE OF CERTIFICATES: The shares purchased by you hereunder
shall be paid for in full at the public offering price, less any concession to
you as set forth above, by check payable to the Fund, at its office, within
three business days after our acceptance of your order. If not so paid, we
reserve the right to cancel the sale and to hold you responsible for any loss
sustained by us or the Fund (including lost profit) in consequence. Certificates
representing the Fund's shares will not be issued unless (i) the Fund's
Prospectus indicates that certificates may be issued for the class of shares
being purchased, and (ii) a specific request is received from the purchaser.
Certificates, if requested, will be issued in the names indicated by
registration instructions accompanying your payment.
-2-
<PAGE>
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will redeem shares held by shareholders on demand. You
agree that you will not make any representations to shareholders relating to the
redemption of their shares other than the statements contained in the Prospectus
and the underlying organizational documents of the Fund, to which it refers, and
that you will quote as the redemption price only the price determined by the
Fund. You shall not repurchase any shares from your customers at a price below
that next quoted by the Fund for redemption. You may charge a reasonable fee for
services in connection with the repurchase by you from your customers of shares.
You may hold such repurchased shares only for investment purposes or submit such
shares to the Fund for redemption.
12b-1 PLAN: With respect to any Fund that offers shares of classes for which
Distribution Plans have been adopted under Rule 12b-1 (individually a "12b-1
Plan") of the Investment Company Act of 1940 (the "1940 Act"), we expect you to
provide distribution and marketing services in the promotion of the Fund's
shares. In connection with the receipt of distribution fees and/or the receipt
of service fees as set forth under the 12b-1 Plan(s) applicable to the class or
classes of Fund shares purchased by your customers, we expect you to provide
administrative and other services to your customers who own Fund shares,
including, but not limited to, furnishing personal and other services and
assistance, answering routine inquiries regarding a Fund, assisting in changing
dividend options, account designations and addresses, maintaining such accounts,
or such other services as the Fund may require, to the extent permitted by
applicable statutes, rules, or regulations. For such services we will pay you a
fee, as established by us from time to time, based on a portion of the net asset
value of the accounts of your clients in the Fund. We are permitted to make this
payment under the terms of the 12b-1 Plans adopted by certain of the Funds, as
such Plans may be in effect from time to time. The 12b-1 Plans in effect on the
date of this Agreement are described in the Funds' Prospectuses. Each Fund
reserves the right to terminate or suspend its 12b-1 Plan at any time as
specified in the Plan and we reserve the right, at any time, without notice, to
modify, suspend or terminate payments hereunder in connection with such 12b-1
Plan. You will furnish the Fund and us with such information as may be
-3-
<PAGE>
reasonably requested by the Fund or its directors or trustees or by us with
respect to such fees paid to you pursuant to this Agreement.
LEGAL COMPLIANCE: This Agreement and any transaction with, or payment to, you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are, and at all times during its
effectiveness you will be: (a) a registered broker/dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws in
each jurisdiction in which you are required to be qualified to act as a
broker/dealer in securities, and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); or (b) a foreign
broker/dealer not eligible for membership in the NASD and otherwise in
compliance with applicable U.S. federal and state securities laws. You agree to
notify us promptly in writing and immediately suspend sales of Fund shares if
this representation ceases to be true. You also agree that, whether you are a
member of the NASD or a foreign broker/dealer not eligible for such membership,
you will comply with the rules of the NASD including, in particular, Sections 2
and 26 of Article III thereof, and that you will maintain adequate records with
respect to your transactions with the Funds.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we may furnish you with information identifying the states and jurisdictions
under the securities laws of which it is believed a Fund's shares may be sold.
You will not transact orders for Fund shares in states or jurisdictions in which
we indicate Fund shares may not be sold. You agree to offer and sell Fund shares
outside the United States only in compliance with all applicable laws, rules and
regulations of any foreign government having jurisdiction over such transactions
in addition to any applicable laws, rules and regulations of the United States.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicity available by the Fund, in
reasonable quantities upon your request. You agree to deliver a copy of the
current Prospectus in accordance with the provisions of the Securities Act of
1933 to each purchaser of Fund shares for whom you act as broker. We shall file
Fund sales literature and promotional material with the NASD and SEC as
required.
-4-
<PAGE>
You may not publish or use any sales literature or promotional materials with
respect to the Funds without our prior review and written approval.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at One Commerce Square, 2005 Market Street, Philadelphia, PA 19103. Any
notice from us to you shall be deemed to have been duly given if mailed or
telegraphed to you at the address set forth below. Each of us may change the
address to which notices shall be sent by notice to the other in accordance with
the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon the
appointment of a trustee for you under the Securities Investor Protection Act,
or any other act of insolvency by you. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Funds and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, or us, or upon any one or more of the
selected dealers based upon the claim that the selected dealers or any of them
constitute a partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you notify us in writing to the contrary, you will be
deemed to have accepted such modifications.
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach and we may offset any
such damages, losses, costs and expenses against any amounts due to you
hereunder. Nothing contained herein shall constitute you, us and any dealers an
association or partnership. All references in this Agreement to the "Prospectus"
refer to the then current version of the Prospectus and include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto. This Agreement supercedes and replaces any prior agreement
-5-
<PAGE>
between us and you with respect to your purchase and sale of Fund shares and is
to be construed in accordance with the laws of the State of Delaware.
Please confirm this Agreement by executing one copy of this Agreement
below and returning it to us. Keep the enclosed duplicate copy for your records.
DELAWARE DISTRIBUTORS, L.P.
By: Delaware Distributors, Inc.,
General Partner
By:/s/Keith E. Mitchell
----------------------
Name: Keith E. Mitchell
Title: President/Chief Executive Officer
-6-
<PAGE>
DEALER'S AGREEMENT ACCEPTANCE
DELAWARE DISTRIBUTORS, L.P.
The undersigned hereby confirms the Dealer's Agreement and acknowledges
that any purchase of Fund shares made during the effectiveness of this Agreement
is subject to all the applicable terms and conditions set forth in this
Agreement, and agrees to pay for the shares at the price and upon the terms and
conditions stated in the Agreement. The undersigned hereby acknowledges receipt
of Prospectuses relating to the Fund shares and confirms that, in executing the
Dealer's Agreement, it has relied on such Prospectuses and not on any other
statement whatsoever, written or oral.
INVESTMENT DEALER PLEASE SIGN HERE AND COMPLETE BELOW
By: DATE
------------------------------- ----------------------------
Name:
-----------------------------
Title:
----------------------------
- ----------------------------------
FIRM
- ----------------------------------
FIRM'S TAX IDENTIFICATION NUMBER
- ----------------------------------
STREET ADDRESS
- ----------------------------------
CITY/STATE/ZIP
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. 35 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.
Ernst & Young LLP
Philadelphia, Pennsylvania
November 20, 1995
[FORM OF 12b-1 PLAN FOR CLASS A SHARES]
12b-1 Plan
Class A
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule l2b-l under the Investment Company Act of l940 (the "Act") by [FUND
NAME] (the "Fund")[, now for the [SERIES NAME] (the "Series")] on behalf of the
_____________ class [now doing business as the _____________ A Class]
(hereinafter referred to as the "Class"), which Fund[, Series] and Class may do
business under these or such other names as the Board of [Directors/Trustees] of
the Fund may designate from time to time. The Plan has been approved by a
majority of the Board of [Directors/Trustees], including a majority of the
[Directors/Trustees] 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 ("non-interested [Directors/Trustees]"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
by the [Directors/Trustees] 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 Class and its shareholders.
If the Plan has not yet been approved by a majority of the outstanding voting
securities as required in the Act, the Plan will be presented to the public
shareholders at the next regular annual or special meeting.
<PAGE>
The Fund is a [corporation/common law trust] organized under the laws
of the [State of Maryland/Commonwealth of Pennsylvania], 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./Delaware International Advisers Ltd.] serves as the [Fund's/Series']
investment adviser and manager pursuant to an Investment Management Agreement.
Delaware Service Company, Inc. serves as the [Fund's/Series'] shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the [Fund's/Series'] shares, including shares of the Class pursuant to the
Distribution Agreement between the Distributor and the [Fund/Series]
("Distribution Agreement").
The Plan provides that:
l. The Fund shall pay to the Distributor a monthly fee not to exceed
0.3% (3/10 of l%) per annum of the [Fund's/Series'] average daily net assets
represented by shares of the Class (the "Maximum Amount") as may be determined
by the Fund's Board of [Directors/Trustees] from time to time. Such monthly fee
shall be reduced by the aggregate sums paid by the Fund [on behalf of the
Series] to persons other than broker-dealers (the "Service Providers") who may,
pursuant to servicing agreements, provide to the [Fund/Series] services in the
[Fund's/Series'] marketing of shares of the Class.
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph l 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 (l) 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>
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 Plan; both the Distributor and the Service Providers shall
furnish the Board of [Directors/Trustees] 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/Trustees] 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 at such time as the Distributor shall
notify the Fund in writing of the commencement of the Plan, which time shall not
be before the first annual or special meeting of the public shareholders at
which the Plan is or was approved by the vote of a majority of the outstanding
voting securities as required in the Act (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/Trustees] of the Fund, and
of the non-interested [Directors/Trustees], 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/Trustees] 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 l thereof without approval by
the shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested [Directors/Trustees] in the manner described in paragraph 5
above.
<PAGE>
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested [Directors/Trustees] shall be committed to the
discretion of such non-interested [Directors/Trustees].
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "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.
November 29, 1995
[FORM OF 12b-1 PLAN FOR CLASS B SHARES]
12b-1 Plan
Class B
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by [FUND
NAME] (the "Fund") [,for the [SERIES NAME] (the "Series")] on behalf of the
_______________________ B Class (the "Class"), which Fund[, Series] and Class
may do business under these or such other names as the Board of
[Directors/Trustees] of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of [Directors/Trustees], including a
majority of the [Directors/Trustees] 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 ("non-interested
[Directors/Trustees]"), cast in person at a meeting called for the purpose of
voting on such Plan. Such approval by the [Directors/Trustees] 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 Class 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/common law trust] organized under the laws
of the [State of Maryland/Commonwealth of Pennsylvania], 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./Delaware International Advisers Ltd.] serves as the [Fund's/Series']
investment adviser and manager pursuant to an Investment Management Agreement.
Delaware Service Company, Inc. serves as the [Fund's/Series'] shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the [Fund's/Series'] shares, including shares of the Class, pursuant to the
Distribution Agreement between the Distributor and the [Fund/Series]
("Distribution Agreement").
<PAGE>
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/Series'] average daily net
assets represented by shares of the Class as may be determined by the Fund's
Board of [Directors/Trustees] from time to time.
(b) In addition to the amounts described in (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/Series'] average daily net assets represented by shares of the Class, as
a service fee pursuant to dealer or servicing agreements.
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 Class.
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/Trustees] 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.
<PAGE>
4. The officers of the Fund shall furnish to the Board of
[Directors/Trustees] 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 at such time as the Distributor shall
notify the Fund 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/Trustees] of the
Fund, and of the non-interested [Directors/Trustees], 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/Trustees] 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. All material amendments to this Plan shall be approved by the
non-interested [Directors/Trustees] in the manner described in paragraph 5
above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested [Directors/Trustees] shall be committed to the
discretion of such non-interested [Directors/Trustees].
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "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.
November 29, 1995
<PAGE>
[FORM OF 12b-1 PLAN
C CLASS SHARES]
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's C 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/business trust] organized under the laws of
the [State of Maryland/Commonwealth of Pennsylvania], 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
<PAGE>
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.
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
<PAGE>
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.
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.
<PAGE>
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. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. 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.
9. The definitions contained in Sections 2(a)(3), 2(a)(19) and
2(a)(42) of the Act shall govern the meaning of "affiliated person,"
<PAGE>
"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.
November 29, 1995
DELAWARE GROUP TAX-FREE PA FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
-------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(l + T) = ERV
ONE
YEAR
------------------
1
$1000(1 - T) = $1,020. 00
T= 2.00%
THREE
YEARS
------------------
3
$1000(1 - T) = $1,139.7
T= 4.46%
FIVE
YEARS
------------------
5
$1000(1 - T) = $1,421.22
T= 7.28%
TEN
YEARS
------------------
10
$1000(1 - T) = $2,207.16
T= 8.24%
<PAGE>
DELAWARE GROUP TAX-FREE PA FUND A
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
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 $0.488 7.026 121.574
- ------ --------- ---------- ---------- ----------
Ending Shares 121.574
Ending NAV x $8.39
--------------
Investment Return $1,020.01
Total Return Performance
- ------------------------
Investment Return $1,020.01
Less Initial Investment $1,000.00
--------------
$20.01 / $1,000.00 x 100
Total Return: 2.00%
<PAGE>
DELAWARE GROUP TAX-FREE PA FUND A
TOTAL RETURN PERFORMANCE
THREE YEARS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.78
Initial Shares 113.895
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1993 113.895 $0.504 6.935 120.830
- --------------------------------------------------------------------------------
1994 120.830 $0.493 7.167 127.997
- --------------------------------------------------------------------------------
1995 127.997 $0.488 7.851 135.848
- --------------------------------------------------------------------------------
Ending Shares 135.848
Ending NAV x $8.39
-------------
Investment Return $1,139.76
Total Return Performance
- ------------------------
Investment Return $1,139.76
Less Initial Investment $1,000.00
------------
$139.76 / $1,000.00 x 100
Total Return: 13.98%
<PAGE>
DELAWARE GROUP TAX-FREE PA FUND A
TOTAL RETURN PERFORMANCE
FIVE YEARS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.04
Initial Shares 124.378
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1991 124.378 $0.536 8.818 133.196
- --------------------------------------------------------------------------------
1992 133.196 $0.525 8.824 142.020
- --------------------------------------------------------------------------------
1993 142.020 $0.504 8.649 150.669
- --------------------------------------------------------------------------------
1994 150.669 $0.493 8.937 159.606
- --------------------------------------------------------------------------------
1995 159.606 $0.488 9.789 169.395
- --------------------------------------------------------------------------------
Ending Shares 169.395
Ending NAV x $8.39
-------------
Investment Return $1,421.22
- ------------------------
Investment Return $1,421.22
Less Initial Investment $1,000.00
------------
$421.22 / $1,000.00 x 100
Total Return: 42.12%
<PAGE>
DELAWARE GROUP TAX-FREE PA FUND A
TOTAL RETURN PERFORMANCE
TEN YEARS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $7.48
Initial Shares 133.690
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1986 133.690 $0.612 11.256 144.946
- --------------------------------------------------------------------------------
1987 144.946 $0.564 10.768 155.714
- --------------------------------------------------------------------------------
1988 155.714 $0.558 12.018 167.732
- --------------------------------------------------------------------------------
1989 167.732 $0.555 12.344 180.076
- --------------------------------------------------------------------------------
1990 180.076 $0.548 13.080 193.156
- --------------------------------------------------------------------------------
1991 193.156 $0.536 13.698 206.854
- --------------------------------------------------------------------------------
1992 206.854 $0.525 13.703 220.557
- --------------------------------------------------------------------------------
1993 220.557 $0.504 13.429 233.986
- --------------------------------------------------------------------------------
1994 233.986 $0.493 13.880 247.866
- --------------------------------------------------------------------------------
1995 247.866 $0.488 15.204 263.070
- --------------------------------------------------------------------------------
Ending Shares 263.070
Ending NAV $8.39
-----------
Investment Return $2,207.16
Total Return Performance
- ------------------------
Investment Return $2,207.16
Less Initial Investment $1,000.00
-----------
$1,207.16 / $1,000.00 x 100
Total Return 120.72%
<PAGE>
DELAWARE GROUP TAX-FREE PA FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(l + T) = ERV
ONE
YEAR
----------
1
$1000(1 - T) = $1,061.62
T= 6.16%
<PAGE>
DELAWARE GROUP TAX-FREE PA FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(l + T) = ERV
ONE
YEAR
- -----------
1
$1000(1 - T) = $1,021.62
T= 2.16%
<PAGE>
DELAWARE GROUP TAX-FREE PA B
TOTAL RETURN PERFORMANCE
ONE YEAR (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 $0.421 6.342 126.534
- --------------------------------------------------------------------------------
Ending Shares 126.534
Ending NAV x $8.39
-----------
$1,061.62
Less CDSC $40.00
-----------
Investment Return $1,021.62
Total Return Performance
- ------------------------
Investment Return $1,021.62
Less Initial Investment $1,000.00
------------------
$21.62 / $1,000.00 x 100
Total Return: 2.16%
<PAGE>
DELAWARE GROUP TAX-FREE PA B
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.39
Initial Shares 119.190
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 119,190 $0.421 7.344 126.534
- --------------------------------------------------------------------------------
Ending Shares 126.534
Ending NAV x $8.39
-------------
Investment Return $1,061.62
Total Return Performance
- ------------------------
Investment Return $1,061.62
Less Initial Investment $1,000.00
-------------
$61.62 / $1,000.00 x 100
Total Return: 6.16%
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000201670
<NAME> DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
<SERIES>
<NUMBER> 001
<NAME> TAX-FREE PENNSYLVANIA FUND A CLASS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 952,786,874
<INVESTMENTS-AT-VALUE> 1,010,466,681
<RECEIVABLES> 17,585,049
<ASSETS-OTHER> 11,907
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,028,063,637
<PAYABLE-FOR-SECURITIES> 10,742,926
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,332,575
<TOTAL-LIABILITIES> 14,075,501
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 953,189,316
<SHARES-COMMON-STOCK> 118,831,537
<SHARES-COMMON-PRIOR> 119,368,970
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,119,013
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 57,679,807
<NET-ASSETS> 997,158,239
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 33,854,324
<OTHER-INCOME> 0
<EXPENSES-NET> 4,573,518
<NET-INVESTMENT-INCOME> 29,280,806
<REALIZED-GAINS-CURRENT> 5,971,917
<APPREC-INCREASE-CURRENT> 19,618,725
<NET-CHANGE-FROM-OPS> 54,871,448
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 28,945,131
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,179,322
<NUMBER-OF-SHARES-REDEEMED> 6,779,058
<SHARES-REINVESTED> 2,062,303
<NET-CHANGE-IN-ASSETS> 27,436,631
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2,852,904)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,921,513
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,573,518
<AVERAGE-NET-ASSETS> 991,591,083
<PER-SHARE-NAV-BEGIN> 8.18
<PER-SHARE-NII> 0.241
<PER-SHARE-GAIN-APPREC> 0.210
<PER-SHARE-DIVIDEND> 0.241
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.39
<EXPENSE-RATIO> 0.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000201670
<NAME> DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
<SERIES>
<NUMBER> 002
<NAME> TAX-FREE PENNSYLVANIA FUND B CLASS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 952,786,874
<INVESTMENTS-AT-VALUE> 1,010,466,681
<RECEIVABLES> 17,585,049
<ASSETS-OTHER> 11,907
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,028,063,637
<PAYABLE-FOR-SECURITIES> 10,742,926
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,332,575
<TOTAL-LIABILITIES> 14,075,501
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 953,189,316
<SHARES-COMMON-STOCK> 2,005,622
<SHARES-COMMON-PRIOR> 1,251,835
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,119,013
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 57,679,807
<NET-ASSETS> 16,829,897
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 33,854,324
<OTHER-INCOME> 0
<EXPENSES-NET> 4,573,518
<NET-INVESTMENT-INCOME> 29,280,806
<REALIZED-GAINS-CURRENT> 5,971,917
<APPREC-INCREASE-CURRENT> 19,618,725
<NET-CHANGE-FROM-OPS> 54,871,448
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 335,675
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 753,247
<NUMBER-OF-SHARES-REDEEMED> 26,115
<SHARES-REINVESTED> 26,655
<NET-CHANGE-IN-ASSETS> 27,436,631
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2,852,904)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,921,513
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,573,518
<AVERAGE-NET-ASSETS> 13,923,550
<PER-SHARE-NAV-BEGIN> 8.18
<PER-SHARE-NII> 0.209
<PER-SHARE-GAIN-APPREC> 0.210
<PER-SHARE-DIVIDEND> 0.209
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.39
<EXPENSE-RATIO> 1.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
