<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No.2-57791
File No.811-2715
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ________ [ ]
Post-Effective Amendment No. 44 [ ]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 44
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
- --------------------------------------------------------------------------------
(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) 255-1255
--------------
Eric E. Miller, 1818 Market Street, Philadelphia, PA 19103
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: April 29, 2000
--------------
It is proposed that this filing will become effective:
______ immediately upon filing pursuant to paragraph (b)
______ on (date) pursuant to paragraph (b)
______ 60 days after filing pursuant to paragraph (a)(1)
__X___ on April 29, 2000 pursuant to paragrah (a)(1)
______ 75 days after filing pursuant to paragrah (a)(2)
______ on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate:
______ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to Rule 414 under the Securities Act of 1933, Delaware Group State Tax-
Free Income Trust, as successor issuer of Delaware Group State Tax-Free Income
Trust, is filing this amendment to the registration statement of Delaware Group
State Tax-Free Income Trust and expressly adopts the registration statement of
Delaware Group State Tax-Free Income Trust as its own for all purposes of the
Securities Act of 1933 and the Investment Company Act of 1940
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 44 to Registration File No.2-57791 include the
following:
1. Facing Page
2. Contents Page
3. Part A - Prospectus
4. Part B - Statement of Additional Information
5. Part C - Other Information
6. Signatures
<PAGE>
DELAWARE
INVESTMENTS
---------------------
Philadelphia o London
Delaware Tax-Free Pennsylvania Fund
Delaware Tax-Free New Jersey Fund
Delaware Tax-Free Ohio Fund
Class A o Class B o Class C
Prospectus
April 29, 2000
Tax-Exempt Current Income Funds
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
2
<PAGE>
Table of contents
Fund profiles page
Delaware Tax-Free Pennsylvania Fund
Delaware Tax-Free New Jersey Fund
Delaware Tax-Free Ohio Fund
How we manage the Funds page
Our investment strategies
The securities we typically invest in
The risks of investing in the Funds
Who manages the Funds page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Funds
Choosing a share class
How to reduce your sales charge
How to buy shares
How to redeem shares
Account minimums
Special services
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
3
<PAGE>
Profile: Delaware Tax-Free Pennsylvania Fund
What are the Fund's goals?
Delaware Tax-Free Pennsylvania Fund seeks a high level of current interest
income exempt from federal income tax and Pennsylvania state and local taxes,
consistent with preservation of capital. Although the Fund will strive to
achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
The Fund will invest primarily in municipal bonds and notes that are exempt from
federal and Pennsylvania state 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
Fund will invest its assets in securities with maturities of various lengths,
depending on market conditions. We will attempt to adjust the average maturity
of the bonds in the portfolio to provide a high level of tax-exempt income
consistent with preservation of capital. The Fund's income level will vary
depending on current interest rates and the specific securities in the
portfolio.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This
Fund will be affected primarily by adverse changes in interest rates. When
interest rates rise, bond prices and the value of the Fund's investments
will generally fall. The Fund may also be affected by the ability of individual
municipalities to pay interest and repay principal on the bonds they issue. That
ability may be impacted by weak economic conditions in the Commonwealth of
Pennsylvania. The Fund is a non-diversified investment company under the
Investment Company Act of 1940 and may be subject to greater risk than if it
were diversified. For a more complete discussion of risk, please turn to page
__.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors seeking monthly income, free from federal and Pennsylvania state and
local taxes.
o Investors with long-term financial goals.
Who should not invest in the Fund
o Investors with very short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
especially, over the short term.
o Investors who are concerned about the special risks associated with
concentrating investments in a particular state or region of the country.
4
<PAGE>
How has Delaware Tax-Free Pennsylvania Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in Delaware Tax-Free Pennsylvania Fund. We show how returns for the Fund's
Class A shares have varied over the past ten calendar years, as well as the
average annual returns of all share classes for one-, five-, and ten-
year or lifetime periods, if applicable. The Fund's past performance does
not necessarily indicate how it will perform in the future.
Year-by-year total return (Class A)
- ---------------------------------------
1999 0.00%
- ---------------------------------------
1998 5.03%
- ---------------------------------------
1997 7.59%
- ---------------------------------------
1996 3.41%
- ---------------------------------------
1995 14.72%
- ---------------------------------------
1994 -3.92%
- ---------------------------------------
1993 10.98%
- ---------------------------------------
1992 9.09%
- ---------------------------------------
1991 12.85%
- ---------------------------------------
1990 4.57%
- ---------------------------------------
The Funds' Class A had a 0.00% calendar year-to-date return as of March 31,
2000. During the periods illustrated in this bar chart, Class A's highest
quarterly return was 0.00% for the quarter ended ______________ and its lowest
quarterly return was 0.00%) for the quarter ended _________________.
The maximum Class A sales charge of 3.75%, which is normally deducted when you
purchase shares, is not reflected in the year-by-year total returns above or in
the bar chart. If this fee were included, the returns would be less than those
shown. The average annual returns shown in the table below do include the sales
charge.
5
<PAGE>
How has Delaware Tax-Free Pennsylvania Fund performed? (continued)
Average annual returns for periods ending 12/31/99
<TABLE>
<CAPTION>
Lehman
Brothers
CLASS A B C Municipal
(if redeemed)* (if redeemed)* Bond
(Inception 3/23/77) (Inception 5/2/94) (Inception 11/29/95) Index
<S> <C> <C> <C> <C>
1 year 0.00% 0.00% 0.00% 0.00%
5 years 0.00% 0.00% N/A 0.00%
10 years or lifetime** 0.00% 0.00% 0.00% 0.00%
</TABLE>
The table above shows the Fund's average annual returns compared to the
performance of the Lehman Brothers Municipal Bond Index. You should remember
that unlike the Fund, the index is unmanaged and doesn't reflect the actual
costs of operating a mutual fund, such as the costs of buying, selling and
holding securities.
* If shares were not redeemed, the returns for Class B would be 0.00% and and
0.00% for the one-year, five-year and lifetime periods, respectively. Returns
for Class C would be 0.00% and 0.00% for the one-year and lifetime periods,
respectively.
** Lifetime returns are shown if the Fund or Class existed for less than 10
years. Lehman Brothers Municipal Bond Index returns are for 10 years. Lehman
Brothers Municipal Bond Index returns for Class B and Class C lifetimes were
0.00% and 0.00%, respectively. Maximum sales charges are included in the Fund
returns above.
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
CLASS A B C
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
Purchases as a percentage of offering price 3.75% none none
- --------------------------------------------------------------------------------------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none(1) 4%(2) 1%(3)
- --------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
Reinvested dividends none none none
- --------------------------------------------------------------------------------------------
Redemption fees none none none
- --------------------------------------------------------------------------------------------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Management fees 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.00%(4) 1.00% 1.00%
- -------------------------------------------------------------------------------------------
Other expenses 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------
Total operating expenses 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(5) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
- --------------------------------------------------------------------------------
CLASS(6) A B B C C
(if redeemed) (if redeemed)
- --------------------------------------------------------------------------------
1 year
- --------------------------------------------------------------------------------
3 years
- --------------------------------------------------------------------------------
5 years
- --------------------------------------------------------------------------------
10 years
- --------------------------------------------------------------------------------
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is paid a
commission, a contingent deferred sales charge will apply to redemptions made
within two years of purchase. Additional Class A purchase options that involve a
contingent deferred sales charge may be permitted from time to time and will be
disclosed in the Prospectus if they are available.
(2) If you redeem Class B shares during the first two years after you buy them,
you will pay a contingent deferred sales charge of 4%, which declines to 3%
during the third and fourth years, 2% during the fifth year, 1% during the sixth
year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Board of Trustees adopted a formula for calculating 12b-1 plan expenses
for Delaware Tax-Free Pennsylvania Fund's Class A shares that went into effect
on June 1, 1992. Under this formula, 12b-1 plan expenses will not be more than
0.30% or less than 0.10%.
(5) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the Fund's
total operating expenses remain unchanged in each of the periods we show.
(6) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
7
<PAGE>
Profile: Delaware Tax-Free New Jersey Fund
What are the Fund's goals?
Delaware Tax-Free New Jersey Fund seeks a high level of current interest
income exempt from federal income tax and New Jersey state and local taxes,
consistent with preservation of capital. Although the Fund will strive to
achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
The Fund will invest primarily in municipal bonds and notes that are exempt from
federal and New Jersey state 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
Fund will invest its assets in securities with maturities of various lengths,
depending on market conditions. We will attempt to adjust the average maturity
of the bonds in the portfolio to provide a high level of tax-exempt income
consistent with preservation of capital. The Fund's income level will vary
depending on current interest rates and the specific securities in the
portfolio.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This
Fund will be affected primarily by adverse changes in interest rates. When
interest rates rise, bond prices and the value of the Fund's investments
will generally fall. The Fund may also be affected by the ability of individual
municipalities to pay interest and repay principal on the bonds they issue. That
ability may be impacted by weak economic conditions in the state of New Jersey.
The Fund is a non-diversified investment company under the Investment Company
Act of 1940 and may be subject to greater risk than if it were diversified. For
a more complete discussion of risk, please turn to page __.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors seeking monthly income, free from federal, New Jersey state and
local taxes.
o Investors with long-term financial goals.
Who should not invest in the Fund
o Investors with very short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
especially, over the short term.
o Investors who are concerned about the special risks associated with
concentrating investments in a particular state or region of the country.
8
<PAGE>
How has Delaware Tax-Free New Jersey Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show returns for the Fund's Class A shares for the past two
calendar years, as well as the average annual returns of all shares for
one-year and lifetime periods. The Fund's past performance does not
necessarily indicate how it will perform in the future. The returns reflect
voluntary expense caps. The returns would be lower without the caps.
Year-by-year total return (Class A)
1999 0.00%
1998 5.77%
The Fund's Class A had a 0.00% Calendar year-to-date return as of March 31,
2000. During the periods illustrated in this bar chart, Class A's highest
quarterly return was 0.00% for the quarter ended ________________ and its lowest
return quarterly was 0.00% for the quarter ended _____________________.
The maximum Class A sales charge of 3.75%, which is normally deducted when
you purchase shares, is not reflected in the year-by-year total returns above
or in the bar chart. If this fee were included, the returns would be less than
those shown. The average annual returns shown in the table on page __ do include
the sales charge.
Average annual returns for periods ending 12/31/99
<TABLE>
<CAPTION>
CLASS A B C Lehman
Brothers
Municipal
Bond
(if redeemed)* (if redeemed)* Index
(Inception 9/2/97) (Inception 9/2/97) (Inception 9/2/97)
<S> <C> <C> <C> <C>
1 year 0.00% 0.00% 0.00% 0.00%
Lifetime 0.00% 0.00% 0.00% 0.00%
</TABLE>
The table above shows the Fund's average annual returns compared to the
performance of the Lehman Brothers Municipal Bond Index. You should remember
that unlike the Fund, the index is unmanaged and doesn't reflect the actual
costs of operating a mutual fund, such as the costs of buying, selling and
holding securities.
* If shares were not redeemed, the returns for Class B would be 0.00%
and 0.00% for the one-year and lifetime periods, respectively. Returns for
Class C would be 0.00% and 0.00% for the one-year and lifetime
periods, respectively.
9
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
- --------------------------------------------------------------------------------
CLASS A B C
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
purchases as a percentage of offering price 3.75% none none
- --------------------------------------------------------------------------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none(1) 4%(2) 1%(3)
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
reinvested dividends none none none
- --------------------------------------------------------------------------------
Redemption fees none none none
- --------------------------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets.
- --------------------------------------------------------------------------------
Management fees 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.25%(4) 1.00% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Total operating expenses(5) 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(6) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
- --------------------------------------------------------------------------------
CLASS(7) A B B C C
(if redeemed) (if redeemed)
- --------------------------------------------------------------------------------
1 year
- --------------------------------------------------------------------------------
3 years
- --------------------------------------------------------------------------------
5 years
- --------------------------------------------------------------------------------
10 years
- --------------------------------------------------------------------------------
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is paid a
commission, a contingent deferred sales charge will apply to redemptions
made within two years of purchase. Additional Class A purchase options that
involve a contingent deferred sales charge may be permitted from time to time
and will be disclosed in the Prospectus if they are available.
(2) If you redeem Class B shares during the first two years after you buy them,
you will pay a contingent deferred sales charge of 4%, which declines to 3%
during the third and fourth years, 2% during the fifth year, 1% during the sixth
year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Board of Trustees has set the 12b-1 Plan payments at 0.25%. Payments
under the Plan may not exceed 0.30%.
10
<PAGE>
(5) The investment manager has agreed to waive fees and pay expenses from
January 22, 1998 through ________________, in order to prevent total operating
expenses (excluding any taxes, interest, brokerage fees, extraordinary expenses
and 12b-1 fees) from exceeding 0.25% of average daily net assets. The fees and
expenses shown in the table above do not reflect this voluntary expense cap. The
following table shows actual operating expenses which are based on the most
recently completed fiscal year and reflect the manager's and distributor's
current fee waivers and payments.
- --------------------------------------------------------------------------------
Actual Fund operating expenses including voluntary expense caps in
effect through ______________, 2000.
CLASS A B C
- --------------------------------------------------------------------------------
Management fees 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.25% 1.00% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Total operating expenses 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
(6) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the Fund's
total operating expenses remain unchanged in each of the periods we show. This
example does not reflect the voluntary expense cap described in footnote 5.
(7) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
11
<PAGE>
Profile: Delaware Tax-Free Ohio Fund
What are the Fund's goals?
Delaware Tax-Free Ohio Fund seeks a high level of current interest income
exempt from federal income tax and Ohio state and local income taxes, consistent
with preservation of capital. Although the Fund will strive to achieve its goal,
there is no assurance that it will.
What are the Fund's main investment strategies?
The Fund will invest primarily in municipal bonds and notes that are exempt from
federal and Ohio 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 Fund will invest its
assets in securities with maturities of various lengths, depending on market
conditions. We will attempt to adjust the average maturity of the bonds in the
portfolio to provide a high level of tax-exempt income consistent with
preservation of capital. The Fund's income level will vary depending on current
interest rates and the specific securities in the portfolio.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This
Fund will be affected primarily by adverse changes in interest rates. When
interest rates rise, bond prices and the value of the Fund's investments
will generally fall. The Fund may also be affected by the ability of individual
municipalities to pay interest and repay principal on the bonds they issue. That
ability may be impacted by weak economic conditions in the state of Ohio. The
Fund is a non-diversified investment company under the Investment Company Act of
1940 and may be subject to greater risk than if it were diversified. For a more
complete discussion of risk, please turn to page __.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors seeking monthly income, free from federal and Ohio state and local
taxes.
o Investors with long-term financial goals.
Who should not invest in the Fund
o Investors with very short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
especially, over the short term.
o Investors who are concerned about the special risks associated with
concentrating investments in a particular state or region of the country.
12
<PAGE>
How has Delaware Tax-Free Ohio Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show returns for the Fund's Class A shares for the past two
calendar years, as well as the average annual returns of all shares for one year
and since inception. The Fund's past performance does not necessarily indicate
how it will perform in the future. The returns reflect voluntary expense caps.
The returns would be lower without the caps.
Year-by-year total return (Class A)
1999 0.00%
1998 6.41%
The Fund's Class A had a 0.00% calendar year-to-date retrun as of March 31,
2000. During the periods illustrated in this bar chart, Class A's highest
quarterly return was 0.00% for the quarter ended ________________ and its lowest
quarterly return was 0.00% for the quarter ended ______________________.
The maximum Class A sales charge of 3.75%, which is normally deducted when
you purchase shares, is not reflected in the year-by-year total returns above
or in the bar chart. If this fee were included, the returns would be less than
those shown. The average annual returns shown in the table on page __ do include
the sales charge.
Average annual returns for periods ending 12/31/99
<TABLE>
<CAPTION>
CLASS A B C Lehman
Brothers
Municipal
Bond
(if redeemed)* (if redeemed)* Index
(Inception 9/3/97) (Inception 9/3/97) (Inception 9/3/97)
<S> <C> <C> <C> <C>
1 year 0.00% 0.00% 0.00% 0.00%
Lifetime 0.00% 0.00% 0.00% 0.00%
</TABLE>
The table above shows the Fund's average annual returns compared to the
performance of the Lehman Brothers Municipal Bond Index. You should remember
that unlike the Fund, the index is unmanaged and doesn't reflect the actual
costs of operating a mutual fund, such as the costs of buying, selling and
holding securities.
* If shares were not redeemed, the returns for Class B would be 0.00% and
0.00% for the one-year and lifetime periods, respectively. Returns for Class C
would be 0.00% and 0.00% for the one-year and lifetime periods, respectively.
13
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
- --------------------------------------------------------------------------------
CLASS A B C
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
purchases as a percentage of offering price 3.75% none none
- --------------------------------------------------------------------------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none(1) 4%(2) 1%(3)
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
reinvested dividends none none none
- --------------------------------------------------------------------------------
Redemption fees none none none
- --------------------------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets .
- --------------------------------------------------------------------------------
Management fees 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.25%(4) 1.00% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Total operating expenses(5) 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
14
<PAGE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(6) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
- --------------------------------------------------------------------------------
CLASS(7) A B B C C
(if redeemed) (if redeemed)
- --------------------------------------------------------------------------------
1 year
- --------------------------------------------------------------------------------
3 years
- --------------------------------------------------------------------------------
5 years
- --------------------------------------------------------------------------------
10 years
- --------------------------------------------------------------------------------
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is paid a
commission, a contingent deferred sales charge will apply to redemptions made
within two years of purchase. Additional Class A purchase options that involve a
contingent deferred sales charge may be permitted from time to time and will be
disclosed in the Prospectus if they are available.
(2) If you redeem Class B shares during the first two years after you buy them,
you will pay a contingent deferred sales charge of 4%, which declines to 3%
during the third and fourth years, 2% during the fifth year, 1% during the sixth
year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Board of Trustees has set the 12b-1 Plan Payments at 0.25%. Payments
under the Plan may not exceed 0.30%.
(5) The investment manager has agreed to waive fees and pay expenses from
January 22, 1998 through _____________________, in order to prevent total
operating expenses (excluding any taxes, interest, brokerage fees, extraordinary
expenses and 12b-1 fees) from exceeding 0.25% of average daily net assets. The
fees and expenses shown in the table above do not reflect this voluntary expense
cap. The following table shows actual operating expenses which are based on the
most recently completed fiscal year and reflect the manager's and distributor's
current fee waivers and payments.
- --------------------------------------------------------------------------------
Actual Fund operating expenses including voluntary expense caps
CLASS A B C
- --------------------------------------------------------------------------------
Management fees 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.25% 1.00% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Total operating expenses 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
(6) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the Fund's
total operating expenses remain unchanged in each of the periods we show. This
example does not reflect the voluntary expense cap described in footnote 4.
(7) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
15
<PAGE>
How we manage the Funds
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Our investment strategies
We analyze economic and market conditions, seeking to identify the securities or
market sectors that we believe are the best investments for a particular
fund. Following are descriptions of how the portfolio managers pursue the Funds'
investment goals.
Each Fund will invest at least 80% of its net assets in tax-exempt securities
that are described below. We will generally invest in securities for income
rather than seeking capital appreciation through active trading. However, we may
sell securities for a variety of reasons such as: to reinvest the proceeds in
higher yielding securities, to eliminate investments not consistent with the
preservation of the capital or to honor redemption requests. As a result we may
realize losses or capital gains which could be taxable to shareholders.
Each Fund intends to invest at least 80% of its net assets in debt obligations
that are rated in the top four quality grades, that is BBB or better, by a
nationally recognized statistical ratings organization (NRSRO) at the time of
purchase. Each Fund may buy securities that have not been rated if we believe
they are comparable in quality to the top four rating categories. The fourth
grade is considered medium grade and may have speculative characteristics. Each
Fund may invest up to 20% of its net assets in securities with ratings lower
than the top four grades and in comparable unrated securities. These securities
(commonly known as "junk bonds") are speculative and may involve greater risks
and have higher yields.
Each Fund may invest up to 20% of its net assets in bonds whose income is
subject to the federal alternative minimum tax.
Each Fund 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, Delaware New Jersey Fund and Delaware
Ohio Fund 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 issuer. Neither Fund will, however, invest more than 25% of
its total assets in bonds issued for companies in the same industry. Percentage
limitations outlined above are determined at the time an investment is made.
Delaware Tax-Free Pennsylvania Fund
We invest primarily in municipal securities paying interest income that is
exempt from federal and Pennsylvania income taxes. Determination of whether a
bond's income qualifies for tax-exemption is based on the opinion of the bond
issuer's legal counsel. The securities we invest in include debt obligations of
the Commonwealth of Pennsylvania and its political subdivisions, agencies,
authorities and instrumentalities and also other issuers such as Puerto Rico and
the Virgin Islands whose bonds are also free of federal and Pennsylvania state
income taxes.
Delaware Tax-Free New Jersey Fund
We invest primarily in municipal securities paying interest income that is
exempt from federal and New Jersey income taxes. Determination of whether a
bond's income qualifies for tax-exemption is based on the opinion of the bond
issuer's legal counsel. The securities we invest in include debt obligations of
the State of New Jersey and its political subdivisions, agencies, authorities
and instrumentalities and also other issuers such as Puerto Rico and the Virgin
Islands whose bonds are also free of federal and New Jersey state income taxes.
Delaware Tax-Free Ohio Fund
We invest primarily in municipal securities paying interest income that is
exempt from federal and Ohio income taxes. Determination of whether a bond's
income qualifies for tax-exemption is based on the opinion of the bond issuer's
legal counsel. The securities we invest in include debt obligations of the State
of Ohio and its political subdivisions, agencies, authorities and
instrumentalities and also other issuers such as Puerto Rico and the Virgin
Islands whose bonds are also free of federal and Ohio state income taxes.
16
<PAGE>
Each Fund's investment objective is non-fundamental. This means that the Board
of Trustees may change an objective without obtaining shareholder approval. If
an objective were changed, we would notify shareholders before the change in the
objective became effective.
17
<PAGE>
The securities we typically invest in
Fixed-income securities offer the potential for greater income payments than
stocks, and may also provide capital appreciation. Municipal bond securities
typically pay income free of federal income taxes and may also be free of state
income taxes in the state where they are issued.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
General obligation bonds: municipal bonds on which the Each Fund may invest without limit in general obligation
payment of principal and interest is secured by the issuer's bonds with an emphasis on bonds rated in the top four
pledge of its full faith, credit and taxing power. quality grades.
- ------------------------------------------------------------------------------------------------------------------------------------
Revenue bonds: municipal bonds on which principal and Each Fund may invest without limit in revenue bonds with an
interest payments are made from revenues derived from a emphasis on bonds rated in the top four quality grades.
particular facility, from the proceeds of a special excise
tax or from revenue generated by the operating project.
Principal and interest are not secured by the general taxing
power. Tax-exempt industrial development bonds, in most
cases, are a type of revenue bond that is not backed by the
credit of the issuing municipality and may therefore involve
more risk.
- ------------------------------------------------------------------------------------------------------------------------------------
Insured Municipal Bonds: Various municipal issuers may Each Fund may invest without limit in insured bonds. We do
obtain insurance for their obligations. In the event of a not evaluate the creditworthiness of the private insurer.
default, the insurer is required to make payments of Instead, we focus first on the creditworthiness of the
interest and principal when due to the bondholders. However, actual bond issuer and its ability to pay interest and
there is no assurance that the insurance company will meet principal.
its obligations. Insured obligations are typically rated in
the top quality grades by an NRSRO. It is possible that a substantial portion of a Fund's
portfolio may consist of municipal bonds that are insured by
a single insurance company.
Insurance is available on uninsured bonds and each Fund may
purchase such insurance directly. We will generally do so
only if we believe that purchasing and insuring a bond
provides an investment opportunity at least comparable to
owning other available uninsured securities.
- ------------------------------------------------------------------------------------------------------------------------------------
Private Activity or Private Placement Bonds: municipal bond Each Fund may invest up to 20% of its assets in bonds whose
issues whose proceeds are used to finance certain income is subject to the federal alternative minimum tax.
non-government activities, including some types of This means that a portion of the Fund's distributions could
industrial revenue bonds such as privately-owned sports and be subject to the federal alternative minimum tax that
convention facilities. The Tax Reform Act of 1986 subjects applies to certain taxpayers.
interest income from these bonds to the federal alternative
minimum tax and makes the tax-exempt status of certain bonds
dependent on the issuer's compliance with specific
requirements after the bonds are issued.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Municipal Leases and Certificates of Participation (COPs): Each Fund may also invest in municipal lease obligations
Certificates of Participation are widely used by state and primarily through certificates of participation.
local governments to finance the purchase of property and
facilities. COPs are like installment purchase agreements. A As with its other investments, each Fund expects its
governmental corporation may create a COP when it issues investments in municipal lease obligations to be exempt from
long-term bonds to pay for the acquisition of property or regular federal income taxes.
facilities. The property or facilities are then leased to a
municipality, which makes lease payments to repay interest We invest only in certificates of participation that are
and principal to the holders of the bonds. Once the lease rated within the four highest rating categories of NRSRO. We
payments are completed, the municipality gains ownership of may also invest in unrated COPs that we believe to be of
the property for a nominal sum. comparable quality. We believe this quality strategy
mitigates the risk of non-appropriation which is described
below.
A feature that distinguishes COPs from municipal debt is
that leases typically contain a "nonappropriation" or
"abatement" clause. This means the municipality leasing the
property or facility must use its best efforts to make lease
payments, but may terminate the lease without penalty if its
legislature or other appropriating body does not allocate
the necessary money. In such a case, the creator of the COP,
or its agent, is typically entitled to repossess the
property. In most cases, however, the market value of the
property will be less than the amount the municipality was
paying.
COPs will be considered illiquid and subject to each Fund's
limitations on illiquid securities unless we determine they
are liquid according to the guidelines set by the Board of
Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
Inverse floaters: Inverse floaters are instruments with Delaware Tax-Free Pennsylvania Fund may invest in inverse
floating or variable interest rates that move in the floaters to the extent that investments in these securities,
opposite direction, of short-term interest rates usually at when combined with futures contracts, options on futures
an accelerated speed. Consequently, the market values of contracts and securities that are rated below investment
inverse floaters will generally be more volatile than other grade, do not exceed 20% of the Fund's total assets.
tax-exempt investments. These securities may be considered
to be derivative securities. Delaware Tax-Free New Jersey Fund and Delaware Tax-Free Ohio
Fund may invest up to 10% of their respective assets in
inverse floaters.
Investment in inverse floaters could increase the volatility
of the Funds' share price.
- ------------------------------------------------------------------------------------------------------------------------------------
Variable rate and floating rate obligations: These Each Fund may purchase "floating-rate" and "variable-rate"
obligations pay interest at rates that are not fixed, but obligations. We generally do not intend to invest more than
instead vary with changes in specified market rates or 5% of any Fund's net assets in these instruments.
indexes on pre-designed dates.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Advanced refunded bonds: In an advance refunding, the issuer We may invest without limit in refunded bonds. These bonds
will use the proceeds of a new bond issue to purchase high are generally considered to be of very high quality because
grade interest bearing debt securities, that are deposited of the escrow account which typically holds U.S. Treasuries.
into an irrevocable escrow account held by a trustee bank to
secure all future payments of principal and interest on
pre-existing bonds which are then considered to be "advance
refunded bonds." Escrow secured bonds often receive the
highest rating from S&P and Moody's.
- ------------------------------------------------------------------------------------------------------------------------------------
High-yield, higher risk municipal bonds: Municipal debt Each Fund may invest up to 20% of its net assets in high
obligations rated lower than investment grade by a yield, high risk fixed-income securities. We will not invest
nationally recognized statistical ratings organization in securities, that are rated lower than B by S&P or
(NRSRO) or, if unrated, of comparable quality. These similarly by another rating agency. We will not invest in
securities are often referred to as "junk bonds" and are unrated bonds that we consider to be of a quality lower than B.
considered to be of poor standing and predominately
speculative.
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed securities whose We may invest without limitation in privately placed
resale is restricted under securities law. securities that are eligible for resale only among certain
institutional buyers without registration. These are
commonly known as "Rule 144A Securities."
- ------------------------------------------------------------------------------------------------------------------------------------
Illiquid securities: Securities that do not have a ready Delaware Tax-Free Pennsylvania Fund may invest up to 10% of
market, and cannot be easily sold within seven days at net assets in illiquid securities
approximately the price that the Fund has valued them.
Delaware Tax-Free New Jersey Fund and Delaware Tax-Free Ohio
Fund may invest up to 15% of their respective net assets in
illiquid securities.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Funds may also invest in other securities including futures. Delaware
Tax-Free New Jersey Fund and Delaware Tax-Free Ohio Fund may invest in options,
zero coupon bonds and derivative tax-exempt obligations. Please see the
Statement of Additional Information for more information on these securities as
well as those listed in the table above.
Borrowing money
Each Fund is permitted to borrow money but normally does not do so. As a
temporary measure for extraordinary purposes or to meet redemption requests,
Delaware Tax-Free New Jersey Fund and Delaware Tax-Free Ohio Fund may borrow
up to 10% of the value of their assets.
Purchasing securities on a when-issued or delayed delivery basis
Each Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery up to 45 days
later. The Fund will designate cash or securities to cover its obligations, and
will value the designated assets daily.
Portfolio turnover
We anticipate that each Fund's annual portfolio turnover will be less than
100%. A turnover rate of 100% would occur if a Fund sold and replaced securities
valued at 100% of its net assets within one year.
20
<PAGE>
The risks of investing in the Funds
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. An investment in Delaware Tax-Free Pennsylvania
Fund, Delaware Tax-Free New Jersey Fund or Delaware Tax-Free Ohio Fund typically
provides the best results when held for a number of years. Following are the
chief risks you assume when investing in these funds. Please see the Statement
of Additional Information for further discussion of these risks and other risks
not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Pennsylvania Fund,
Delaware Tax-Free New Jersey Fund and
Delaware Tax-Free Ohio Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of the We maintain a long-term investment approach and focus on
securities in a certain market--like the stock or bond bonds we believe will provide a steady income stream
market--will decline in value because of factors such as regardless of interim market fluctuations. We do not try to
economic conditions, future expectations or investor predict overall market movements and generally do not trade for
confidence. short-term purposes.
- ------------------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk that the value of We diversify the Fund's assets across different types of
securities in a particular industry or the value of an municipal bonds and among bonds representing different
individual security will decline because of changing industries and regions within a state. We also follow a
expectations for the performance of that industry or for the rigorous selection process before choosing securities for
individual issuer of the security. the portfolio.
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that securities, particularly We do not try to increase return by predicting and
bonds with longer maturities, will decrease in value if aggressively capitalizing on interest rate moves.
interest rates rise.
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Risk is the possibility that a bond's issuer (or an We conduct careful, credit analysis of individual bonds. We
entity that insures the bond) will be unable to make timely focus on high quality bonds and limit our holdings of bonds
payments of interest and principal. rated below investment grade. We also hold a number of
different bonds in the portfolio. All of this is designed to
help reduce credit risk.
In the case of municipal bonds, issuers may be affected by
poor economic conditions in their state.
- ------------------------------------------------------------------------------------------------------------------------------------
Call risk is the risk that a bond issuer will prepay the We take into consideration the likelihood of prepayment when
bond during periods of low interest rates, forcing an we select bonds and in certain environments may look for
investor to reinvest their money at interest rates that bonds that have protection against early prepayment.
might be lower than rates on the called bond.
- ------------------------------------------------------------------------------------------------------------------------------------
Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price
that a Fund has valued them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Pennsylvania Fund,
Delaware Tax-Free New Jersey Fund and
Delaware Tax-Free Ohio Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Non-diversified funds Non-diversified funds have the Each Fund is a non-diversified investment company, subject
flexibility to invest as much as 50% of their assets in as to this risk. Nevertheless, we typically hold securities
few as two issuers provided no single issuer accounts for from a variety of different issuers representing different
more than 25% of the portfolio. The remaining 50% of the sectors and different types of municipal projects. We also
portfolio must be diversified so that no more than 5% of the perform extensive credit analysis on all securities. We are
Fund's assets is invested in the securities of a single particularly diligent in reviewing the credit status of
issuer. When a Fund invests its assets in fewer issuers, the bonds that represent a larger percentage of portfolio
value of Fund shares may increase or decrease more rapidly assets.
than if the Fund were fully diversified. If a Fund has
invested more than 5% of its assets in a single issuer and
that issuer encounters difficulties in satisfying its
financial obligations, the Fund would be affected more than
a fully diversified fund.
- ------------------------------------------------------------------------------------------------------------------------------------
Concentration risk is the risk that a fund which Each Fund invests primarily in a specific state and may be
concentrates on investments from a particular state or subject to concentration risk. However, we believe that the
region could be adversely affected by political and economic economies and municipal bond markets in Pennsylvania, New
conditions in that state or region. There is also a risk Jersey, and Ohio are broad enough to satisfy our investment
that the supply of municipal bonds in a particular state or needs. In addition, we have the flexibility to invest in
region would not be sufficient to meet the portfolio's issuers in Puerto Rico and the Virgin Islands whose bonds
needs. are also free of Pennsylvania, New Jersey, and Ohio state
income taxes.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
Who manages the Funds
Investment manager
The Funds are managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Funds, manages the Funds' business affairs and provides daily
administrative services. For these services, the manager was paid a fee for the
last fiscal year as follows:
Investment management fees
<TABLE>
<CAPTION>
Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free
Pennsylvania New Jersey Ohio
Fund Fund Fund
<S> <C> <C> <C>
As a percentage of average daily net assets 0.00% 0.00%* 0.00%*
</TABLE>
*Reflects a reduction in fees due to an expense cap.
Portfolio managers
Patrick P. Coyne and Mitchell L. Conery have primary responsibility for making
day-to-day investment decisions for each Fund. Mr. Coyne and Mr. Conery have
managed Delaware Tax-Free New Jersey Fund and Delaware Tax-Free Ohio Fund since
their inception. Mr. Coyne assumed primary responsibility for managing Delaware
Tax-Free Pennsylvania Fund on November 26, 1996. Mr. Conery became co-manager of
Delaware Tax-Free Pennsylvania Fund in January 1997.
Patrick P. Coyne, Vice President/Senior Portfolio Manager for the Fund, is a
graduate of Harvard University with an MBA from the University of Pennsylvania's
Wharton School. Mr. Coyne joined Delaware Investment's fixed-income department
in 1990. Prior to joining Delaware Investments, he was a manager of Kidder,
Peabody & Co. Inc.'s trading desk, and specialized in trading high grade
municipal bonds and municipal futures contracts. Mr. Coyne is a member of the
Municipal Bond Club of Philadelphia.
Mitchell L. Conery, Vice President/Senior Portfolio Manager for the Fund, joined
Delaware Investments in January 1997. Mr. Conery holds a bachelor's degree from
Boston University and an MBA in Finance from the State University of New York at
Albany. He has served as an investment officer with Travelers Insurance and as a
research analyst with CS First Boston and MBIA Corporation.
23
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS
<TABLE>
<CAPTION>
Board of Trustees
<S> <C> <C>
Investment Manager The Funds Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page ___ for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of
Trustees which has oversight responsibility for the management of the fund's
business affairs. Trustees establish procedures and oversee and review the
performance of the investment manager, the distributor and others that perform
services for the fund. At least 40% of the Board of Trustees must be
independent of the fund's investment manager or distributor. These independent
fund trustees, in particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's Prospectus. The investment manager places portfolio orders
with broker/dealers and is responsible for obtaining the best overall execution
of those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
NASD Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
24
<PAGE>
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material
changes in the terms of a fund's management contract must be approved by a
shareholder vote, and funds seeking to change fundamental investment objectives
or policies must also seek shareholder approval.
25
<PAGE>
About your account
Investing in the Funds
You can choose from a number of share classes for each Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class A
o Class A shares have an front-end sales charge of up to 3.75% that you pay
when you buy the shares. The offering price for Class A shares includes the
front-end sales charge.
o If you invest $100,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information for
details.
o Class A shares are also subject to an annual 12b-1 fee no greater than 0.30%
of average daily net assets, which is lower than the 12b-1 fee for Class B
and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge.
Class A Sales Charges
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Amount of Sales charge as % Sales charge as % Dealer's commission as %
purchase of offering price of amount invested of offering price
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $100,000 3.75% 0.00% 3.25%
$100,000 but 3.00% 0.00% 2.50%
under $250,000
$250,000 but 2.50% 0.00% 2.00%
under $500,000
$500,000 but 2.00% 0.00% 1.75%
under $1 million
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you will have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year, and 0.50%
if you redeem them within the second year, unless a specific waiver of the
charge applies.
26
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Amount of Sales charge as % Sales charge as % Dealer's commission as %
purchase of offering price of amount invested of offering price
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1 million up to
$5 million none none 1.00%
Next $20 million
Up to $25 million none none 0.50%
Amount over
$25 million none none 0.25%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Class B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge if you redeem your shares within six years after you
buy them.
o If you redeem Class B shares during the first two years after you buy them,
the shares will be subject to a contingent deferred sales charge of 4%. The
contingent deferred sales charge is 3% during the third and fourth years, 2%
during the fifth year, 1% during the sixth year, and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information for details.
o For approximately eight years after you buy your Class B shares, they are
subject to annual 12b-1 fees no greater than 1% of average daily net assets,
of which 0.25% are service fees paid to the distributor, dealers or others
for providing services and maintaining accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and
any dividends paid on these shares are lower than dividends on Class A
shares.
o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%.
Conversion may occur as late as three months after the eighth anniversary of
purchase, during which time Class B's higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
27
<PAGE>
Class C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge of 1% if you redeem your shares within 12 months
after you buy them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information for details.
o Class C shares are subject to an annual 12b-1 fee which may not be greater
than 1% of average daily net assets, of which 0.25% are service fees paid to
the distributor, dealers or others for providing services and maintaining
shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and
pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any
one time. The limitation on maximum purchases varies for retirement plans.
Each share class of the Funds has adopted a separate 12b-1 plan that allows it
to pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
28
<PAGE>
About your account (continued)
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Program How it works Share class
A B C
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Letter of Intent Through a Letter of Intent you X Although the Letter of
agree to invest a certain Intent and Rights of
amount in Delaware Accumulation do not apply
Investments Funds (except to the purchase of Class
money market funds with no B and C shares, you can
sales charge) over a 13-month combine your purchase of
period to qualify for reduced Class A shares with your
front-end sales charges. purchase of B and C
shares to fulfill your
Letter of Intent or
qualify for Rights of
Accumulation.
- -----------------------------------------------------------------------------------------------------------------------------
Rights of Accumulation You can combine your holdings X
or purchases of all funds in
the Delaware Investments family
(except money market funds with
no sales charge) as well as the
holdings and purchases of your
spouse and children under 21 to
qualify for reduced front-end
sales charges.
- -----------------------------------------------------------------------------------------------------------------------------
Reinvestment of redeemed shares Up to 12 months after you For Class For Class B,
redeem shares, you can reinvest A, you your account will be
the proceeds with no will not credited with the
additional charge. have to contingent deferred
pay an sales charge you
additional previously paid on
front-end the amount you are
sales reinvesting. Your
charge. schedule for
contingent deferred
sales charges and
conversion to Class A
will not start over
again; it will pick
up from the point at
which you redeemed
your shares.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
How to buy shares
GRAPHIC OMITTED: ILLUSTRATION OF A PERSON
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service or through our web site, www.delawareinvestments.com. For more
information about how to sign up for these services, call our Shareholder
Service Center at 800.523.1918.
30
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can generally open an account with
an initial investment of $1,000 and make additional investments at any time for
as little as $100. If you are buying shares under the Uniform Gifts to Minors
Act or the Uniform Transfers to Minors Act{^}, or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of $25 or more.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right
to reject any purchase order.
We determine the Funds' net asset value (NAV) per share at the close of
regular trading of the New York Stock Exchange each business day that the
Exchange is open. We calculate this value by adding the market value of all the
securities and assets in a Fund's portfolio, deducting all liabilities, and
dividing the resulting number by the number of shares outstanding. The result is
the net asset value per share. We price securities and other assets for which
market quotations are available at their market value. We price fixed-income
securities on the basis of valuations provided to us by an independent pricing
service that uses methods approved by the Board of Trustees. Any
fixed-income securities that have a maturity of less than 60 days we price at
amortized cost. For all other securities, we use methods approved by the
Board of Trustees that are designed to price securities at their fair market
value.
31
<PAGE>
How to redeem shares
GRAPHIC OMITTED: ILLUSTRATION OF A PERSON
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000 , you must include a signature guarantee for each owner. Signature
guarantees are also required when you request redemption proceeds to be
sent to an address other than the address of record on an account.
GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, a bank wire fee may be deducted
from your proceeds. Bank information must be on file before you request a wire
redemption.
GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service or
through our web site, www.delawareinvestments.com. For more information
about how to sign up for these services, call our Shareholder Service Center at
800.523.1918.
32
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern Time) you will receive the net asset value as determined on the business
day we receive your request. We will deduct any applicable contingent deferred
sales charges. You may also have to pay taxes on the proceeds from your sale of
shares. We will send you a check, normally the next business day, but no later
than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares--not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for Uniform Gift to Minors Act accounts or accounts with
automatic investing plans) for three or more consecutive months, you will have
until the end of the current calendar quarter to raise the balance to the
minimum. If your account is not at the minimum by the required time, you will be
charged a $9 fee for that quarter and each quarter after that until your account
reaches the minimum balance. If your account does not reach the minimum balance,
the Fund may redeem your account after 60 days' written notice to you.
33
<PAGE>
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly or quarterly
investments directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as Social Security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for similar shares in other
funds, your new shares will be subject to the same contingent deferred sales
charge as the shares you originally purchased. The holding period for the
contingent deferred sales charge will also remain the same, with the amount of
time you held your original shares being credited toward the holding period of
your new shares. You don't pay sales charges on shares that you acquired through
the reinvestment of dividends. You may have to pay taxes on your exchange. When
you exchange shares, you are purchasing shares in another fund so you should be
sure to get a copy of the fund's Prospectus and read it carefully before
buying shares through an exchange.
34
<PAGE>
About your account (continued)
Special services (continued)
MoneyLine(SM) On Demand Service
Through our MoneyLine(SM) On Demand Service, you or your financial adviser may
transfer money between your Fund account and your predesignated bank account by
telephone request. Delaware Investments does not charge a fee for this service;
however, your bank may assess one. MoneyLine has a minimum transfer of $25 and
a maximum transfer of $50,000.
MoneyLine Direct Deposit Service
Through our MoneyLine Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account. Delaware
Investments does not charge a fee for this service; however, your bank may
assess one.
Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly or
quarterly payment from your account made to you or someone you designate. If the
value of your account is $5,000 or more, you can make withdrawals of at least
$25 monthly, or $75 quarterly. You may also have your withdrawals deposited
directly to your bank account through our MoneyLine Direct Deposit Service.
Dividends, distributions and taxes
For each Fund, dividends, if any, are paid monthly, while any capital gains are
distributed annually. We automatically reinvest all dividends and any capital
gains, unless you tell us otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your distributions from these Funds is the same whether you
reinvest your dividends or receive them in cash.
Dividends paid by the Funds are generally expected to be exempt from federal
income tax. However, they must be included in the tax base for determining how
much of a shareholder's Social Security benefits are subject to federal income
tax. Shareholders are required to disclose tax-exempt interest received from the
Funds on their federal income tax returns.
Distributions from a Fund's long-term capital gains are taxable as capital
gains. Short-term capital gains are generally taxable as ordinary income. Any
capital gains may be taxable at different rates depending on the length of time
the Fund held the assets. In addition, you may be subject to state and local
taxes on distributions.
The sale of Fund shares either through redemption or exchange, is a taxable
event and may result in a capital gain or loss to shareholders.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year
as well as all redemptions and exchanges.
Delaware Tax-Free Pennsylvania Fund
Any dividends paid by the Fund that are properly attributable to interest on
Pennsylvania state and municipal obligations or U.S. government obligations (the
interest on which is exempt from state taxation under the laws of Pennsylvania
or the United States) will be exempt from Pennsylvania personal income tax. For
shareholders who are residents of Philadelphia, income from these sources, as
well as distributions designated as capital gain dividends, will also be exempt
from Philadelphia School District income tax.
Shares of the Fund are exempt from Pennsylvania county personal property tax to
the extent the portfolio securities consist of Pennsylvania state and municipal
obligations or qualifying obligations of the United States and its agencies and
instrumentalities on the annual assessment date. It should be noted, however,
that at present, Pennsylvania counties generally have stopped assessing personal
property taxes. This is due, in part, to ongoing litigation challenging the
validity of the tax.
35
<PAGE>
Shareholders of the Fund will receive notification from the Fund annually as to
the taxability of such distributions in Pennsylvania.
Delaware Tax-Free New Jersey Fund
Any distributions paid by the Fund that are properly attributable to income or
net capital gains from New Jersey state and municipal obligations or obligations
of the United States and certain of its territories, agencies and
instrumentalities will be exempt from the New Jersey gross income tax (the
interest on which is exempt from state taxation under the laws of the state of
New Jersey or the United States).
Gains resulting from the redemption or sale of shares of the Fund will also be
exempt from New Jersey gross income tax.
Tax-Free New Jersey Fund has qualified and will continue to qualify as a
"qualified investment fund" under the New Jersey gross income tax law except
when investing for defensive purposes under certain circumstances. This
qualification is described more fully in the Statement of Additional
Information. The exemptions described above are effective as long as the Fund
remains a "qualified investment fund." If the Fund fails to be a qualified
investment fund, none of its distributions for the entire taxable year will
qualify for tax-exempt status under New Jersey law.
Delaware Tax-Free Ohio Fund
Any distributions paid by the Fund that are properly attributable to interest on
obligations issued by or on behalf of the State of Ohio, political subdivisions
thereof, or agencies or instrumentalities thereof (Ohio Obligations) are exempt
from
o Ohio personal income tax, and
o school district and municipal income taxes in Ohio
provided that the Fund continues to qualify as a regulated investment company
for federal income tax purposes and that at all times at least 50% of the value
of the total assets of the Fund consists of Ohio Obligations or similar
obligations of other states or their subdivisions. It is assumed for purposes of
this discussion of Ohio taxation that these requirements are satisfied.
All distributions received from the Fund are excluded from the net income base
of the Ohio corporation franchise tax to the extent that they (a) are properly
attributable to interest on Ohio Obligations, or (b) represent exempt-interest
dividends for federal income tax purposes. Fund shares will be included in a
shareholder's tax base for purposes of computing the Ohio corporation franchise
tax on the net worth basis.
Capital gains distributions from the Fund will be exempt from Ohio personal
income tax and school district and municipal income taxes in Ohio and will be
excluded from the net income base of the Ohio corporation franchise tax provided
that such distributions are properly attributable to profits made on the Fund's
sale, exchange or other disposition of Ohio Obligations.
Distributions properly attributable to interest on obligations of the United
States or of any authority, commission, or instrumentality of the United States
or obligations of Puerto Rico, the Virgin Islands, or Guam or their authorities
or instrumentalities (the interest on which is exempt from state income taxes
under the laws of the United States) will also be exempt from Ohio personal
income tax and school district and municipal income taxes in Ohio. Distributions
properly attributable to interest on obligations of U.S. territories (for
example Puerto Rico) will also be excluded from the net income base of the Ohio
corporation franchise tax provided that such interest is excluded from gross
income for federal income tax purposes.
36
<PAGE>
Financial highlights
The Financial highlights table is intended to help you understand each Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Funds' financial statements, is included in the
Funds' annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Tax-Free Pennsylvania Fund A Class
Year Ended 2/28
-------------------------------------------------------
2000 1999 1998 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.420 $ 8.240 $ 8.460 $ 8.180
Income from investment operations
Net investment income 0.415 0.430 0.456 0.476
Net realized and unrealized gain (loss)
on investments (0.034) 0.193 (0.105) 0.330
--------- -------- ----- ---------
Total from investment operations 0.381 0.623 0.351 0.806
--------- -------- ----- ---------
Less dividends and distributions
Dividends from net investment income (0.415) (0.430) (0.456) (0.476)
Distributions from net realized gain
on investments (0.096) (0.013) (0.015) (0.050)
--------- -------- -------- ---------
Total dividends and distributions (0.511) (0.443) (0.571) (0.526)
--------- -------- -------- ---------
Net asset value, end of period $ 8.290 $ 8.420 $ 8.240 $ 8.460
========= ======== ======== =========
Total return(2) 4.64% 7.78% 4.35% 10.08%
Ratios and supplemental data
Net assets, end of period (000 omitted) $ 871,740 $917,364 $954,258 $1,002,888
Ratio of expenses to average net assets 0.95% 0.94% 0.91% 0.90%
Ratio of net investment income
to average net assets 4.96% 5.20% 5.52% 5.67%
Portfolio turnover 41% 32% 27% 25%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions of net asset
value and does not reflect the impact of a sales charge.
<PAGE>
[RESTUBED TABLE FOR ABOVE]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Tax-Free Pennsylvania
Tax-Free Pennsylvania Fund B Class Fund C Class Period
Year Ended 2/28 Year Ended 2/28 11/29/95(1)
-------------------------------------- ----------------------- through
2000 1999 1998 1997 1996 2000 1999 1998 1997 2/28/96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.420 8.240 8.460 8.180 8.420 8.240 8.460 8.510
Income from investment operations
Net investment income 0.348 0.370 0.390 0.408 0.355 0.364 0.390 0.102
Net realized and unrealized gain (loss)
on investments (0.034) 0.193 (0.105) 0.330 (0.034) 0.193 (0.105) none
----- ------- ------- ------- ------- ------ ------ ------
Total from investment operations 0.314 0.563 0.285 0.738 0.321 0.557 0.285 0.102
----- ------- ------- ------- ------- ------ ------ ------
Less dividends and distributions
Dividends from net investment income (0.348) (0.370) (0.390) (0.408) (0.355) (0.364) (0.390) (0.102)
Distributions from net realized gain
on investments (0.096) (0.013) (0.115) (0.050) (0.096) (0.013) (0.115) (0.050)
------- ------- ------- ------- ------- ------ ------ ------
Total dividends and distributions (0.444) (0.383) (0.505) (0.458) (0.451) (0.377) (0.505) (0.152)
------- ------- ------- ------- ------- ------ ------ ------
Net asset value, end of period $8.290 $8.420 $ 8.240 $ 8.460 $ 8.290 $8.420 $8.240 $8.460
====== ======= ======= ======= ======= ====== ====== ======
Total return(2) 3.81% 6.92% 3.52% 9.19% 3.81% 6.92% 3.52% 1.19%
Ratios and supplemental data
Net assets, end of period (000 omitted) $42,994 $37,631 $31,644 $20,861 $ 3,963 $2,569 $1,181 $123
Ratio of expenses to average net assets 1.75% 1.74% 1.71% 1.71% 1.75% 1.74% 1.71% 1.71%
Ratio of net investment income
to average net assets 4.16% 4.40% 4.72% 4.86% 4.16% 4.40% 4.72% 4.86%
Portfolio turnover 41% 32% 27% 25% 41% 32% 27% 25%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Tax-Free
Tax-Free Tax-Free New Jersey
New Jersey New Jersey Fund C
Fund A Class Fund B Class Class
----------------------------------------------------------------------------------------
Period Period
9/2/97(1) 9/2/97
Year Ended 2/28 through Year Ended 2/28 through Year Ended 2/28
2000 1999 2/28/98 2000 1999 2/28/98(1) 2000 1998(1/4)
- ------------------------------------------ ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $5.700 $5.500 $5.700 $5.500 $5.700
Income from investment operations
Net investment income 0.256 0.115 0.213 0.069 0.213
Net realized and unrealized gain
on investments 0.075 0.200 0.075 0.200 0.075
------ ------ ------ ------ ------
Total from investment operations 0.331 0.315 0.288 0.269 0.288
------ ------ ------ ------ ------
Less dividends and distributions
Dividends from net investment income (0.256) (0.115) (0.213) (0.069) (0.213)
Distributions from realized gain on
investment (0.025) none (0.025) none (0.025)
------ ------ ------ ------ ------
Total dividends and distributions (0.281) (0.115) (0.238) (0.069) (0.238)
------ ------ ------ ------ ------
Net asset value, end of period $5.750 $5.700 $5.750 $5.700 $5.750
====== ====== ====== ====== ======
Total return(2/3) 5.93% 5.77% 5.14% 4.90% 5.14%
Ratios and supplemental data
Net assets, end of period (000 omitted) $2,052 $1,141 $1,680 $146 $171
Ratio of expenses to average net assets 0.50% 0.88% 1.25% 1.56% 1.25%
Ratio of expenses to average net assets
prior to expense limitation and expenses
paid indirectly 1.75% 1.93% 2.50% 2.61% 2.50%
Ratio of net investment income
to average net assets 4.42% 4.23% 3.67% 3.63% 3.67%
Ratio of net investment income
to average net assets prior to expense
limitation and expenses paid indirectly 3.17% 3.18% 2.42% 2.58% 2.42%
Portfolio turnover 0% 47% 0% 47% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of initial public offering; ratios have been annualized but total
return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Total investment return reflects the voluntary waiver and payment of fees by
the manager.
(4) Shares of the Tax-Free New Jersey Fund C Class were initially offered on
September 2, 1997. On October 20, 1997 the C Class sold shares which were
subsequently repurchased, leaving a balance of 1 share, which is the initial
seed purchase, as of February 28, 1998. This shareholder data is not being
disclosed because the data is not believed to be meaningful.
38
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Tax-Free Tax-Free Tax-Free Tax-Free
Ohio Fund Ohio Fund Ohio Fund Ohio Fund
A Class A Class B Class C Class
-----------------------------------------------------------------------------------------
Period
9/3/97(1)
Year Ended 2/28 through Year Ended Year Ended
2000 1999 2/28/98 2000 2/28/98(4) 2000 2/28/98(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $5.730 $5.500 $5.690 $5.690
Income from investment operations
Net investment income 0.272 0.120 0.231 0.231
Net realized and unrealized gain
on investments 0.013 0.230 0.053 0.053
------ ------ ------ ------
Total from investment operations 0.285 0.350 0.284 0.284
------ ------ ------ ------
Less dividends and distributions
Dividends from net investment income (0.272) (0.120) (0.231) (0.231)
Distribution from net realized gain on
on investments (0.093) none (0.093) (0.093)
------ ------ ------ ------
Total dividends and distributions (0.365) (0.120) (0.324) (0.324)
------ ------ ------ ------
Net asset value, end of period $5.650 $5.730 $5.650 $5.650
====== ====== ====== ======
Total return(2/3) 5.12% 6.41% 4.37% 4.37%
Ratios and supplemental data
Net assets, end of period (000 omitted) $1,422 $1,201 $80 $16
Ratio of expenses to average net assets 0.50% 0.88% 1.25% 1.25%
Ratio of expenses to average net assets
prior to expense limitation and fees paid
indirectly 1.86% 1.93% 2.61% 2.61%
Ratio of net investment income
to average net assets 4.75% 4.38% 4.00% 4.00%
Ratio of net investment income
limitation and fees paid indirectly
to average net assets prior to expense 3.39% 3.33% 2.64% 2.64%
Portfolio turnover 45% 66% 45% 45%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of initial public offering; ratios have been annualized but total
return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Total investment return reflects the voluntary waiver and payment of fees by
the manager.
(4) Shares of the Tax-Free Ohio Fund B and C Classes were initially offered on
September 3, 1997. For the period September 3, 1997 through February 28,
1998, there was no shareholder activity besides the initial seed purchase of
1 share. This shareholder data is not being disclosed because the data is
not believed to be meaningful.
39
<PAGE>
How to read the Financial highlights
Net investment income
Net investment income includes dividend and interest income earned from a
fund's securities; it is after expenses have been deducted.
Net realized and unrealized gain (loss)
A realized gain on investments occurs when we sell an investment at a profit,
while a realized loss occurs when we sell an investment at a loss. When an
investment increases or decreases in value but we do not sell it, we record an
unrealized gain or loss. The amount of realized gain per share that we pay to
shareholders, if any, is listed under "Less dividends and
distributions-Distributions from net realized gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities, that are attributable to that class of the Fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover has bought and sold half of the value of its
total investment portfolio during the stated period.
40
<PAGE>
begin glossary
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
Corporate bond
A debt security issued by a corporation. See Bond.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
41
<PAGE>
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invest is paid back
at a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bond.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Lehman Brothers Municipal Bond Index
The Lehman Brothers Municipal Bond Index is an index that includes approximately
15,000 bonds. To be included in the index, a municipal bond must meet the
following criteria: a minimum credit rating of at least Baa; has been part of a
deal of at least $50 million; been issued within the last 5 years, and has a
maturity of at least 2 years. Bonds subject to the Alternative Minimum Tax are
excluded. Bonds with floating or zero coupons are also excluded
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
NASD Regulation, Inc. (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service,
Inc. (Moody's), Standard & Poor's (S&P), Duff & Phelps, Inc. (Duff), and Fitch
IBCA, Inc. (Fitch).
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
42
<PAGE>
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pay dividends at a fixed
rate and are sometimes convertible into common stock.
Price/earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
43
<PAGE>
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
44
<PAGE>
Delaware Tax-Free Pennsylvania Fund
Delaware Tax-Free New Jersey Fund
Delaware Tax-Free Ohio Fund
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance during the report
period. You can find more detailed information about the Funds in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in these Funds, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about the Funds from your financial adviser.
You can find reports and other information about the Funds on the EDGAR
Database on the SEC web site (http://www.sec.gov). You can also get copies of
this information, after payment of a duplicating fee, by e-mailing the SEC at
[email protected] or by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549- 0102. Information about the Funds, including their
Statement of Additional Information, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get information on the public reference room by calling the SEC at
202-942-8090.
Web site
www.delawareinvestments.com
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
oFor fund information; literature; price, yield and performance figures.
oFor information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone redemptions and
telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
oFor convenient access to account information or current performance information
on all Delaware Investments Funds seven days a week, 24 hours a day, use this
Touch-Tone(R) service.
Investment Company Act file number: 811-2715
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Fund name CUSIP number NASDAQ symbol
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Delaware Tax-Free Pennsylvania Fund A Class 233216100 DELIX
- --------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Pennsylvania Fund B Class 233216209 DPTBX
- --------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Pennsylvania Fund C Class 233216308 DPTCX
- --------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free New Jersey Fund A Class 24609H107 DPJAX
- --------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free New Jersey Fund B Class 24609H206 DPJBX
- --------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free New Jersey Fund C Class 24069H305 DPJCX
- --------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Ohio Fund A Class 24609H404 DPOAX
- --------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Ohio Fund B Class 24609H503 DPOBX
- --------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Ohio Fund Class 24609H602 DPOCX
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
P- 000 -- PP 0/00
46
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April 29, 2000
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE TAX-FREE PENNSYLVANIA FUND
DELAWARE TAX-FREE NEW JERSEY FUND
DELAWARE TAX-FREE OHIO FUND
1818 Market Street
Philadelphia, PA 19103
For Prospectus, Performance and Information on Existing Accounts of
Class A Shares, Class B Shares and Class C Shares:
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY) Nationwide 800-362-7500
Delaware Group State Tax-Free Income Trust (the "Trust") is a
professionally-managed mutual fund of the series type which currently offers
three series of shares: Delaware Tax-Free Pennsylvania Fund, Delaware Tax-Free
New Jersey Fund and Delaware Tax-Free Ohio Fund (individually, a "Fund", and
collectively, the "Funds").
Each Fund offers three retail classes: Class A Shares, Class B Shares
and Class C Shares (individually, a "Class" and collectively, the "Fund
Classes").
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectus for
the Fund Classes dated April 29, 2000, as it may be amended from time to time.
Part B should be read in conjunction with the Class' Prospectus. Part B is not
itself a prospectus but is, in its entirety, incorporated by reference into each
Class' Prospectus. A prospectus relating to the Fund Class may be obtained by
writing or calling your investment dealer or by contacting each Fund's national
distributor, Delaware Distributors, L.P. (the "Distributor"), at the above
address or by calling the above phone numbers. The Funds' financial statements,
the notes relating thereto, the financial highlights and the report of
independent auditors are incorporated by reference from the Annual Report into
this Part B. The Annual Report will accompany any request for Part B. The Annual
Report can be obtained, without charge, by calling 800-523-1918.
1
<PAGE>
TABLE OF CONTENTS
Cover Page
Investment Objectives and Policies
Performance Information
Trading Practices and Brokerage
Purchasing Shares
Investment Plans
Determining Offering Price and Net Asset Value
Redemption and Exchange
Dividends and Distributions and Taxes
Taxes
Investment Management Agreement
Officers and Trustees
General Information
Financial Statements
Appendix A--Investing in Pennsylvania, New Jersey and Ohio Tax-Exempt
Obligations
Appendix B--Description of Ratings
Appendix C--Investment Objectives of the Funds in the Delaware Investments
Family
2
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Pennsylvania Fund--The objective of the Fund 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 Fund 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 Fund may invest not more than 20% of its assets in debt
obligations issued by other states.
The Fund intends to invest at least 80% of its net assets in
Pennsylvania tax-exempt debt obligations which are rated by Standard & Poor's
("S&P"), Moody's Investors Service, Inc. ("Moody's") or Fitch IBCA, Inc.
(formerly Fitch Investor Service, Inc.) ("Fitch") at the time of purchase as
being within their top four grades, or which are unrated but considered by
Delaware Management Company (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 Fund may also invest up to 20% of its net
assets in securities with grades lower than the top four grades of S&P, Moody's
or Fitch, and in comparable unrated securities. These securities are speculative
and may involve greater risk and have higher yields.
New Jersey Fund--The objective of the Fund is to seek as high a level
of current interest income exempt from federal income tax and certain New Jersey
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 Fund seeks to achieve this objective by investing its assets in a
nondiversified portfolio of debt obligations issued by or on behalf of the State
of New Jersey 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 New Jersey state and local taxes. However,
the Fund may invest not more than 20% of its assets in debt obligations issued
by other states.
The Fund intends to invest at least 80% of its net assets in New Jersey
tax-exempt debt obligations which are rated by S&P, Moody's or Fitch at the time
of purchase as being within their top four grades, or which are unrated but
considered by 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 Fund may also invest up to 20% of its net assets in
securities with grades lower than the top four grades of S&P, Moody's or Fitch,
and in comparable unrated securities. These securities are speculative and may
involve greater risk and have higher yields.
3
<PAGE>
Ohio Fund--The objective of the Fund is to seek as high a level of
current interest income exempt from federal income tax and certain Ohio 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 Fund seeks to achieve this objective by investing its assets in a
nondiversified portfolio of debt obligations issued by or on behalf of the State
of Ohio, 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 Ohio state and local taxes. However, the
Fund may invest not more than 20% of its assets in debt obligations issued by
other states.
The Fund intends to invest at least 80% of its net assets in Ohio
tax-exempt debt obligations which are rated by S&P, Moody's or Fitch at the time
of purchase as being within their top four grades, or which are unrated but
considered by 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 Fund may also invest up to 20% of its net assets in
securities with grades lower than the top four grades of S&P, Moody's or Fitch,
and in comparable unrated securities. These securities are speculative and may
involve greater risk and have higher yields.
See Appendix B - Description of Ratings for a description of S&P,
Moody's and Fitch ratings.
Each Fund 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 Funds 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.
Each Fund 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 a Fund'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
Pennsylvania Fund has no more than 10% and New Jersey Fund and Ohio Fund each
has no more than 15% of its net assets in illiquid securities.
Each Fund may also invest in "when-issued securities" for which a Fund
will maintain a segregated account containing cash or high-grade debt
obligations which it will mark to market daily. When-issued securities involve
commitments to purchase new issues of securities which are offered on a
when-issued basis which usually involve delivery and payment up to 45 days after
the date of transaction. During this period between the date of commitment and
the date of delivery, a Fund does not accrue interest on the investment, but the
market value of the bonds could fluctuate. This would result in a Fund having
unrealized appreciation or depreciation which would affect the net asset value
of its shares.
4
<PAGE>
Each Fund 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, a Fund may also invest in short-term, tax-free instruments such as
tax-exempt commercial paper and general obligation, revenue and project notes.
Each Fund 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 generally 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, each Fund 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 a Fund 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 Fund will invest in both types.
Each Fund is registered as a nondiversified investment company. Each
Fund 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 each Fund may invest its
assets in fewer issuers, the value of Fund shares may fluctuate more rapidly
than if the Fund were fully diversified. In the event a Fund 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. Each Fund may invest without limitation in U.S.
government and government agency securities backed by the U.S. government or its
agencies or instrumentalities.
Each Fund will invest in securities for income earnings rather than
trading for profit. A Fund 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 Fund;
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.
<PAGE>
Fundamental Restrictions
The Trust has adopted the following restrictions for each Fund (except
where otherwise noted) which cannot be changed without approval by the holders
of a "majority" of the respective Fund's outstanding shares, 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.
Each Fund shall not:
1. Make investments that will result in the concentration (as that term
may be defined in the Investment Company Act of 1940 (the "1940 Act"), any
rule or other thereunder, or U.S. Securities and Exchange Commission ("SEC")
staff interpretation thereof) of its investments in the securities of issuers
primarily engaged in the same industry, provided that this restriction does not
limit the Fund from investing in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or in tax-exempt securities or
in certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940 Act, any
rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that the Fund may
engage in transactions involving the acquisition, disposition or resale of its
portfolio securities, under circumstances where it may be considered to be an
underwriter under the 1933 Act.
4. Purchase or sell real estate, unless acquired as a result of
ownership of securities or other instruments and provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
5
<PAGE>
5. Purchase or sell physical commodities, unless acquired as a result
of ownership of securities or other instruments and provided that this
restriction does not prevent the Fund from engaging in transactions involving
futures contracts and options thereon or investing in securities that are
secured by physical commodities.
6. Make loans, provided that this restriction does not prevent the Fund
from purchasing debt obligations, entering into repurchase agreements, loaning
its assets to broker/dealers or institutional investors and investing in loans,
including assignments and participation interests.
In addition to the fundamental policies and investment restrictions
described above, and the various general investment policies described in the
prospectus, each Fund will be subject to the following investment restrictions,
which are considered non-fundamental and may be changed by the Board of
Trustees without shareholder approval.
1. The Fund is permitted to invest in other investment companies,
including open-end, closed-end or unregistered investment companies, either
within the percentage limits set forth in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof, or without regard to percentage
limits in connection with a merger, reorganization, consolidation or other
similar transaction. However, the Fund may not operate as a "fund of funds"
which invests primarily in the shares of other investment companies as permitted
by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are utilized as
investments by such a "fund of funds."
2. The Fund may not invest more than 15% of its net assets in
securities which it cannot sell or dispose of in the ordinary course of business
within seven days at approximately the value at which the Fund has valued the
investment.
Non-Fundamental Restrictions
The following sets forth additional investment restrictions for the
Funds, which are considered non-fundamental and may be changed by the Board of
Trustees without shareholder approval. The percentage limitations contained in
the restrictions and policies set forth herein apply at the time of purchase of
securities.
Pennsylvania Fund
The Fund shall not:
<PAGE>
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 Fund'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 Fund shall,
within three days thereafter (not including Sunday or holidays) or such longer
period as the SEC 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 Fund 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.
6
<PAGE>
5. Underwrite the securities of other issuers, except that the Fund 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 Fund'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 Fund
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 Fund'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 Fund, 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 Fund 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 Fund 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 Fund 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 Fund's assets may be invested
in municipal bonds insured as to payment of principal and interest by a single
insurance company. The Fund believes such investments are consistent with the
foregoing restrictions. If a percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentages resulting from change in
value of net assets will not result in a violation of the restrictions.
Special Considerations Relating to Pennsylvania Tax-Exempt Securities
Pennsylvania Fund concentrates its investments in the Commonwealth of
Pennsylvania. Therefore, there are risks associated with the Fund that would not
be present if the Fund 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.
7
<PAGE>
New Jersey Fund
The Fund shall not:
1. Purchase securities other than municipal bonds and taxable
short-term investments.
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 Fund'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 Fund shall,
within three days thereafter (not including Sunday or holidays) or such longer
period as the SEC 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 Fund will not issue senior securities as defined in
the Investment Company Act of 1940 (the "1940 Act"), except for notes to banks.
Investment securities will not normally be purchased while there is an
outstanding borrowing.
3. Make short sales of securities, or purchase securities on margin,
except that the Fund may satisfy margin requirements with respect to futures
transactions.
4. Underwrite the securities of other issuers, except that the Fund 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;
5. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements) in accordance with the Fund's investment
objective and policies are considered loans.
6. With respect to 50% of the value of the assets of the Fund, 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 Fund 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.
7. Invest in securities of other investment companies, except as part
of a merger, consolidation or other acquisition, or in accordance with the
limitations contained in the 1940 Act.
8. Invest more than 25% of its total assets in any particular industry
or industries, except that the Fund 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.
From time to time, more than 10% of the Fund's assets may be invested
in municipal bonds insured as to payment of principal and interest by a single
insurance company. The Fund believes such investments are consistent with the
foregoing restrictions. As a matter of non-fundamental policy, no more than 15%
of the Fund's total assets will be invested in repurchase agreements and other
assets maturing in more than seven days, or invest in companies for the purpose
of exercising control. 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.
8
<PAGE>
Special Considerations Relating to New Jersey Tax-Exempt Securities
New Jersey Fund concentrates its investments in the State of New
Jersey. Therefore, there are risks associated with the Fund that would not be
present if the Fund were diversified nationally. These risks include any new
legislation that would adversely affect New Jersey 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 State of New Jersey.
Ohio Fund
The Fund shall not:
1. Purchase securities other than municipal bonds and taxable
short-term investments.
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 Fund'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 Fund shall,
within three days thereafter (not including Sunday or holidays) or such longer
period as the SEC 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 Fund 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. Make short sales of securities, or purchase securities on margin,
except that the Fund may satisfy margin requirements with respect to futures
transactions.
4. Underwrite the securities of other issuers, except that the Fund 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.
5. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements) in accordance with the Fund's investment
objective and policies are considered loans.
6. With respect to 50% of the value of the assets of the Fund, 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 Fund 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.
7. Invest in securities of other investment companies, except as part
of a merger, consolidation or other acquisition, or in accordance with the
limitations contained in the 1940 Act.
8. Invest more than 25% of its total assets in any particular industry
or industries, except that the Fund 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.
From time to time, more than 10% of the Fund's assets may be invested
in municipal bonds insured as to payment of principal and interest by a single
insurance company. The Fund believes such investments are consistent with the
foregoing restrictions. As a matter of non-fundamental policy, no more than 15%
of the Fund's total assets will be invested in repurchase agreements and other
assets maturing in more than seven days, or invest in companies for the purpose
of exercising control. 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.
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Special Considerations Relating to Ohio Tax-Exempt Securities
Ohio Fund concentrates its investments in the State of Ohio. Therefore,
there are risks associated with the Fund that would not be present if the Fund
were diversified nationally. These risks include any new legislation that would
adversely affect Ohio 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 State of Ohio.
Repurchase Agreements
While each Fund 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 Investments family have obtained an exemption
from the joint-transaction prohibitions of Section 17(d) of the 1940 Act to
allow the funds in the Delaware Investments family jointly to invest cash
balances. Each Fund 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 a
Fund, if any, would be the difference between the repurchase price and the
market value of the security. Each Fund 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, a Fund must have collateral of at least 102% of the
repurchase price, including the portion representing that Fund's yield under
such agreements which is monitored on a daily basis.
Municipal Bonds
The term "municipal bonds" is generally understood to include debt
obligations issued to obtain funds for various public purposes, including the
construction of a wide range of public facilities such as airports, bridges,
highways, housing, hospitals, mass transportation, schools, streets and water
and sewer works. Other public purposes for which municipal bonds may be issued
include the refunding of outstanding obligations, obtaining funds for general
operating expenses and the obtaining of funds to lend to other public
institutions and facilities. In addition, certain types of industrial
development bonds are issued by or on behalf of public authorities to obtain
funds to provide privately-operated housing facilities, sports facilities,
convention or trade show facilities, airport, mass transit, port or parking
facilities, air or water pollution control facilities and certain local
facilities for water supply, gas, electricity or sewage or solid waste
disposals. Such obligations are included within the term "municipal bonds"
provided that the interest paid thereon qualifies as exempt from federal income
tax in the opinion of bond counsel to the issuer. In addition, the interest paid
on industrial development bonds, the proceeds from which are used for the
construction, equipment, repair or improvement of privately-operated industrial
or commercial facilities, may be exempt from federal income tax, although
current federal tax laws place substantial limitations on the size of such
issues.
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.
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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 a Fund's management fee, as well as other
operating expenses, will have the effect of reducing the yield to investors.
Private Purpose Bonds
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.
Each Fund intends to seek to achieve a high level of tax-exempt income.
However, if a Fund invests in newly-issued private purpose bonds, a portion of
Fund distributions would be subject to the federal alternative minimum tax
applicable to certain shareholders.
Municipal Bond Insurance
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"),
Financial Security Assurance ("FSA") 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 Fund will be insured. Accordingly, from time to time a
substantial portion of a Fund'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, S&P and Fitch, most insured
obligations will qualify for investment under each Fund'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 Fund believes such investments are consistent
with its fundamental investment policies and restrictions.
Municipal Leases
Each Fund's may invest a portion of its assets 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. Each
Fund will invest only in COPs rated within the four highest rating categories of
Moody's, S&P or Fitch, or in unrated COPs believed to be of comparable quality.
Each Fund follows certain guidelines to determine whether the COPs held
in a Fund'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 Fund both in general and with respect to COPs; and (c) the extent to
which the type of COPs held by the Fund trade on the same basis and with the
same degree of dealer participation as other municipal bonds of comparable
credit rating or quality.
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Options--New Jersey Fund and Ohio Fund
New Jersey Fund and Ohio Fund may write put and call options on a
covered basis only, and will not engage in option writing strategies for
speculative purposes. The Funds may write covered call options and secured put
options from time to time on such portion of its portfolio, without limit, as
the Manager determines is appropriate in seeking to obtain a Fund's investment
objective. A Fund may also purchase (i) call options to the extent that premiums
paid for such options do not exceed 2% of the Fund's total assets and (ii) put
options to the extent that premiums paid for such options do not exceed 2% of
the Fund's total assets.
A. Covered Call Writing - A call option gives the purchaser of such
option the right to buy, and the writer, in this case the Fund, the obligation
to sell the underlying security at the exercise price during the option period.
There is no percentage limitation on writing covered call options.
The advantage to a Fund of writing covered calls is that the Fund
receives a premium which is additional income. The disadvantage is that if the
security rises in value the Fund will lose the appreciation.
During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable a Fund
to write another call option on the underlying security with either a different
exercise price or expiration date or both. A Fund may realize a net gain or loss
from a closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
If a call option expires unexercised, a Fund will realize a short-term
capital gain in the amount of the premium on the option less the commission
paid. Such a gain, however, may be offset by depreciation in the market value of
the underlying security during the option period. If a call option is exercised,
a Fund will realize a gain or loss from the sale of the underlying security
equal to the difference between the cost of the underlying security and the
proceeds of the sale of the security plus the amount of the premium on the
option less the commission paid.
The market value of a call option generally reflects the market price
of the underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.
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Call options will be written only on a covered basis, which means that
a Fund will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected, a
Fund would be required to continue to hold a security which it might otherwise
wish to sell. Options written by the Fund will normally have expiration dates
between three and nine months from the date written. The exercise price of a
call option may be below, equal to or above the current market value of the
underlying security at the time the option is written.
B. Purchasing Call Options - New Jersey Fund and Ohio Fund may purchase
call options to the extent that premiums paid by the Fund do not aggregate more
than 2% of the Fund's total assets. When a Fund purchases a call option, in
return for a premium paid by the Fund to the writer of the option, the Fund
obtains the right to buy the security underlying the option at a specified
exercise price at any time during the term of the option. The writer of the call
option, who receives the premium upon writing the option, has the obligation,
upon exercise of the option, to deliver the underlying security against payment
of the exercise price. The advantage is that a Fund may hedge against an
increase in the price of securities which it ultimately wishes to buy. However,
the premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by a Fund upon exercise of the option.
A Fund may, following the purchase of a call option, liquidate its
position by effecting a "closing sale transaction." This is accomplished by
selling an option of the same series as the option previously purchased. A Fund
will realize a profit from a closing sale transaction if the price received on
the transaction is more than the premium paid to purchase the original call
option; the Fund will realize a loss from a closing sale transaction if the
price received on the transaction is less than the premium paid to purchase the
original call option.
Although a Fund will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market may exist. In such event, it may not be possible to
effect closing transactions in particular options, with the result that a Fund
would be required to exercise its options in order to realize any profit and
would incur brokerage commissions upon the exercise of such options and upon the
subsequent disposition of the underlying securities acquired through the
exercise of such options. Further, unless the price of the underlying security
changes sufficiently, a call option purchased by the Fund may expire without any
value to a Fund.
C. Secured Put Writing - A put option gives the purchaser of the option
the right to sell, and the writer, in this case a Fund, the obligation to buy
the underlying security at the exercise price during the option period. During
the option period, the writer of a put option may be assigned an exercise notice
by the broker/dealer through whom the option was sold requiring the writer to
make payment of the exercise price against delivery of the underlying security.
In this event, the exercise price will usually exceed the then-market value of
the underlying security. This obligation terminates upon expiration of the put
option or at such earlier time at which the writer effects a closing purchase
transaction. The operation of put options in other respects is substantially
identical to that of call options. Premiums on outstanding put options written
or purchased by a Fund may not exceed 2% of its total assets.
The advantage to a Fund of writing such options is that it receives
premium income. The disadvantage is that a Fund may have to purchase securities
at higher prices than the current market price when the put is exercised.
Put options will be written only on a secured basis, which means that a
Fund will maintain in a segregated account with its Custodian Bank, (The Chase
Manhattan Bank ), cash or U.S. government securities in an amount not less
than the exercise price of the option at all times during the option period. The
amount of cash or U.S. government securities held in the segregated account will
be adjusted on a daily basis to reflect changes in the market value of the
securities covered by the put option written by a Fund. Secured put options will
generally be written in circumstances where the Manager wishes to purchase the
underlying security for a Fund's portfolio at a price lower than the current
market price of the security. In such event, a Fund would write a secured put
option at an exercise price which, reduced by the premium received on the
option, reflects the lower price it is willing to pay.
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D. Purchasing Put Options - New Jersey Fund and Ohio Fund may purchase
put options to the extent that premiums paid for such options do not exceed 2%
of the Fund's total assets. A Fund will, at all times during which it holds a
put option, own the security covered by such option.
A Fund intends to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise price
less the premium paid for the option ("protective puts"). The ability to
purchase put options will allow a Fund to protect unrealized gain in an
appreciated security in its portfolio without actually selling the security. In
addition, a Fund will continue to receive interest income on the security. If
the security does not drop in value, the Fund will lose the value of the premium
paid. A Fund may sell a put option which it has previously purchased prior to
the sale of the securities underlying such option. Such sales will result in a
net gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put option which
is sold.
Futures--New Jersey Fund , Ohio Fund and Pennsylvania Fund
New Jersey Fund and Ohio Fund may enter into contracts for the purchase
or sale for future delivery of securities. Pennsylvania Fund may invest in
futures contracts and options on futures contracts to the extent that
investments in these securities when combined with invest floaters and below
investment grade securities (described below) do not exceed 20% of the Fund's
total assets. While futures contracts provide for the delivery of securities,
deliveries usually do not occur. Contracts are generally terminated by entering
into an offsetting transaction. When a Fund enters into a futures transaction,
it must deliver to the futures commission merchant selected by that Fund an
amount referred to as "initial margin." This amount is maintained by the futures
commission merchant in an account at a Fund's Custodian Bank. Thereafter, a
"variation margin" may be paid by a Fund to, or drawn by a Fund from, such
account in accordance with controls set for such accounts, depending upon
changes in the price of the underlying securities subject to the futures
contract.
A Fund may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities except that
options on futures give the purchaser the right, in return for the premium paid,
to assume a position in a futures contract, rather than actually to purchase or
sell the futures contract, at a specified exercise price at any time during the
period of the option.
The purpose of the purchase or sale of futures contracts for a Fund,
which consists of a substantial number of municipal securities, is to protect a
Fund against the adverse effects of fluctuations in interest rates without
actually buying or selling such securities. Similarly, when it is expected that
interest rates may decline, futures contracts may be purchased to hedge in
anticipation of subsequent purchases of municipal securities at higher prices.
With respect to options on futures contracts, when a Fund is not fully
invested, it may purchase a call option on a futures contract to hedge against a
market advance due to declining interest rates. The writing of a call option on
a futures contract constitutes a partial hedge against declining prices of the
securities which are deliverable upon exercise of the futures contract. If the
futures price at the expiration of the option is below the exercise price, a
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the portfolio holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the securities which are deliverable upon exercise
of the futures contract. If the futures price at expiration of the option is
higher than the exercise price, a Fund will retain the full amount of the option
premium which provides a partial hedge against any increase in the price of
municipal securities which a Fund intends to purchase.
To the extent that a Fund purchases an option on a futures contract and
fails to exercise the option prior to the exercise date, it will suffer a loss
of the premium paid. Further, with respect to options on futures contracts, a
Fund may seek to close out an option position by writing or buying an offsetting
position covering the same securities or contracts and have the same exercise
price and expiration date. The ability to establish and close out positions on
options will be subject to the maintenance of a liquid secondary market, which
cannot be assured.
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In addition, when a Fund engages in futures transactions, to the extent
required by the SEC, it will maintain with its Custodian Bank, assets in a
segregated account to cover its obligations with respect to such contracts,
which assets will consist of cash, cash equivalents or high quality debt
securities from its portfolio in an amount equal to the difference between the
fluctuating market value of such futures contracts and the aggregate value of
the margin payments made by the Fund with respect to such futures contracts.
A Fund may enter into such futures contracts to protect against the
adverse effects of fluctuations in interest rates without actually buying or
selling the securities. For example, if interest rates are expected to increase,
a Fund might enter into futures contracts for the sale of debt securities. Such
a sale would have much the same effect as selling an equivalent value of the
debt securities owned by a Fund. If interest rates did increase, the value of
the debt securities in the portfolio would decline, but the value of the futures
contracts to a Fund would increase at approximately the same rate, thereby
keeping the net asset value of the Fund from declining as much as it otherwise
would have. Similarly, when it is expected that interest rates may decline,
futures contracts may be purchased to hedge in anticipation of subsequent
purchases of securities at higher prices. Since the fluctuations in the value of
futures contracts should be similar to those of debt securities, a Fund could
take advantage of the anticipated rise in value of debt securities without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and a Fund could then buy debt securities on the
cash market.
With respect to options on futures contracts, when a Fund is not fully
invested, it may purchase a call option on a futures contract to hedge against a
market advance due to declining interest rates. The purchase of a call option on
a futures contract is similar in some respects to the purchase of a call option
on an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based, or the price of
the underlying debt securities, it may or may not be less risky than ownership
of the futures contract or underlying debt securities. As with the purchase of
futures contracts, when a Fund is not fully invested, it may purchase a call
option on a futures contract to hedge against a market advance due to declining
interest rates.
The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security which is deliverable
upon exercise of the futures contract. If the futures price at the expiration of
the option is below the exercise price, a Fund will retain the full amount of
the option premium which provides a partial hedge against any decline that may
have occurred in that Fund's portfolio holdings. The writing of a put option on
a futures contract constitutes a partial hedge against the increasing price of
the security which is deliverable upon exercise of the futures contract. If the
futures price at the expiration of the option is higher than the exercise price,
a Fund will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities which a Fund
intends to purchase.
If a put or call option a Fund has written is exercised, that Fund will
incur a loss which will be reduced by the amount of the premium it receives.
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its futures positions, a Fund's
losses from existing options on futures may, to some extent, be reduced or
increased by changes in the value of portfolio securities. The purchase of a put
option on a futures contract is similar in some respects to the purchase of
protective puts on portfolio securities. For example, a Fund will purchase a put
option on a futures contract to hedge that Fund's portfolio against the risk of
rising interest rates.
To the extent that interest rates move in an unexpected direction, a
Fund may not achieve the anticipated benefits of futures contracts or options on
futures contracts or may realize a loss. For example, if a Fund is hedged
against the possibility of an increase in interest rates which would adversely
affect the price of securities held in its portfolio and interest rates decrease
instead, a Fund will lose part or all of the benefit of the increased value of
its securities which it has because it will have offsetting losses in its
futures position. In addition, in such situations, if a Fund had insufficient
cash, it may be required to sell securities from its portfolio to meet daily
variation margin requirements. Such sales of securities may, but will not
necessarily, be at increased prices which reflect the rising market. A Fund may
be required to sell securities at a time when it may be disadvantageous to do
so.
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<PAGE>
Further, with respect to options on futures contracts, a Fund may seek
to close out an option position by writing or buying an offsetting position
covering the same securities or contracts and have the same exercise price and
expiration date. The ability to establish and close out positions on options
will be subject to the maintenance of a liquid secondary market, which cannot be
assured.
Variable or Floating Rate Demand Notes
Variable or floating rate demand notes ("VRDNs") are tax-exempt
obligations which contain a floating or variable interest rate adjustment
formula and an unconditional right of demand to receive payment of the unpaid
principal balance plus accrued interest upon a short notice period (generally up
to 30 days) prior to specified dates, either from the issuer or by drawing on a
bank letter of credit, a guarantee or insurance issued with respect to such
instrument. The interest rates are adjustable at intervals ranging from daily to
up to six months to some prevailing market rate for similar investments, such
adjustment formula being calculated to maintain the market value of the VRDN at
approximately the par value of the VRDN upon the adjustment date. The
adjustments are typically based upon the price rate of a bank or some other
appropriate interest rate adjustment index. The Manager will decide which
variable or floating rate demand instruments a Fund will purchase in accordance
with procedures prescribed by the Board of Trustees to minimize credit risks.
Any VRDN must be of high quality as determined by the Manager and subject to
review by the Board, with respect to both its long-term and short-term aspects,
except where credit support for the instrument is provided even in the event of
default on the underlying security, the Fund may rely only on the high quality
character of the short-term aspect of the demand instrument, i.e., the demand
feature. A VRDN which is unrated must have high quality characteristics similar
to those rated in accordance with policies and guidelines determined by the
Board. If the quality of any VRDN falls below the quality level required by the
Board and any applicable rules adopted by the SEC, a Fund must dispose of the
instrument within a reasonable period of time by exercising the demand feature
or by selling the VRDN in the secondary market, whichever is believed by the
Manager to be in the best interests of a Fund and its shareholders.
Inverse Floaters
Each Fund may invest in inverse floaters subject to certain
limitations. Inverse floaters are instruments with floating or variable interest
rates that move in the opposite direction, usually at an accelerated speed, to
short-term interest rates or interest rate indices. Consequently, the market
values of inverse floaters will generally be more volatile than other tax-exempt
investments and may increase the volatility of the value of shares of a Fund.
High Yield, High Risk Securities
Each Fund may invest up to 20% of its net assets in high yield, high
risk fixed-income securities. These securities are rated lower than BBB by S&P,
Baa by Moody's and/or rated similarly by another rating agency, or, if unrated,
are considered by the Manager to be of equivalent quality. A Fund will not
invest in securities which are rated lower than B by S&P, B by Moody's or
similarly by another rating agency, or, if unrated, are considered by the
Manager to be of a quality that is lower than such ratings. See Appendix A -
Description of Ratings for more rating information. Fixed-income securities of
this type are considered to be of poor standing and predominantly speculative.
Such securities are subject to a substantial degree of credit risk. If a
security held by a Fund falls below such ratings, the Manager may commence the
orderly sale of such security or continue to hold the security pending a workout
or refinancing of the security, if it determined by the Manager that holding the
security will create greater value for the Fund.
Medium and low-grade bonds held by a Fund may be issued as a
consequence of corporate restructurings, such as leveraged buy-outs, mergers,
acquisitions, debt recapitalizations or similar events. Also these bonds are
often issued by smaller, less creditworthy companies or by highly leveraged
(indebted) issuers, which are generally less able than more financially stable
issuers to make scheduled payments of interest and principal. The risks posed by
bonds issued under such circumstances are substantial.
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The economy and interest rates may affect these high yield, high risk
securities differently than other securities. Prices have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic changes or individual corporate developments.
Also, during an economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their ability to service principal and interest payment
obligations, to meet projected business goals and to obtain additional
financing. Changes by recognized rating agencies in their rating of any security
and in the ability of an issuer to make payments of interest and principal will
also ordinarily have a more dramatic effect on the values of these investments
than on the values of higher-rated securities. Such changes in value will not
affect cash income derived from these securities, unless the issuers fail to pay
interest or dividends when due. Such changes will, however, affect a Fund's net
asset value per share.
Zero-Coupon Bonds
New Jersey Fund and Ohio Fund may invest in zero-coupon and
payment-in-kind bonds. Zero-coupon bonds do not entitle the holder to any
periodic payment of interest prior to maturity or a specified date when the
securities begin paying current interest. They are issued and traded at a
discount, which discount varies depending on the time remaining until cash
payments begin, prevailing interest rates, liquidity of the security and the
perceived credit quality of the issuer. Since a Fund must distribute at least
90% of its investment income each year, in order to maintain its desired tax
treatment, the Fund may be required to borrow or to liquidate portfolio
securities in order to distribute income which has been attributed to
zero-coupon bonds but which the Fund has not yet received. Payment-in-kind
securities are securities that pay interest through the issuance of additional
securities. Such securities generally are more volatile in response to changes
in interest rates and are more speculative investments than are securities that
pay interest periodically in cash.
Derivative Tax Exempt Obligations
New Jersey Fund and Ohio Fund may also acquire Derivative Tax Exempt
Obligations, which are custodial receipts or certificates that evidence
ownership of future interest payments, principal payments or both on certain tax
exempt securities. The sponsor of these certificates or receipts typically
purchases and deposits the securities in an irrevocable trust or custodial
account with a custodian bank, which then issues the receipts or certificates
that evidence ownership. Although a Fund typically would be authorized to assert
its rights directly against the issuer of the underlying obligation, the Fund
could be required to assert such rights through the custodian bank. Thus, in the
event of a default, a Fund may be subject to delays, expenses and risks that are
greater than those that would have been involved if the Fund had purchased a
direct obligation of the issuer.
In addition, if the trust or custodial account in which the underlying
security had been deposited is determined to be a taxable entity, it would be
subject to state income tax on the income earned on the underlying security.
Furthermore, amounts paid by the trust or custodial account to a Fund would
become taxable in the hands of the Fund and its shareholders. However, a Fund
will only invest in custodial receipts which are accompanied by a tax opinion
stating that interest payable on the receipts is tax exempt. Also, it is
possible that a portion of the discount at which a Fund purchases the receipts
might have to be accrued as taxable income during the period that the Fund holds
the receipts.
Restricted Securities
Each Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the 1933 Act. Rule 144A permits many privately placed and
legally restricted securities to be freely traded among certain institutional
buyers such as the Funds. Pennsylvania Fund may invest no more than 10% of the
value of its net assets in illiquid securities. New Jersey Fund and Ohio Fund
may invest no more than 15% 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 each Fund's percentage 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).
17
<PAGE>
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, a
Fund's holdings of illiquid securities exceed its percentage limitation on
investments in such securities, the Manager will determine what action to take
to ensure that the Fund continues to adhere to such limitation.
Concentration
In applying the Funds' fundamental policy concerning concentration that
is described above, it is a matter of non-fundamental policy that: (i) utility
companies will be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii) asset
backed securities will be classified according to the underlying assets securing
such securities.
PERFORMANCE INFORMATION
From time to time, each Fund may state its Classes' total return in
advertisements and other types of literature. Any statement of total return
performance data for a Class will be accompanied by information on the average
annual compounded rate of return for that Class over, as relevant, the most
recent one-, five- and ten-year, or life-of-fund periods, as applicable. Each
Fund may also advertise aggregate and average total return information for its
Classes over additional periods of time.
In presenting performance information for 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 a
description of the Limited CDSC and the limited instances in which it applies.
All references to a CDSC in this Performance Information section will apply to
Class B Shares or Class C Shares.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P(1 + T) = ERV
<TABLE>
<CAPTION>
<S> <C>
Where: P = a hypothetical initial purchase order of $1,000 from which, in the case of
only Class A Shares, the maximum front-end sales charge is deducted;
T = average annual total return;
n = number of years;
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
</TABLE>
18
<PAGE>
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares and that all distributions
are reinvested at net asset value, and, with respect to Class B Shares and Class
C Shares, reflects the deduction of the CDSC that would be applicable upon
complete redemption of such shares. In addition, each Fund may present total
return information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC.
Each Fund may also state total return performance for its Classes in
the form of an average annual return. This average annual return figure will be
computed by taking the sum of a Class' annual returns, then dividing that figure
by the number of years in the overall period indicated. The computation will
reflect the impact of the maximum front-end sales charge or CDSC, if any, paid
on the illustrated investment amount against the first year's return.
The performance of Class A Shares, as shown below, is the average
annual total return quotations of Pennsylvania Fund and aggregate total return
quotations for New Jersey Fund and Ohio Fund through February 29, 2000. The
average annual total return (and, as applicable, aggregate total return) for
Class A Shares at offer reflects the maximum front-end sales charge of 3.75%
paid on the purchase of shares. The average annual total return (and, as
applicable, aggregate total return) for Class A Shares at net asset value (NAV)
does not reflect the payment of any front-end sales charge.
The performance of Class B Shares and Class C Shares, as shown below,
is the average annual total return quotations for Pennsylvania Fund and the
aggregate total return quotations for New Jersey Fund through February 29,
2000. The average annual total return (and, as applicable, aggregate total
return) for Class B Shares and Class C Shares including deferred sales charge
reflects the deduction of the applicable CDSC that would have been paid if the
shares were redeemed at February 29, 2000. The average annual total return
(and, as applicable, aggregate total return) for Class B Shares and Class C
Shares excluding deferred sales charge assumes the shares were not redeemed at
February 29, 2000 and therefore does not reflect the deduction of a CDSC.
19
<PAGE>
Securities prices fluctuated during the periods covered and past
results should not be considered as representative of future performance.
Average Annual Total Return
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Class B Class B Class C
Class A (1) Class A (1) including excluding Class C excluding
at offer(2) at NAV CDSC CDSC including CDSC CDSC
(Inception (Inception (Inception (Inception (Inception (Inception
Tax-Free PA Fund 3/23/77) 3/23/77) 5/2/94) 5/2/94) 11/29/95) 11/29/95)
- --------------------------------------------------------------------------------------------------------------
<S> <C>
1 year ended
2/29/00
3 years ended
2/29/00
- --------------------------------------------------------------------------------------------------------------
5 years ended
2/29/00
- --------------------------------------------------------------------------------------------------------------
10 years ended
2/29/00
- --------------------------------------------------------------------------------------------------------------
15 years ended
2/29/00
- --------------------------------------------------------------------------------------------------------------
Life of Fund
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Class B Class B Class C
Class A Class A including excluding Class C excluding
Tax-Free New at offer at NAV CDSC CDSC including CDSC CDSC
Jersey Fund(3) (Inception (Inception (Inception (Inception (Inception (Inception
9/2/97) 9/2/97) 9/2/97) 9/2/97) 9/2/97) 9/2/97)
- --------------------------------------------------------------------------------------------------------------
1 year ended
2/29/00
- --------------------------------------------------------------------------------------------------------------
Life of Fund
- --------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
Average Annual Total Return
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Class B Class B Class C
Class A Class A including excluding Class C excluding
at offer at NAV CDSC CDSC including CDSC CDSC
(Inception (Inception (Inception (Inception (Inception (Inception
Tax-Free Ohio 9/3/97) 9/3/97) 9/3/97) 9/3/97) 9/3/97) 9/3/97)
Fund(3)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 year ended
2/29/00
- --------------------------------------------------------------------------------------------------------------
Life of Fund
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(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) Effective June 9, 1997, the maximum front-end sales charge was reduced
from 4.75% to 3.75%. The above performance numbers are calculated using
3.75% as the applicable sales charge for all time periods, and are more
favorable than they would have been had they been calculated using the
former front-end sales charges.
(3) Total return reflects voluntary expense caps in effect for the Fund.
Returns would be lower without the caps.
See Investment Management Agreement.
Each Fund 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(-------- + 1) -- 1
cd
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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.
</TABLE>
21
<PAGE>
The above formula will be used in calculating quotations of yield of
each Class, based on specified 30-day periods identified in advertising by the
Fund. The yields of Class A Shares, Class B Shares and Class C Shares of each
Fund as of February 29, 2000 using this formula were as follows:
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Tax-Free Pennsylvania Fund 0.00% 0.00% 0.00%
Tax-Free New Jersey Fund 0.00% 0.00% 0.00%
Tax-Free Ohio Fund 0.00% 0.00% 0.00%
</TABLE>
Yield calculations assume the maximum front-end sales charge, if any,
and does not reflect the deduction of any CDSC or Limited CDSC. The yields for
Tax-Free New Jersey Fund and Tax-Free Ohio Fund reflect the voluntary waiver and
payment of fees by the Manager. 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 Fund in the future.
Each Fund may also publish a tax-equivalent yield concerning a Class
based on federal and, if applicable, state tax rates, which demonstrates the
taxable yield necessary to produce an after-tax yield equivalent to such Class'
yield. For the 30-day period ended February 29, 2000, the tax-equivalent
yield, assuming a federal income tax rate of 31%, of Class A Shares, Class B
Shares and Class C Shares of each Fund was as follows:
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Tax-Free Pennsylvania Fund 0.00% 0.00% 0.00%
Tax-Free New Jersey Fund 0.00% 0.00% 0.00%
Tax-Free Ohio Fund 0.00% 0.00% 0.00%
</TABLE>
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. The yields for Tax-Free New Jersey Fund and
Tax-Free Ohio Fund reflect the voluntary waiver and payment of fees by the
Manager. In addition, the Fund may advertise a tax-equivalent yield assuming
other income tax rates, when applicable.
Investors should note that the income earned and dividends paid by a
Fund will vary with the fluctuation of interest rates and performance of the
portfolio. The net asset value of a Fund may change. Unlike money market funds,
each Fund invests in longer-term securities that fluctuate in value and do so in
a manner inversely correlated with changing interest rates. A Fund's net asset
value will tend to rise when interest rates fall. Conversely, a Fund's net asset
value will tend to fall as interest rates rise. Normally, fluctuations in
interest rates have a greater effect on the prices of longer-term bonds. The
value of the securities held in a Fund will vary from day to day and investors
should consider the volatility of a Fund's net asset value as well as its yield
before making a decision to invest.
22
<PAGE>
Total return performance of each 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 CDSC, 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. As securities prices fluctuate, an illustration of past
performance should not be considered as representative of future results.
From time to time, each Fund may also quote its Classes' actual total
return and/or yield performance, dividend results and other performance
information in advertising and other types of literature. This information may
be compared to that of other mutual funds with similar investment objectives and
to stock, bond and other relevant indices or to rankings prepared by independent
services or other financial or industry publications that monitor the
performance of mutual funds. For example, the performance of a Fund (or Class)
may be compared to data prepared by Lipper Analytical Services, Inc.,
Morningstar, Inc. or the performance of unmanaged indices compiled or maintained
by statistical research firms such as Lehman Brothers or Salomon Brothers, Inc.
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare a Fund's
performance to another fund in appropriate categories over specific time periods
also may be quoted in advertising and other types of literature. The total
return performance reported for these indices will reflect the reinvestment of
all distributions on a quarterly basis and market price fluctuations. The
indices do not take into account any sales charge or other fees. A direct
investment in an unmanaged index is not possible.
Salomon Brothers and Lehman Brothers are statistical research firms
that maintain databases of international market, bond market, corporate and
government-issued securities of various maturities. This information, as well as
unmanaged indices compiled and maintained by these firms, will be used in
preparing comparative illustrations. In addition, the performance of multiple
indices compiled and maintained by these firms may be combined to create a
blended performance result for comparative purposes. Generally, the indices
selected will be representative of the types of securities in which a Fund may
invest and the assumptions that were used in calculating the blended performance
will be described.
Comparative information on the Consumer Price Index may also be
included in advertisements or other literature. The Consumer Price Index, as
prepared by the U.S. Bureau of Labor Statistics, is the most commonly used
measure of inflation. It indicates the cost fluctuations of a representative
group of consumer goods. It does not represent a return from an investment.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. A Fund may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of a Fund. Each Fund may also compare performance to that of other compilations
or indices that may be developed and made available in the future.
23
<PAGE>
A Fund may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of a Fund (such as value investing, market timing, dollar
cost averaging, asset allocation, constant ratio transfer, automatic account
rebalancing, the advantages and disadvantages of investing in tax-deferred and
taxable investments or global or international investments), economic and
political conditions, the relationship between sectors of the economy and the
economy as a whole, the effects of inflation and historical performance of
various asset classes, including but not limited to, stocks, bonds and Treasury
bills.
From time to time advertisements, sales literature, communications to
shareholders or other materials may summarize the substance of information
contained in shareholder reports (including the investment composition of a
Fund), as well as the views as to current market, economic, trade and interest
rate trends, legislative, regulatory and monetary developments, investment
strategies and related matters believed to be of relevance to a Fund. In
addition, selected indices may be used to illustrate historic performance of
selected asset classes. A Fund may also include in advertisements, sales
literature, communications to shareholders or other materials, charts, graphs or
drawings which illustrate the potential risks and rewards of investment in
various investment vehicles, including but not limited to, domestic stocks,
and/or bonds, treasury bills and shares of that Fund. In addition,
advertisements, sales literature, communications to shareholders or other
materials may include a discussion of certain attributes or benefits to be
derived by an investment in a Fund and/or other mutual funds, shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax planning and investment alternatives to certificates of deposit
and other financial instruments. Such sales literature, communications to
shareholders or other materials may include symbols, headlines or other material
which highlight or summarize the information discussed in more detail therein.
Materials may refer to the CUSIP numbers of a Fund and may illustrate
how to find the listings of that Fund in newspapers and periodicals. Materials
may also include discussions of other Fund products and services.
Each Fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, a Fund may compare these measures to
those of other funds. Measures of volatility seek to compare the historical
share price fluctuations or total returns to those of a benchmark. Measures of
benchmark correlation indicate how valid a comparative benchmark may be.
Measures of volatility and correlation may be calculated using averages of
historical data. Each Fund may advertise its current interest rate sensitivity,
duration, weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to a Fund may include information
regarding the background and experience of its portfolio managers.
24
<PAGE>
The following tables present examples, for purposes of illustration
only, of cumulative total return performance for each Class of the Funds through
February 29, 2000. Comparative information on the Consumer Price Index is also
included. For these purposes, the calculations reflect maximum sales charges, if
any, and assume the reinvestment of any capital gains distributions and income
dividends paid during the indicated periods. The performance does not reflect
any income taxes payable by shareholders on the reinvested distributions
included in the calculations. The performance of Class A Shares as shown below,
reflects maximum front-end sales charge paid on the purchase of shares but may
also be shown without reflecting the impact on any front-end sales charge. The
performance of Class B Shares and Class C Shares is calculated both with the
applicable CDSC included and excluded. 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.
Cumulative Total Return
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Class B Class B Class C Class C
Class A (1) Class A (1) including excluding including excluding
at offer(2) at NAV CDSC CDSC CDSC CDSC
(Inception (Inception (Inception (Inception (Inception (Inception
Tax-Free PA Fund 3/23/77) 3/23/77) 5/2/94) 5/2/94) 11/29/95) 11/29/95)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
3 months ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
6 months ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
9 months ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
1 year ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
3 years ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
5 years ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
10 years ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
15 years ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
Life of Fund
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return
- ---------------------------------------------------------------------------------------------------------------------
Class C
Class A Class A Class B Class B including Class C
at offer at NAV including CDSC excluding CDSC CDSC excluding CDSC
Tax-Free New (Inception (Inception (Inception (Inception (Inception (Inception
Jersey Fund(3) 9/2/97) 9/2/97) 9/2/97) 9/2/97) 9/2/97) 9/2/97)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3 months ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
6 months ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
9 months ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
1 year ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
3 years
ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
Life of Fund
- ---------------------------------------------------------------------------------------------------------------------
Class B Class C Class C
Class A Class A Class B excluding including excluding
at offer at NAV including CDSC CDSC CDSC CDSC
Tax-Free Ohio (Inception (Inception (Inception (Inception (Inception (Inception
Fund(3) 9/3/97) 9/3/97) 9/3/97) 9/3/97) 9/3/97) 9/3/97)
- ---------------------------------------------------------------------------------------------------------------------
3 months ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
6 months ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
9 months ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
1 year ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
3 years
ended
2/29/00
- ---------------------------------------------------------------------------------------------------------------------
Life of Fund
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Performance figures for periods after May 31, 1992 reflect applicable
Rule 12b-1 distribution expenses. Future performance will be affected
by such expenses.
26
<PAGE>
(2) Effective June 9, 1997, the maximum front-end sales charge was reduced
from 4.75% to 3.75%. The above performance numbers are calculated using
3.75% as the applicable sales charge for all time periods, and are more
favorable than they would have been had they been calculated using the
former front-end sales charges.
(3) Total return reflects voluntary expense caps in effect for the Fund.
Returns would be lower without the caps.
See Investment Management Agreement.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Funds and other mutual funds available from
Delaware Investments, will provide general information about investment
alternatives and scenarios that will allow investors to assess their personal
goals. This information will include general material about investing as well as
materials reinforcing various industry-accepted principles of prudent and
responsible personal financial planning. One typical way of addressing these
issues is to compare an individual's goals and the length of time the individual
has to attain these goals to his or her risk threshold. In addition, the
Distributor will provide information that discusses the Manager's overriding
investment philosophy and how that philosophy impacts the Funds', and other
Delaware Investments funds', investment disciplines employed in seeking their
objectives. The Distributor may also from time to time cite general or specific
information about the institutional clients of the Manager, including the number
of such clients serviced by such persons.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. You also should consider your financial ability to
continue to purchase shares during periods of high fund share prices. Delaware
Investments offers three services -- Automatic Investing Program, Direct Deposit
Program and the Wealth Builder Option -- that can help to keep your regular
investment program on track. See Investing by Electronic Fund Transfer - Direct
Deposit Purchase Plan and Automatic Investing Plan under Investment Plans and
Wealth Builder Option under Investment Plans for a complete description of these
services, including restrictions or limitations.
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
27
<PAGE>
Number of
Investment Price Per Shares
Amount Share Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $5.00 12
Month 4 $100 $10.00 10
-----------------------------------------
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of any stock or bond fund available from
Delaware Investments.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Fund
shares, your investment is given yet another opportunity to grow. It's called
the Power of Compounding. Each Fund may include illustrations showing the power
of compounding in advertisements and other types of literature.
TRADING PRACTICES AND BROKERAGE
Brokers, dealers and banks are selected to execute transactions for the
purchase or sale of portfolio securities on the basis of the Manager's judgment
of their professional capability to provide the service. The primary
consideration is to have brokers, dealers or banks execute transactions at best
execution. Best 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
securities are either bought or sold directly from or to a broker, dealer or
bank. In these instances, there is no direct commission charged, but there is a
spread (the difference between the buy and sell price) which is the equivalent
of a commission. When a commission is paid, a Fund pays reasonably competitive
brokerage commission rates based upon the professional knowledge of the
Manager's trading department as to rates paid and charged for similar
transactions throughout the securities industry. In some instances, a Fund pays
a minimal share transaction cost when the transaction presents no difficulty.
During the past three fiscal years of Pennsylvania Fund, there were no
brokerage commissions paid, and for the period ended February 29, 2000, there
were no brokerage commissions paid for New Jersey Fund or Ohio Fund.
The Manager may allocate out of all commission business generated by
all of the funds and accounts under its management, brokerage business to
brokers or dealers who provide brokerage and research services. These services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software and hardware used in
security analyses; and providing portfolio performance evaluation and technical
market analyses. Such services are used by the Manager in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.
28
<PAGE>
As provided in the Securities Exchange Act of 1934 (the "1934 Act") and
each Fund's 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, a Fund 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 a Fund and to other funds in the Delaware
Investments family. Subject to best execution, commissions allocated to
brokers providing such pricing services may or may not be generated by the funds
receiving the pricing service.
The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result in
best 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 Conduct Rules of the NASD Regulation, Inc. (the
"NASD"), and subject to seeking best price and execution, the Funds may place
orders with broker/dealers that have agreed to defray certain expenses of the
funds in the Delaware Investments family such as custodian fees, and may, at the
request of the Distributor, give consideration to sales of such funds' shares as
a factor in the selection of brokers and dealers to execute Fund portfolio
transactions.
Portfolio Turnover
Portfolio trading will be undertaken principally to accomplish a Fund's
objective in relation to anticipated movements in the general level of interest
rates. A Fund is free to dispose of portfolio securities at any time, subject to
complying with the Internal Revenue Code of 1986, as amended, (the "Code") and
the 1940 Act, when changes in circumstances or conditions make such a move
desirable in light of the investment objective. A Fund will not attempt to
achieve or be limited to a predetermined rate of portfolio turnover, such a
turnover always being incidental to transactions undertaken with a view to
achieving a Fund's investment objective. Portfolio transactions will be
undertaken only to accomplish a Fund'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. A Fund anticipates the portfolio turnover rate will ordinarily be less
than 100%.
29
<PAGE>
During the past two fiscal years, each Fund's portfolio turnover rates
were as follows:
---------------------------------------------------------------
February 28
---------------------------------------------------------------
1999 2000
---------------------------------------------------------------
Pennsylvania Fund 41% 00%
---------------------------------------------------------------
New Jersey Fund 0% 0%
---------------------------------------------------------------
Ohio Fund 45% 00%
---------------------------------------------------------------
Each Fund's portfolio turnover rate is calculated by dividing the
lesser of purchases or sales of portfolio securities for the particular fiscal
year by the monthly average of the value of the portfolio securities owned by
the Fund during the particular fiscal year, exclusive of securities whose
maturities at the time of acquisition are one year or less.
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's
shares and has agreed to use its best efforts to sell shares of each Fund. See
the Prospectus for information on how to invest. Shares of each Fund are offered
on a continuous basis and may be purchased through authorized investment dealers
or directly by contacting the Trust or the Distributor.
The minimum initial purchase is generally $1,000 for each Class.
Subsequent purchases must generally 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 fund in the Delaware Investments family, the
Manager or any of the Manager's affiliates if the purchases are made pursuant to
a payroll deduction program. Shares purchased pursuant to the Uniform Gifts to
Minors Act or the Uniform Transfers to Minors Act and shares purchased in
connection with an Automatic Investing Plan are subject to a minimum initial
purchase of $250 and a minimum subsequent purchase of $25. Accounts opened under
the Asset Planner Service are subject to a minimum initial investment of $2,000
per Asset Planner strategy selected.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. The Trust will reject any purchase order for more
than $250,000 of Class B Shares and $1,000,000 or more of Class C Shares. An
investor may exceed these limitations by making cumulative purchases over a
period of time. In doing so, an investor should keep in mind, however, that
reduced front-end sales charges apply to investments of $100,000 or more in
Class A Shares, and that Class A Shares are subject to lower annual 12b-1 Plan
expenses than Class B Shares and Class C Shares and generally are not subject to
a CDSC.
Selling dealers are responsible for transmitting orders promptly. The
Trust reserves the right to reject any order for the purchase of its shares of
either Fund if in the opinion of management such rejection is in such Fund's
best interest. If a purchase is canceled because your check is returned unpaid,
you are responsible for any loss incurred. A Fund can redeem shares from your
account(s) to reimburse itself for any loss, and you may be restricted from
making future purchases in any of the funds in the Delaware Investments family.
Each Fund reserves the right to reject purchase orders paid by third-party
checks or checks that are not drawn on a domestic branch of a United States
financial institution. If a check drawn on a foreign financial institution is
accepted, you may be subject to additional bank charges for clearance and
currency conversion.
30
<PAGE>
Each Fund also reserves the right, following shareholder notification,
to charge a service fee on accounts that, as a result of redemption, have
remained below the minimum stated account balance for a period of three or more
consecutive months. Holders of such accounts may be notified of their
insufficient account balance and advised that they have until the end of the
current calendar quarter to raise their balance to the stated minimum. If the
account has not reached the minimum balance requirement by that time, the Fund
will charge a $9 fee for that quarter and each subsequent calendar quarter until
the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining
low-balance accounts. No fees will be charged without proper notice, and no CDSC
will apply to such assessments.
Each Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
The NASD has adopted amendments to its Conduct Rules, as amended,
relating to investment company sales charges. 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 3.75%; however, lower front-end sales charges
apply for larger purchases. See the table in the Fund Classes' Prospectus. Class
A Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment.
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 for approximately eight years after purchase. See Automatic Conversion
of Class B Shares, below.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
Class A Shares, Class B Shares and Class C Shares represent a
proportionate interest in a Fund's assets and will receive a proportionate
interest in that Fund's income, before application of any expenses under that
Fund's 12b-1 Plans.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares, 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 full share denominations purchased by sending a letter
signed by each owner of the account to the Transfer Agent requesting the
certificate. No charge is assessed by the Trust for any certificate issued. A
shareholder may be subject to fees for replacement of a lost or stolen
certificate, under certain conditions, including the cost of obtaining a bond
covering the lost or stolen certificate. Please contact a Fund for further
information. Investors who hold certificates representing any of their shares
may only redeem those shares by written request. The investor's certificate(s)
must accompany such request.
31
<PAGE>
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B Shares
and Class C Shares permit investors to choose the method of purchasing shares
that is most suitable for their 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
0.30% (currently no more than 0.25% in the case of New Jersey Fund and Ohio
Fund) 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 Fund 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 12 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% (0.25% 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
0.30% (currently no more than 0.25% in the case of New Jersey Fund and Ohio
Fund) of average daily net assets of such shares. Unlike Class B Shares, Class C
Shares do not convert to another Class.
The higher 12b-1 Plan expenses on Class B Shares and Class C Shares
will be offset to the extent a return is realized on the additional money
initially invested upon the purchase of such shares. However, there can be no
assurance as to the return, if any, that will be realized on such additional
money. In addition, the effect of any return earned on such additional money
will diminish over time. In comparing Class B Shares to Class C Shares,
investors should also consider the duration of the annual 12b-1 Plan expenses to
which each of the classes is subject and the desirability of an automatic
conversion feature, which is available only for Class B Shares.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Funds, the Distributor and others will be paid, in the
case of Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and Class C Shares, from the
proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for selling
Class A Shares, Class B Shares 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 are used to finance the distribution of the respective
Classes. See Plans under Rule 12b-1 for the Fund Classes.
Dividends, if any, paid on Class A Shares, Class B Shares and Class C
Shares will be calculated in the same manner, at the same time and on the same
day and will be in the same amount, except that the additional amount of 12b-1
Plan expenses relating to Class B Shares and Class C Shares will be borne
exclusively by such shares. See Determining Offering Price and Net Asset Value.
Class A Shares
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the table in the Fund Classes'
Prospectus, and may include a series of purchases over a 13-month period under a
Letter of Intention signed by the purchaser. See Special Purchase Features -
Class A Shares, below for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
32
<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.
In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Investments products and services and who
increase sales of Delaware Investments funds may receive an additional
commission of up to 0.15% of the offering price in connection with sales of
Class A Shares. Such dealers must meet certain requirements in terms of
organization and distribution capabilities and their ability to increase sales.
The Distributor should be contacted for further information on these
requirements as well as the basis and circumstances upon which the additional
commission will be paid. Participating dealers may be deemed to have additional
responsibilities under the securities laws. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described in the Prospectus, for initial purchases of Class A Shares
of $1,000,000 or more, a dealer's commission may be paid by the Distributor to
financial advisers through whom such purchases are effected.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
funds as to which a Limited CDSC applies (see Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange) may be aggregated with those of the Class A Shares of a
Fund. Financial advisers also may be eligible for a dealer's commission in
connection with certain purchases made under a Letter of Intention or pursuant
to an investor's Right of Accumulation. Financial advisers should contact the
Distributor concerning the applicability and calculation of the dealer's
commission in the case of combined purchases.
An exchange from other Delaware Investments funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth above, and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are charged
as a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time of
purchase of the shares being redeemed or the net asset value of those shares at
the time of redemption. No CDSC will be imposed on increases in net asset value
above the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestment of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of Class B Shares or Class C
Shares of a Fund, even if those shares are later exchanged for shares of another
Delaware Investments fund. In the event of an exchange of the shares, the "net
asset value of such shares at the time of redemption" will be the net asset
value of the shares that were acquired in the exchange. See Waiver of Contingent
Deferred Sales Charge--Class B Shares and Class C Shares under Redemption and
Exchange for the Fund Classes for a list of the instances in which the CDSC is
waived.
33
<PAGE>
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the same
Fund. See Automatic Conversion of Class B Shares below. Such conversion will
constitute a tax-free exchange for federal income tax purposes. See Taxes.
Investors are reminded that the Class A Shares into which Class B Shares will
convert are subject to ongoing annual 12b-1 Plan expenses of up to a maximum of
0.30% (currently no more than 0.25% in the case of New Jersey Fund and Ohio
Fund) of average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
dealers or brokers for selling Class B Shares at the time of purchase from its
own assets in an amount equal to no more than 4% of the dollar amount purchased.
In addition, from time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may pay additional compensation to dealers or brokers for selling
Class B Shares at the time of purchase. As discussed below, however, Class B
Shares are subject to annual 12b-1 Plan expenses and, if redeemed within six
years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees makes it possible for a Fund to sell
Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class B Shares
described in this Part B, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the 18th day or
next business day 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.
34
<PAGE>
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, the Delaware Cash Reserve Fund 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.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
dealers or brokers for selling Class C Shares at the time of purchase from its
own assets in an amount equal to no more than 1% of the dollar amount purchased.
As discussed below, Class C Shares are subject to annual 12b-1 Plan expenses
and, if redeemed within 12 months of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class C Shares as
described in this Part B. See Redemption and Exchange.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a
separate plan for each of the Class A Shares, Class B Shares and Class C Shares
of the Fund (the "Plans"). Each Plan permits the relevant Fund 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 a Fund, pursuant to its 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 dealer's agreements with the Distributor. The
Plan expenses relating to Class B Shares and Class C Shares are also used to pay
the Distributor for advancing the commission costs to dealers with respect to
the initial sale of such shares.
In addition, each Fund may make payments out of the assets of Class A
Shares, Class B Shares 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 Fund under the Plans, and the
Fund's Distribution Agreement, is on an annual basis up to 0.30% (currently, no
more than 0.25% for New Jersey Fund and Ohio Fund pursuant to Board action) of
average daily net assets of Class A Shares, and up to 1% (0.25% of which are
service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of the Class B
Shares' and Class C Shares' average daily net assets for the year. The Trust's
Board of Trustees may reduce these amounts at any time.
35
<PAGE>
Effective June 1, 1992, the Board of Trustees has determined that the
annual fee payable on a monthly basis for Class A Shares of Pennsylvania Fund,
pursuant to its Plan, will be equal to the sum of: (i) the amount obtained by
multiplying 0.30% 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 0.10% 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 0.10%
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 0.30% of average daily
net assets). In addition, the Board of Trustees set the fee for Class A Shares
of New Jersey Fund and Ohio Fund at 0.25% of average daily net assets. While
this describes the current basis for calculating the fees which will be payable
under the Plans with respect to Class A Shares, such Plans permit a full 0.30%
on all Class A Shares' assets to be paid at any time following appropriate Board
approval.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A Shares, Class B Shares 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 of the Trust, 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 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, 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 Fund 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 relevant Class' outstanding voting securities. Any
amendment materially increasing the maximum percentage payable under the Plans
must likewise be approved by a majority vote of the relevant Class' outstanding
voting securities, as well as by a majority vote of those trustees who are not
"interested persons." With respect to the Class A Share Plan, any material
increase in the maximum percentage payable thereunder must also be approved by a
majority of the outstanding voting securities of a Fund's B Class. 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 of the Trust 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.
36
<PAGE>
For the fiscal year ended February 29, 2000, payments from Class A
Shares, Class B Shares and Class C Shares of each Fund were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
New New New
Jersey Jersey Jersey Ohio Ohio Ohio
Pennsylvania Pennsylvania Pennsylvania Fund A Fund B Fund B Fund A Fund B Fund C
Fund A Class Fund B Class Fund C Class Class Class Class Class Class Class
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Advertising
- -------------------------------------------------------------------------------------------------------------------------------
Annual/Semi
Annual Reports
- -------------------------------------------------------------------------------------------------------------------------------
Broker
Trails
- -------------------------------------------------------------------------------------------------------------------------------
Broker Sales
Charges
- -------------------------------------------------------------------------------------------------------------------------------
Dealer Service
Expenses
- -------------------------------------------------------------------------------------------------------------------------------
Interest on
Broker Sales
Charges
- -------------------------------------------------------------------------------------------------------------------------------
Commissions to
Wholesalers
- -------------------------------------------------------------------------------------------------------------------------------
Promotional-
Broker Meetings
- -------------------------------------------------------------------------------------------------------------------------------
Promotional-Other
- -------------------------------------------------------------------------------------------------------------------------------
Prospectus
Printing
- -------------------------------------------------------------------------------------------------------------------------------
Telephone
- -------------------------------------------------------------------------------------------------------------------------------
Other
- -------------------------------------------------------------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other Payments to Dealers - Class A Shares, Class B Shares and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Investments family of funds. In some instances, these
incentives or payments may be offered only to certain dealers who maintain, have
sold or may sell certain amounts of shares. The Distributor may also pay a
portion of the expense of preapproved dealer advertisements promoting the sale
of Delaware Investments fund shares.
37
<PAGE>
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under
the Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
Purchases of Class A Shares may be made at net asset value by current
and former officers, directors and employees (and members of their families) of
the Manager, any affiliate, any of the funds in the Delaware Investments family,
certain of their agents and registered representatives and employees of
authorized investment dealers and by employee benefit plans for such entities.
Individual purchases, including those in retirement accounts, must be for
accounts in the name of the individual or a qualifying family member. Class A
Shares may also be purchased at net asset value by current and former officers,
directors and employees (and members of their families) of the Dougherty
Financial Group LLC.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of funds in the
Delaware Investments family. Officers, directors and key employees of
institutional clients of the Manager or any of its affiliates may purchase Class
A Shares at net asset value. Moreover, purchases may be effected at net asset
value for the benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such broker, dealer
or investment adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in connection with
special investment products, such as wrap accounts or similar fee based
programs. Investors may be charged a fee when effecting transactions in Class A
Shares through a broker or agent that offers these special investment products.
The Trust must be notified in advance that the trade qualifies for
purchase at net asset value.
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Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or 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 90 days prior to the date the Letter
is signed. The 13-month period begins on the date of the earliest purchase. If
the intended investment is not completed, except as noted below, the purchaser
will be asked to pay an amount equal to the difference between the front-end
sales charge on Class A Shares purchased at the reduced rate and the front-end
sales charge otherwise applicable to the total shares purchased. If such payment
is not made within 20 days following the expiration of the 13-month period, the
Transfer Agent will surrender an appropriate number of the escrowed shares for
redemption in order to realize the difference. Such purchasers may include the
value (at offering price at the level designated in their Letter of Intention)
of all their shares of a Fund and of any class of any of the other mutual funds
available from the Delaware Investments family (except shares of any fund in the
Delaware Investments family which do not carry a front-end sales charge, CDSC or
Limited CDSC, other than shares of Delaware Group Premium Fund beneficially
owned in connection with the ownership of variable insurance products, unless
they were acquired through an exchange from a fund in the Delaware Investments
family 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.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class A Shares, Class B Shares and/or Class C
Shares of the Funds, as well as shares of any other class of any of the other
funds in the Delaware Investments family (except shares of any funds in the
Delaware Investments family which do not carry a front-end sales charge, CDSC or
Limited CDSC, other than shares of Delaware Group Premium Fund beneficially
owned in connection with the ownership of variable insurance products, unless
they were acquired through an exchange from a fund in the Delaware Investments
family which carried a front-end sales charge, CDSC or Limited CDSC). In
addition, assets held by investment advisory clients of the Manager or its
affiliates in a stable value account may be combined with other holdings of
shares of funds in the Delaware Investments family.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of a Fund as well
as shares of any other class of any of the funds in the Delaware Investments
family which offer such classes (except shares of any funds in the Delaware
Investments family which do not carry a front-end sales charge, CDSC or Limited
CDSC, other than shares of Delaware Group Premium Fund beneficially owned in
connection with the ownership of variable insurance products, unless they were
acquired through an exchange from shares from a fund in the Delaware Investments
family 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 3.00%. 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 in the Prospectus to determine the applicability of the Right of
Accumulation to their particular circumstances.
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12-Month Reinvestment Privilege
Holders of Class A Shares and Class B Shares of a Fund who redeem
such shares have one year from the date of redemption to reinvest all or part of
their redemption proceeds in the same Class of the Fund or in the same Class
of any of the other funds in the Delaware Investments family. In the case of
Class A Shares, the reinvestment will not be assessed a front-end sales charge
and in the case of Class B Shares, the amount of the CDSC previously charged on
the redemption will be reimbursed by the Distributor. The reinvestment will be
subject to applicable eligibility and minimum purchase requirements and must be
in states where shares of such other funds may be sold. This reinvestment
privilege does not extend to Class A Shares where the redemption of the shares
triggered the payment of a Limited CDSC. Persons investing redemption proceeds
from direct investments in mutual funds in the Delaware Investments family,
offered without a front-end sales charge will be required to pay the applicable
sales charge when purchasing Class A Shares. The reinvestment privilege does not
extend to a redemption of 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. In the case of
Class B Shares, the time that the previous investment was held will be included
in determining any applicable CDSC due upon redemptions as well as the automatic
conversion into Class A Shares.
A redemption and reinvestment of Class B Shares could have income tax
consequences. Shareholders will receive from the Distributor the amount of the
CDSC paid at the time of redemption as part of the reinvested shares, which may
be treated as a capital gain to the shareholder for tax purposes. 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
the fund's shares. Consequently, an investor should obtain and read carefully
the prospectus for the fund in which the investment is intended to be made
before investing or sending money. The prospectus contains more complete
information about the fund, including charges and expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as each Fund's shareholder servicing agent, about
the applicability of the Class A Limited CDSC in connection with the
features described above.
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
Classes in which an investor has an account (based on the net asset value in
effect on the payable date) and will be credited to the shareholder's account on
that date. Confirmations of each dividend payment from net investment income
will be mailed to shareholders quarterly. A confirmation of each distribution
from realized securities profits, if any, 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
a Fund Class. Such purchases, which must meet the minimum subsequent purchase
requirements stated in the Prospectus and this Part B, are made for Class A
Shares at the public offering price and for Class B Shares 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.
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Reinvestment of Dividends in Other Delaware Investments Family of Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A Shares,
Class B Shares and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Investments, including
the Funds, in states where their shares may be sold. Such investments will be at
net asset value at the close of business on the reinvestment date without any
front-end sales charge or service fee. The shareholder must notify the Transfer
Agent in writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
a fund in which the investor does not then have an account will be treated like
all other initial purchases of a fund's shares. Consequently, an investor should
obtain and read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses.
Subject to the following limitations, dividends and/or distributions
from other funds in Delaware Investments may be invested in shares of the Funds,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares or Class C Shares. Dividends from Class B Shares
may only be directed to other Class B Shares and dividends from Class C Shares
may only be directed to other Class C Shares.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or all of
your investment into shares of a Fund. If you wish to open an account by
exchange, call the Shareholder Service Center for more information. All
exchanges are subject to the eligibility and minimum purchase requirements set
forth in each fund's prospectus. See Redemption and Exchange for more complete
information concerning your exchange privileges.
Holders of Class A Shares of a Fund may exchange all or part of their
shares for certain of the shares of other funds in the Delaware Investments
family, including other Class A Shares, but may not exchange their Class A
Shares for Class B Shares or Class C Shares of the Fund or of any other fund in
the Delaware Investments family. Holders of Class B Shares of a Fund are
permitted to exchange all or part of their Class B Shares only into Class B
Shares of other Delaware Investments funds. Similarly, holders of Class C Shares
of a Fund are permitted to exchange all or part of their Class C Shares only
into Class C Shares of other Delaware Investments funds. Class B Shares of a
Fund and Class C Shares of a Fund acquired by exchange will continue to carry
the CDSC and, in the case of Class B Shares, the automatic conversion schedule
of the fund from which the exchange is made. The holding period of Class B
Shares of a Fund acquired by exchange will be added to that of the shares that
were exchanged for purposes of determining the time of the automatic conversion
into Class A Shares of that Fund.
Permissible exchanges into Class A Shares of a Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of a Fund will be made without the imposition of a CDSC
by the fund from which the exchange is being made at the time of the exchange.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for either Fund to
accept for investment in Class A Shares, Class B Shares or Class C Shares,
through an agent bank, preauthorized government or private recurring payments.
This method of investment assures the timely credit to the shareholder's account
of payments such as social security, veterans' pension or compensation benefits,
federal salaries, Railroad Retirement benefits, private payroll checks,
dividends, and disability or pension fund benefits. It also eliminates lost,
stolen and delayed checks.
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Automatic Investing Plan--Shareholders of Class A Shares, Class B
Shares and Class C Shares may make automatic investments by authorizing, in
advance, monthly or quarterly payments directly from their checking account
for deposit into their Fund account. This type of investment will be handled in
either of the following ways. (1) If the shareholder's bank is a member of the
National Automated Clearing House Association ("NACHA"), the amount of the
investment will be electronically deducted from his or her account by Electronic
Fund Transfer ("EFT"). The shareholder's checking account will reflect a debit
each month at a specified date although no check is required to initiate the
transaction. (2) If the shareholder's bank is not a member of NACHA, deductions
will be made by preauthorized checks, known as Depository Transfer Checks.
Should the shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to a Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
a Fund may liquidate sufficient shares from a shareholder's account to reimburse
the government or the private source. In the event there are insufficient shares
in the shareholder's account, the shareholder is expected to reimburse the Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. Either Fund will accept
these investments, such as bank-by-phone, annuity payments and payroll
allotments, by mail directly from the third party. Investors should contact
their employers or financial institutions who in turn should contact the Trust
for proper instructions.
MoneyLine(SM) On Demand
You or your investment dealer may request purchases of Fund shares by
phone using MoneyLine(SM) On Demand. When you authorize a Fund to accept such
requests from you or your investment dealer, funds will be withdrawn from (for
share purchases) your predesignated bank account. Your request will be processed
the same day if you call prior to 4 p.m., Eastern time. There is a $25 minimum
and $50,000 maximum limit for MoneyLine(SM) On Demand transactions.
It may take up to four business days for the transactions to be
completed. You can initiate this service by completing an Account Services form.
If your name and address are not identical to the name and address on your Fund
account, you must have your signature guaranteed. The Funds do not charge a fee
for this service; however, your bank may charge a fee.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Investments family. Shareholders of the Fund Classes may
elect to invest in one or more of the other mutual funds in Delaware Investments
family through the Wealth Builder Option. If in connection with the election of
the Wealth Builder Option, you wish to open a new account to receive the
automatic investment, such new account must meet the minimum initial purchase
requirements described in the prospectus of the fund that you select. All
investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above.
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Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Investments family, subject to the conditions and limitations set forth in the
Fund Classes' Prospectus. The investment will be made on the 20th day of each
month (or, if the fund selected is not open that day, the next business day) at
the public offering price or net asset value, as applicable, of the fund
selected on the date of investment. No investment will be made for any month if
the value of the shareholder's account is less than the amount specified for
investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Redemption and Exchange for a brief summary of the tax
consequences of exchanges. Shareholders can terminate their participation in
Wealth Builder at any time by giving written notice to the fund from which
exchanges are made.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisers or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial adviser,
you may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under Investing by Exchange. Also see
Buying Class A Shares at Net Asset Value. The minimum initial investment per
Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available through the Asset Planner
service. Generally, only shares within the same class may be used within the
same Strategy. However, Class A Shares of a Fund and of other funds in the
Delaware Investments family may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors will receive a customized quarterly Strategy Report
summarizing all Asset Planner investment performance and account activity during
the prior period. Confirmation statements will be sent following all
transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
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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 after receipt of the order by a Fund, its agent or certain
other authorized persons. Orders for purchases of Class B Shares and Class C
Shares are effected at the net asset value per share next calculated by a Fund
after receipt of the order by a Fund, its agent or other certain authorized
persons. See Distribution and Service under Investment Management
Agreement. Selling dealers have the responsibility of transmitting orders
promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable 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, Martin Luther King, Jr.'s
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. When the New York Stock Exchange is closed, the
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 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.
Each Fund'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 Fund shares outstanding. In determining a Fund'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 a Fund. In
addition, money market instruments having a maturity of less than 60 days are
valued at amortized cost. Expenses and fees are accrued daily.
Each Class of a Fund will bear, pro-rata, all of the common expenses of
that Fund. The net asset values of all outstanding shares of each Class of a
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of shares
of that Class. All income earned and expenses incurred by a Fund will be borne
on a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in the Fund represented by the value of shares of such Classes,
except that the Class A Shares, Class B Shares 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 a Fund may vary. However, the net
asset value per share of each Class is expected to be equivalent.
REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
Exchanges are subject to the requirements of each fund and all exchanges of
shares constitute taxable events. Further, in order for an exchange to be
processed, shares of the fund being acquired must be registered in the state
where the acquiring shareholder resides. You may want to consult your financial
adviser or investment dealer to discuss which funds in Delaware Investments will
best meet your changing objectives, and the consequences of any exchange
transaction. You may also call the Delaware Investments directly for fund
information.
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Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after a Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. A shareholder submitting a redemption
request may indicate that he or she wishes to receive redemption proceeds of a
specific dollar amount. In the case of such a request, a Fund will redeem the
number of shares necessary to deduct the applicable CDSC in the case of Class B
Shares and Class C Shares, and, if applicable, the Limited CDSC in the case of
Class A Shares and tender to the shareholder the requested amount, assuming the
shareholder holds enough shares in his or her account for the redemption to be
processed in this manner. Otherwise, the amount tendered to the shareholder upon
redemption will be reduced by the amount of the applicable CDSC or Limited CDSC.
Redemption proceeds will be distributed promptly, as described below, but not
later than seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800-523-1918. Each Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
In addition to redemption of Fund shares, the Distributor, acting as
agent of the Funds, offers to repurchase Fund shares from broker/dealers acting
on behalf of shareholders. The redemption or repurchase price, which may be more
or less than the shareholder's cost, is the net asset value per share next
determined after receipt of the request in good order by the respective Fund,
its agent, or certain authorized persons, subject to applicable CDSC or Limited
CDSC. This is computed and effective at the time the offering price and net
asset value are determined. See Determining Offering Price and Net Asset Value.
The Funds and the Distributor end their business days at 5 p.m., Eastern time.
This offer is discretionary and may be completely withdrawn without further
notice by the Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order by the Fund or certain other authorized persons (see Distribution
and Service under Investment Management Agreement); provided, however, that
each commitment to mail or wire redemption proceeds by a certain time, as
described below, is modified by the qualifications described in the next
paragraph.
Each Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. Each Fund will honor redemption requests as to shares for which a check
was tendered as payment, but a Fund will not mail or wire the proceeds until it
is reasonably satisfied that the purchase check has cleared, which may take up
to 15 days from the purchase date. You can avoid this potential delay if you
purchase shares by wiring Federal Funds. Each Fund reserves the right to reject
a written or telephone redemption request or delay payment of redemption
proceeds if there has been a recent change to the shareholder's address of
record.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund involved will automatically redeem from the shareholder's account the
shares purchased by the check plus any dividends earned thereon. Shareholders
may be responsible for any losses to a Fund or to the Distributor.
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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 a Fund of securities owned by it is not reasonably practical,
or it is not reasonably practical for a Fund fairly to value its assets, or in
the event that the SEC has provided for such suspension for the protection of
shareholders, a Fund may postpone payment or suspend the right of redemption or
repurchase. In such case, the shareholder may withdraw the request for
redemption or leave it standing as a request for redemption at the net asset
value next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, the Trust
has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which
each Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of such Fund during any 90-day period for
any one shareholder.
The value of a Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to a Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value, below.
Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed within
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 shares are redeemed within 12 months following purchase. Class C Shares
are subject to a CDSC of 1% if shares are redeemed within 12 months following
purchase. See Contingent Deferred Sales Charge - Class B Shares and Class C
Shares under Purchasing Shares. Except for the applicable CDSC or Limited CDSC
and, with respect to the expedited payment by wire described below for which
there may be a bank wiring cost, neither the Funds nor the Distributor charges
a fee for redemptions or repurchases, but such fees could be charged at any time
in the future.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Investments (in
each case, "New Shares") in a permitted exchange, will not be subject to a CDSC
that might otherwise be due upon redemption of the Original Shares. However,
such shareholders will continue to be subject to the CDSC and, in the case of
Class B Shares, the automatic conversion schedule of the Original Shares as
described in this Part B and any CDSC assessed upon redemption will be charged
by the fund from which the Original Shares were exchanged. In an exchange of
Class B Shares from a Fund, the Fund's CDSC schedule may be higher than the CDSC
schedule relating to the New Shares acquired as a result of the exchange. For
purposes of computing the CDSC that may be payable upon a disposition of the New
Shares, the period of time that an investor held the Original Shares is added to
the period of time that an investor held the New Shares. With respect to Class B
Shares, the automatic conversion schedule of the Original Shares may be longer
than that of the New Shares. Consequently, an investment in New Shares by
exchange may subject an investor to the higher 12b-1 fees applicable to Class B
Shares of a Fund for a longer period of time than if the investment in New
Shares were made directly.
Written Redemption
You can write to each Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares. The request must be signed by all
owners of the account or your investment dealer of record. For redemptions of
more than $50,000, or when the proceeds are not sent to the shareholder(s) at
the address of record, the Funds require a signature by all owners of the
account and a signature guarantee for each owner. A signature guarantee can be
obtained from a commercial bank, a trust company or a member of a Securities
Transfer Association Medallion Program ("STAMP"). Each Fund reserves the right
to reject a signature guarantee supplied by an eligible institution based on its
creditworthiness. The Funds 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 after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate(s) must accompany your request and also be in good order.
Certificates are issued for Class A Shares only if a shareholder submits a
specific request. Certificates are not issued for Class B Shares or Class C
Shares.
Written Exchange
You may also write to each Fund (at 1818 Market Street, Philadelphia,
PA 19103) to request an exchange of any or all of your shares into another
mutual fund in Delaware Investments, subject to the same conditions and
limitations as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificates.
The Telephone Redemption - Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in which you have your account
in writing that you do not wish to have such services available with respect to
your account. Each Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be difficult to
reach the Funds by telephone during periods when market or economic conditions
lead to an unusually large volume of telephone requests.
Neither the Funds nor their Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, each Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by the
Fund Classes are generally tape recorded, and a written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone. By exchanging shares by telephone, you are acknowledging prior
receipt of a prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day. If the
proceeds are wired to the shareholder's account at a bank which is not a member
of the Federal Reserve System, there could be a delay in the crediting of the
funds to the shareholder's bank account. A bank wire fee may be deducted
from Fund Class redemption proceeds. If you ask for a check, it will normally be
mailed the next business day after receipt of your redemption request to your
predesignated bank account. There are no separate fees for this redemption
method, but the mail time may delay getting funds into your bank account. Simply
call the Shareholder Service Center prior to the time the offering price and net
asset value are determined, as noted above.
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Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in Delaware Investments under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Investments family. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and each Fund reserve
the right to record exchange instructions received by telephone and to reject
exchange requests at any time in the future.
MoneyLine(SM) On Demand
You or your investment dealer may request redemptions of Fund shares by
phone using MoneyLine(SM) On Demand. When you authorize a Fund to accept such
requests from you or your investment dealer, funds will be deposited to (for
share redemptions) your predesignated bank account. Your request will be
processed the same day if you call prior to 4 p.m., Eastern time. There is a $25
minimum and $50,000 maximum limit for MoneyLine(SM) On Demand transactions. See
MoneyLine(SM) On Demand under Investment Plans.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Funds will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Investments funds from Timing Firms. A Fund reserves the right to temporarily or
permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Investments funds: (1)
Delaware Decatur Equity Income Fund, (2) Delaware Growth and Income Fund,
(3) Delaware Balanced Fund, (4) Delaware Limited-Term Government Fund, (5)
Delaware Tax-Free USA Fund, (6) Delaware Cash Reserve, (7) Delaware
Delchester Fund and (8) Delaware Tax-Free Pennsylvania Fund. No other Delaware
Investments funds are available for timed exchanges. Assets redeemed or
exchanged out of Timing Accounts in Delaware Investments funds not listed above
may not be reinvested back into that Timing Account. Each Fund reserves the
right to apply these same restrictions to the account(s) of any person whose
transactions seem to follow a time pattern (as described above).
Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund and therefore may be
refused.
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Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
Systematic Withdrawal Plans
49
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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 a Fund does not recommend any
specific amount of withdrawal. This is particularly useful to shareholders
living on fixed incomes, since it can provide them with a stable supplemental
amount. Shares purchased with the initial investment and through reinvestment of
cash dividends and realized securities profits distributions will be credited to
the shareholder's account and sufficient full and fractional shares will be
redeemed at the net asset value calculated on the third business day preceding
the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital, and the share
balance may in time be depleted, particularly in a declining market.
Shareholders should not purchase additional shares while participating in a
Systematic Withdrawal Plan.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in a Fund managed by the
Manager must be terminated before a Systematic Withdrawal Plan with respect to
such shares can take effect, except if the shareholder is investing in
Delaware Investments funds which do not carry a sales charge. Redemptions of
Class A Shares pursuant to a Systematic Withdrawal Plan may be subject to a
Limited CDSC if the purchase was made at net asset value and a dealer's
commission has been paid on that purchase. The applicable Limited CDSC for
Class A Shares and CDSC for Class B and C Shares redeemed via a Systematic
Withdrawal Plan will be waived if the annual amount withdrawn in each year is
less than 12% of the account balance on the date that the Plan is established.
If the annual amount withdrawn in any year exceeds 12% of the account balance
on the date that the Systematic Withdrawal Plan is established, all redemptions
under the Plan will be subjected to the applicable contingent deferred sales
charge, including an assessment for previously redeemed amounts under the Plan.
Whether a waiver of the contingent deferred sales charge is available or not,
the first shares to be redeemed for each Systematic Withdrawal Plan payment will
be those not subject to a contingent deferred sales charge because they have
either satisfied the required holding period or were acquired through the
reinvestment of distributions. See Waiver of Contingent Deferred Sales
Charges, below.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. Each Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
Systematic Withdrawal Plan payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine(SM) Direct
Deposit Service. Your funds will normally be credited to your bank account up to
four business days after the payment date. There are no separate fees for this
redemption method. It may take up to four business days for the transactions to
be completed. You can initiate this service by completing an Account Services
form. If your name and address are not identical to the name and address on your
Fund account, you must have your signature guaranteed. None of the Funds
charge a fee for this service; however, your bank may charge a fee.
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Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or shares
into which such Class A Shares are exchanged) according to the following
schedule: (1) 1.00% if shares are redeemed during the first year after the
purchase; and (2) 0.50% if such shares are redeemed during the second year after
the purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed
on an amount equal to the lesser of: (1) the net asset value at the time of
purchase of the Class A Shares being redeemed or (2) the net asset value of such
Class A Shares at the time of redemption. For purposes of this formula, the "net
asset value at the time of purchase" will be the net asset value at purchase of
the Class A Shares even if those shares are later exchanged for shares of
another Delaware Investments fund and, in the event of an exchange of Class A
Shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than two years will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments fund will not trigger the imposition of the Limited
CDSC at the time of such exchange. The period a shareholder owns shares into
which Class A Shares are exchanged will count towards satisfying the two-year
holding period. The Limited CDSC is assessed if such two-year period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of a Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
Waiver of Limited Contingent Deferred Sales Charge -- Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from a Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) redemptions by the classes of shareholders who are
permitted to purchase shares at net asset value, regardless of the size of the
purchase (see Buying Class A Shares at Net Asset Value under Purchasing
Shares); and (iii) distributions from an account if the redemption results from
a death of a registered owner, or a registered joint owner, 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 disability (as defined in Section 72 of the
Code) of all registered owners occurring after the purchase of the shares being
redeemed.
Waiver of Contingent Deferred Sales Charge -- Class B Shares and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from a
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; and (ii) distributions from an account if the redemption results
from the death of all registered owners, or a registered joint owner, 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 1986, as amended (the
"Code")) of all registered owners occurring after the purchase of the shares
being redeemed.
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The CDSC of Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from a Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; and (ii)
distributions from an account if the redemption results from the death of all
registered owners, or a registered joint owner, of the account (in the case of
accounts established under the Uniform Gifts to Minors or Uniform Transfers to
Minors Acts or trust accounts, the waiver applies upon the death of all
beneficial owners) or a total and permanent disability (as defined in Section 72
of the Code) of all registered owners occurring after the purchase of the shares
being redeemed.
In addition, the CDSC will be waived on Class A Shares, Class B
Shares and Class C Shares redeemed in accordance with a Systematic Withdrawal
Plan if the annual amount selected to be withdrawn under the Plan does not
exceed 12% of the value of the account on the date that the Systematic
Withdrawal Plan was established or modified.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund declares a dividend from net investment income to its
shareholders on a daily basis. Dividends are declared each day the Funds are
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 Funds are not open will be declared as a dividend on the next business day.
Purchases of Fund shares by wire begin earning dividends when converted into
Federal Funds and available for investment, normally the next business day after
receipt. However, if a Fund is given prior notice of Federal Funds wire and an
acceptable written guarantee of timely receipt from an investor satisfying a
Fund's credit policies, the purchase will start earning dividends on the date
the wire is received. Investors desiring to guarantee wire payments must have an
acceptable financial condition and credit history in the sole discretion of a
Fund. Each Fund 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.
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 quarterly statement showing dividends paid
and all the transactions made during the period.
Each Class of a Fund will share proportionately in the investment
income and expenses of that Fund, 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. A Fund may deduct from
a shareholder's account the costs of the Fund's effort to locate a shareholder
if a shareholder's mail is returned by the Post Office or the Fund is otherwise
unable to locate the shareholder or verify the shareholder's mailing address.
These costs may include a percentage of the account when a search company
charges a percentage fee in exchange for their location services.
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Pennsylvania Fund anticipates that substantially all dividends paid to
shareholders will be exempt from federal and Pennsylvania personal income taxes
and from certain other Pennsylvania state and local taxes. New Jersey Fund
anticipates that substantially all dividends paid to shareholders will be exempt
from federal and New Jersey gross income taxes. In addition, Ohio Fund
anticipates that substantially all dividends paid to shareholders will be exempt
from federal and Ohio personal income taxes and from certain other Ohio 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 a Fund's distribution is subject to the federal alternative minimum
tax should that Fund invest in "private purpose" bonds.
TAXES
Federal Income Tax Aspects
Each Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code, 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 a Fund 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 Fund intends to meet the
requirements of the 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.
For federal income tax purposes, portfolio securities of Pennsylvania
Fund, New Jersey Fund and Ohio Fund had net unrealized appreciation at February
29, 2000 of $00,000,000, $00,000 and $00,000, respectively, on the basis of
specific cost.
Distributions representing net interest income received by a Fund 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 that Fund, 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 a Fund, 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 a Fund.
Section 265 of the 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 a Fund is not deductible.
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A Fund 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 Code. Persons who are or may be considered "substantial users" should
consult their tax advisers in this matter before purchasing shares of a Fund.
Each Fund intends to use the "average annual" method of allocation in
the event a Fund 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 a Fund at any time
during the year.
State and Local Taxes
See Taxes in the Prospectus for a discussion of Pennsylvania, New
Jersey and Ohio taxation. Shares of a Fund may be taxable for purposes of, as
applicable, Pennsylvania, New Jersey or Ohio inheritance and estate tax.
Shareholders of the Pennsylvania Fund 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
Fund which are not exempt from such tax. However, since the Trust's inception,
all of its assets have been exempt from such tax.
Distributions by a Fund may not be exempt from state or local income
tax in states other than, as applicable, Pennsylvania, New Jersey or Ohio.
Shareholders of each Fund are advised to consult their own tax adviser in this
regard.
Under the 1997 Act, as revised by the 1998 Act and the Omnibus
Consolidated and Emergency Supplemental Appropriations Act, a Fund is required
to track its sales of portfolio securities and to report its capital gain
distributions to you according to the following categories of holding periods:
"Long-term capital gains": gains on securities sold after December 31,
1997 and held for more than 12 months as capital assets in the hands of
the holders are taxed at the 20% rate when distributed to shareholders
(10% for individual investors in the 15% bracket).
"Short-term capital gains": gains on securities sold by a Fund that
do not meet the long-term holding period are considered short-term
capital gains and are taxed as ordinary income.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
five-year gains are net gains on securities held for more than 5 years which are
sold after December 31, 2000. For individuals who are subject to tax at
higher rate brackets, qualified five-year gains are net gains on securities
which are purchased after December 31, 2000 and are held for more than five
years. Taxpayers subject to tax at a higher rate brackets may also make an
election for shares held on January 1, 2001 to recognize gain on their shares in
order to qualify such shares as qualified five-year property. These gains will
be taxable to individual investors at a maximum rate of 18% for investors in the
28% or higher federal income tax brackets, and at a maximum rate of 8% for
investors in the 15% federal income tax bracket when sold after the five-year
holding period.
If you redeem some or all of your shares in a Fund, and then reinvest
the sales proceeds in such Fund or in another Delaware Investments fund within
90 days of buying the original shares, the sales charge that would otherwise
apply to your reinvestment may be reduced or eliminated. The IRS will require
you to report gain or loss on the redemption of your original shares in a Fund.
In doing so, all or a portion of the sales charge that you paid for your
original shares in a Fund will be excluded from your tax basis in the shares
sold (for the purpose of determining gain or loss upon the sale of such shares).
The portion of the sales charge excluded will equal the amount that the sales
charge is reduced on your reinvestment. Any portion of the sales charge excluded
from your tax basis in the shares sold will be added to the tax basis of the
shares you acquire from your reinvestment.
Shareholders will be notified annually by the Trust as to the federal
income tax status of dividends and distributions paid by their Fund.
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INVESTMENT MANAGEMENT AGREEMENTS
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to each Fund, subject to the
supervision and direction of the Board of Trustees of the Trust
The Manager and its predecessors have been managing the funds in
Delaware Investments since 1938. On February 29, 2000, the Manager and its
affiliates within Delaware Investments, including the Delaware International
Advisers Ltd., were managing in the aggregate more than $00 billion in
assets in the various institutional or separately managed (approximately
$00,000,000,000) and investment company (approximately $00,000,000,000)
accounts.
The Investment Management Agreement for the Funds is dated April 29,
2000 and was approved by the initial shareholders on that date. The
Agreement has an initial term of two years and may be further renewed after its
initial term 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 each Fund to which the Agreement relates,
and only if the terms of the renewal thereof have been approved by the vote of a
majority of the trustees of the Trust who are not parties thereto or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. The Agreement is terminable without penalty on 60 days
notice by the trustees of the Trust or by the Manager. The Agreement will
terminate automatically in the event of its assignment.
The Investment Management Agreement provides that each respective Fund
shall pay the Manager a management fee equal to (on an annual basis) 0.55% on
the first $500 million of average daily net assets of the Fund, 0.50% on the
next $500 million, 0.45% on the next $1.5 billion and 0.425% on the average
daily net assets in excess of $2.5 billion.
The Manager elected voluntarily to waive that portion, if any, of the
annual management fees payable by New Jersey Fund and Ohio Fund and to pay
certain of these Funds' expenses to the extent necessary to ensure that the
Total Operating Expenses of each Class of the Funds do not exceed 0.25%
(exclusive of taxes, interest, brokerage commissions, extraordinary expenses and
12b-1 Plan expenses) from January 22, 1998 through April 20, 2000.
On February 29, 2000, the total net assets of the Trust were
$000,000,000, broken down as follows:
Pennsylvania Fund $000,000,000
New Jersey Fund $0,000,000
Ohio Fund $0,000,000
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On February 29, 2000, the total net assets for each Fund and
investment management fees paid for each Fund for the past three fiscal years
were as follows:
<TABLE>
<CAPTION>
Fund February 29, 2000 February 28, 1999 February 28, 1998
- ---- -------------------- -------------------- -------------------
<S> <C> <C> <C>
Pennsylvania Fund $0,000,000 earned $5,416,438 earned $5,604,856 earned
$0,000,000 paid $5,416,438 paid $5,604,856 paid
$-0- waived $-0- waived $-0- waived
New Jersey Fund(1) $00,000 earned $12,630 earned $3,235 earned
$-0- paid $-0- paid $-0- paid
$00,000 waived $12,630 waived $3,235 waived
Ohio Fund(2) $0,000 earned $7,534 earned $2,856 earned
$-0- paid $-0- paid $-0- paid
$0,000 waived $7,534 waived $2,856 waived
</TABLE>
(1) Commenced operations on September 2, 1997.
(2) Commenced operations on September 3, 1997.
Under the general supervision of the Board of Trustees, the Manager
makes all investment decisions which are implemented by the Funds. The Manager
pays the salaries of all trustees, officers and employees of each Fund who are
affiliated with the Manager. Each Fund pays all of its other expenses, including
its proportionate share of rent and certain other administrative expenses. The
Manager is a series of Delaware Management Business Trust. The Manager changed
its form of organization from a corporation to a business trust on March 1,
1998.
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 for each Fund under
separate Distribution Agreements dated April 29, 2000. The Distributor is an
affiliate of the Manager and bears all of the costs of promotion and
distribution, except for payments by each Fund on behalf of the Class A Shares,
Class B Shares and Class C Shares under their respective 12b-1 Plans. Delaware
Distributors, Inc. ("DDI") is the corporate general partner of Delaware
Distributors, L.P. and both DDI and Delaware Distributors, L.P. are indirect,
wholly owned subsidiaries of Delaware Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
each Fund's shareholder servicing, dividend disbursing and transfer agent
pursuant to an amended and restated agreement dated September 2, 1997. The
Transfer Agent also provides accounting services to each Fund pursuant to the
terms of a separate Fund Accounting Agreement. The Transfer Agent is also an
indirect, wholly owned subsidiary of Delaware Management Holdings, Inc.
The Funds have authorized one or more brokers to accept on their behalf
purchase and redemption orders in addition to the Transfer Agent. Such brokers
are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Funds. For purposes of pricing, the Funds
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Investors may be charged a fee effecting transactions through a broker or
agent.
56
<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 available from the Delaware Investments family. As of
March 31, 2000, the Trust's officers and trustees, as a group, owned less
than 1% of each of the Class A Shares, B Shares and C Shares of Tax-Free
Pennsylvania Fund, Tax-Free New Jersey Fund and Tax-Free Ohio Fund.
As of March 31, 2000, management believes the following accounts
held 5% or more of the outstanding shares of Class A Shares, Class B Shares and
Class C Shares of each Fund:
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Tax-Free Pennsylvania Merrill Lynch, Pierce, Fenner & Smith
Fund Class A Shares For the Sole Benefit of its Customers
Attn: Fund Admin. Sec.
4800 Dear Lake Drive East, 2nd Floor
Jacksonville, FL 32246
Tax-Free Pennsylvania Merrill Lynch, Pierce, Fenner & Smith
Fund Class B Shares For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Dear Lake Drive East, 2nd Floor
Jacksonville, FL 32246
Tax-Free Pennsylvania Margaret M. Magreni
Fund Class C Shares 70 W. Manila Avenue
Pittsburgh, PA 15220
The Mennonite Foundation, Inc.
W&A Rosenberger
P.O. Box 483
Goshen, IL
Joanne Stephano
1152 Thrush Lane
Norristown, PA 19403
David N. Arms and
Janet E. Arms JT WROS
2147 Deep Creek Road
Perkiomenville, PA 18074
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Tax-Free New Jersey Lincoln National Life Insurance Co.
Fund Class A Shares c/o Lincoln Investment Management, Inc.
Attn: Carol A. Schmidt
200 East Berry Street
Fort Wayne, IN 46802
Daniel Murray
Margaret Murray
2526 Sparrowbush Lane
Manasquan, NJ 08736
Tax-Free New Jersey Donaldson Lufkin Jenrette
Fund Class B Shares Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303
First Clearing Corporation
Theodore W. Gruber, Jr.
P.O. Box 615
Elmer, NJ
John Schley
Custody Account
P.O. Box 181
Whitehouse, NJ 08888
Summit Financial Services Group
Beatrice T. Nucci
One Bethlehem Plaza
Bethlehem, PA 18018
Summit Financial Services Group
Glenna Williams
One Bethlehem Plaza
Bethlehem, PA 18018
First Clearing Corporation
John A. Lanckowski and
Lillian Lanckowski
4 Delford Drive
North Cape May, NJ 08204
Stanley Kumer
Sarita Kumer
29 Quicksilver Court
Lakewood, NJ 08701
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Tax-Free New Jersey Merrill Lynch Pierce Fenner & Smith
Fund Class B Shares For the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Drive, 2nd Floor
Jacksonville, FL 32246
Tax-Free New Jersey Merrill Lynch Pierce Fenner & Smith
Fund Class C Shares For the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Drive, 2nd Floor
Jacksonville, FL 32246
Renee Hackel
Tod, Gerald, Steren, Kaufman, et al.
2000 Linwood Avenue
Fort Lee, NJ 07024
Paine Webber for the benefit of
Robert C. Crosson as Trustee
For Robert C. Crosson Trust
312 Commodore Bay
1100 Ocean Drive
Avalon, NJ 08202
Paine Webber for the benefit of
Ellen J. Crosson as Trustee
For Ellen J. Crosson Trust
312 Commodore Bay
1100 Ocean Drive
Avalon, NJ 08202
Paine Webber for the benefit of
Sara P. Badger
7 Crestview Drive
Somers Point, NJ 08244
Robert V. Barnabet and
Deborah G. Barnabet, JT WROS
59 5th Avenue
Maple Shade, NJ 08052
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Tax-Free Ohio Fund Lincoln National Life Insurance Company
Class A Shares c/o Lincoln Investment Management, Inc.
Attn: Carol A. Schmidt
200 East Berry Street
Fort Wayne, IN 46802
David J. Littell and
Mary Ann Littell JT WROS
3804 Long Road
Avon, OH 44011
- -------------------------------- ------------------------------------------------- ----------------- ---------------
Tax-Free Ohio Fund Brent W. Wright and
Class B Shares Irrevocable Trust of
Mabel Jean Wright
7676 Red Bank Road
Westerville, OH 43082
Catherine F. Peter
2884 Grandin Road
Cincinnati, OH 45208
Susan S. Lecky
5632 Vogel Road
Cincinnati, OH 45239
Jack R. Gasaway and
Charlotte J. Gasaway JR WROS
454 S. Beechgrove Road
Wilmington, OH 45177
- -------------------------------- ------------------------------------------------- ----------------- ---------------
Tax-Free Ohio Fund Richard M. Payne
Class C Shares 1078 Cross Country Drive
Worthington, OH 43235
First Clearing Corporation
Melvin Strauss Rev. Tr.
Melvin Strauss
30601 Ainsworth Drive
Pepper Pike, OH 44124
- -------------------------------- ------------------------------------------------- ----------------- ---------------
</TABLE>
61
<PAGE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Management Company, Inc., Delaware Investment Advisers (a series of Delaware
Management Business Trust), Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust Company,
Delaware International Holdings Ltd., Founders Holdings, Inc., Delaware
International Advisers Ltd., Delaware Capital Management, Inc., Delaware
General Management, Inc. and Retirement Financial Services, Inc. are direct or
indirect, wholly owned subsidiaries of Delaware Management Holdings, Inc.
("DMH"). On April 3, 1995, a merger between DMH and a wholly owned subsidiary of
Lincoln National Corporation ("Lincoln National") was completed. DMH and the
Manager are now indirect, wholly owned subsidiaries, and subject to the ultimate
control, of Lincoln National. Lincoln National, with headquarters in Fort Wayne,
Indiana, is a diversified organization with operations in many aspects of the
financial services industry, including insurance and investment management.
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 director is One Commerce
Square, Philadelphia, PA 19103.
<TABLE>
<CAPTION>
Trustee and Officer Business Experience
- ------------------------------------------- ----------------------------------------------------------------------------------------
<S> <C>
*Wayne A. Stork (61) Trustee/Director and Chairman of the Trust and each of the other 32
investment companies in the Delaware Investments family.
Prior to January 1, 1999, Mr. Stork was Chairman and Director and/or Trustee of the
Trust and each of the other 33 investment companies in the Delaware Investments family
and Delaware Capital Management, Inc.; Chairman, President, Chief Executive Officer
and Director of DMH Corp., Delaware Distributors, Inc. and Founders Holdings, Inc.;
Chairman, President, Chief Executive Officer, Chief Investment Officer and
Director/Trustee of Delaware Management Company, Inc. and Delaware Management Business
Trust; Chairman, President, Chief Executive Officer and Chief Investment Officer of
Delaware Management Company (a series of Delaware Management Business Trust);
Chairman, Chief Executive Officer and Chief Investment Officer of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Chairman, Chief Executive
Officer and Director of Delaware International Advisers Ltd., Delaware International
Holdings Ltd. and Delaware Management Holdings, Inc.; President and Chief Executive
Officer of Delvoy, Inc.; Chairman of Delaware Distributors, L.P.; Director of Delaware
Service Company, Inc. and Retirement Financial Services, Inc. Prior to January 1,
2000, Mr. Stork was Chairman and Director of Delaware Management Holdings, Inc. and a
Director of Delaware International Advisers Ltd.
In addition, during the five years prior to January 1, 2000, Mr. Stork has served
in various executive capacities at different times within the Delaware organization.
- ------------------------------------------- ----------------------------------------------------------------------------------------
- ----------------------
*Director affiliated with the Trust's investment manager and considered an
"interested person" as defined in the 1940 Act.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
Trustee and Officer Business Experience
- ------------------------------------------- ----------------------------------------------------------------------------------------
<S> <C>
David K. Downes (60) President, Chief Executive Officer, Chief Financial Officer and Trustee/Director of
the Trust and each of the other 32 investment companies in the Delaware Investments
family.
President and Director of Delaware Management Company, Inc.
President of Delaware Management Company (a series of Delaware Management Business
Trust)
President, Chief Executive Officer and Director of Delaware Capital Management, Inc.
Chairman, President, Chief Executive Officer and Director of Delaware Service
Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and Director of Delaware
International Holdings Ltd.
Chairman and Director of Delaware Management Trust Company and Retirement Financial
Services, Inc.
President/Chief Operating Officer of Delaware General Management, Inc.
Executive Vice President, Chief Operating Officer, Chief Financial Officer of
Delaware Management Holdings, Inc., Founders CBO Corporation, Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware Distributors,
L.P.
Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Director of DMH Corp., Delaware Distributors, Inc., Founders Holdings, Inc. and
Delvoy, Inc.
Executive Vice President and Trustee of Delaware Management Business Trust
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served in various executive capacities at
different times within the Delaware organization.
- ------------------------------------------- ----------------------------------------------------------------------------------------
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
Trustee Business Experience
- ------------------------------------------- ----------------------------------------------------------------------------------------
<S> <C>
Walter P. Babich (72) Trustee/Director of the Trust and each of the other 33 investment companies in the
Delaware Investments family
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from 1988 to 1991,
he was a partner of I&L Investors.
- ------------------------------------------- ----------------------------------------------------------------------------------------
John H. Durham (62) Trustee/Director of the Trust and 18 other investment companies in the Delaware
Investments family.
Private Investor.
P.O. Box 819, Gwynedd Valley, PA 19437
Mr. Durham served as Chairman of the Board of each fund in the Delaware Investments
family from 1986 to 1991; President of each fund from 1977 to 1990; and Chief
Executive Officer of each fund from 1984 to 1990. Prior to 1992, with respect to
Delaware Management Holdings, Inc., Delaware Management Company, Delaware
Distributors, Inc. and Delaware Service Company, Inc., Mr. Durham served as a director
and in various executive capacities at different times. He was also a Partner of
Complete Care Services from 1995 to 1999.
- ------------------------------------------- ----------------------------------------------------------------------------------------
Anthony D. Knerr (61) Trustee/Director of the Trust and each of the 33 other investment companies in the
Delaware Investments family
500 Fifth Avenue, New York, NY 10110
Founder and Managing Director, Anthony Knerr & Associates
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and Treasurer of
Columbia University, New York. From 1987 to 1989, he was also a lecturer in English
at the University. In addition, Mr. Knerr was Chairman of The Publishing Group, Inc.,
New York, from 1988 to 1990. Mr. Knerr founded The Publishing Group, Inc. in 1988.
- ------------------------------------------- ----------------------------------------------------------------------------------------
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
Trustee Business Experience
- ------------------------------------------- -------------------------------------------------------------------------------------
<S> <C>
Ann R. Leven (59) Trustee/Director of the Trust and each of the other 33 other investment companies
in the Delaware Investments family
785 Park Avenue, New York, NY 10021
Retired Treasurer, National Gallery of Art
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of the Smithsonian
Institution, Washington, DC, and from 1975 to 1992, she was Adjunct Professor of
Columbia Business School. From 1994 to 1999, Ms. Leven was Treasurer of the National
Gallery of Art and from 1990 to 1994, Ms. Leven was Deputy Treasurer of the National
Gallery of Art.
- ------------------------------------------- -------------------------------------------------------------------------------------
Thomas F. Madison (64) Trustee/Director of the Trust and each of the other 32 investment companies in the
Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
Mr. Madison has also been Chairman of the Board of Communications Holdings, Inc.
since 1996. From February to September 1994, Mr. Madison served as Vice
Chairman--Office of the CEO of The Minnesota Mutual Life Insurance Company and from
1988 to 1993, he was President of U.S. WEST Communications--Markets.
- ------------------------------------------- -------------------------------------------------------------------------------------
Charles E. Peck (74) Trustee/Director of the Trust and each of the other 32 investment companies in the
Delaware Investments family
P.O. Box 1102, Columbia, MD 21044
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of The Ryland
Group, Inc., Columbia, MD.
- ------------------------------------------- -------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
Trustee Business Experience
- ------------------------------------------- -------------------------------------------------------------------------------------
<S> <C>
Janet L. Yeomans (51) Trustee/Director of the Trust and each of the other 32 investment companies in the
Delaware Investments family
Building 220-13W-37, St. Paul, MN 55144
Vice President and Treasurer, 3M Corporation.
From 1987-1994, Ms. Yeomans was Director of Benefit Funds and Financial Markets for the
3M Corporation; Manager of Benefit Fund Investments for the 3M Corporation, 1985-1987;
Manager of Pension Funds for the 3M Corporation, 1983-1985; Consultant--Investment
Technology Group of Chase Econometrics, 1982-1983; Consultant for Data Resources,
1980-1982; Programmer for the Federal Reserve Bank of Chicago, 1970-1974
- ------------------------------------------- -------------------------------------------------------------------------------------
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
Officer Business Experience
- ------------------------------------------- ----------------------------------------------------------------------------------------
<S> <C>
Richard G. Unruh, Jr. (60) Executive Vice President and Chief Investment Officer, Equity of the Trust, each
of the other 32 investment companies in the Delaware Investments family and
Delaware Management Company (a series of Delaware Management Business Trust)
Executive Vice President and Director of Delaware Management Business Trust
Executive Vice President of Delaware Management Holdings, Inc. and Delaware Capital
Management, Inc.
Executive Vice President/Chief Investment Officer, Equities and Director of Delaware
Management Company, Inc.
Chief Executive Officer/Chief Investment Officer, Equities of Delaware Investment
Advisers (a series of Delaware Management Business Trust);
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive capacities at
different times within the Delaware organization.
- ------------------------------------------- ----------------------------------------------------------------------------------------
H. Thomas McMeekin (46) Executive Vice President and Chief Investment Officer , Fixed Income of
the Trust and each of the other 32 investment companies in the Delaware Investments
family.
Director of Delaware Management Holdings, Inc. and Founders CBO Corporation.
Executive Vice President/Chief Investment Officer, DMC-Fixed Income of Delaware
Management Company (a series of Delaware Management Business Trust)
Executive Vice President/Chief Investment Officer, DIA-Fixed Income of Delaware
Investment Advisers (a series of Delaware Management Business Trust)
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Management Business Trust and Delaware
Capital Management, Inc.
Mr. McMeekin joined Delaware Investments in 1999. During the past five
years, he has also served in various executive capacities for Lincoln
National Corporation.
- ------------------------------------------- ----------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
Officer Business Experience
- ------------------------------------------- ----------------------------------------------------------------------------------------
<S> <C>
Richard J. Flannery (42) Executive Vice President of the Trust and each of the other 32 investment
companies in the Delaware Investments family
Executive Vice President and General Counsel of Delaware Management Holdings, Inc.,
Delaware Distributors, L.P., Delaware Capital Management, Inc., Delaware Service
Company, Inc., Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management Business Trust)
and Founders CBO Corporation
Executive Vice President/General Counsel and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Management Business Trust, Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware International Holdings Ltd., Founders
Holdings, Inc., Delvoy, Inc., Retirement Financial Services, Inc., Delaware Capital
Management, Inc. and Delaware Management Trust Company
Director of Delaware International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
During the past five years, Mr. Flannery has served in various executive capacities at
different times within the Delaware organization.
- ------------------------------------------- ----------------------------------------------------------------------------------------
Eric E. Miller (46) Senior Vice President/Deputy General Counsel and Secretary of the Trust and each of
the other 32 investment companies in Delaware Investments.
Senior Vice President/Deputy General Counsel and Assistant Secretary of Delaware
Management Holdings, Inc., DMH Corp., Delvoy, Inc., Delaware Management Company, Inc.,
Delaware Management Business Trust, Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), Delaware Service Company, Inc., Delaware Capital
Management, Inc., Retirement Financial Services, Inc., Delaware Distributors, Inc.,
Delaware Distributors, L.P. and Founders Holdings, Inc.
During the past five years, Mr. Miller has served in various executive capacities at
different times within Delaware Investments.
- ------------------------------------------- ----------------------------------------------------------------------------------------
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
Officer Business Experience
- ------------------------------------------- ----------------------------------------------------------------------------------------
<S> <C>
Joseph H. Hastings (50) Senior Vice President/Corporate Controller of the Trust and each of the other 32
investment companies in the Delaware Investments family
Senior Vice President/Corporate Controller and Treasurer of Delaware Management
Holdings, Inc., DMH Corp., Delaware Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business Trust), Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware Capital
Management, Inc., Founders Holdings, Inc., Delaware International Holdings Ltd.,
Retirement Financial Services, Inc., Delvoy, Inc. and Delaware Management Business
Trust
Executive Vice President/Chief Financial Officer/Treasurer of Delaware Management
Trust Company
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
During the past five years, Mr. Hastings has served in various executive capacities at
different times within the Delaware organization.
- ------------------------------------------- ----------------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
Officer Business Experience
- ------------------------------------------- ----------------------------------------------------------------------------------------
<S> <C>
Michael P. Bishof (37) Senior Vice President and Treasurer of the Trust and each of the other 33 investment
companies in the Delaware Investments family
Senior Vice President/Investment Accounting of Delaware Management Company, Inc. and
Delaware Service Company, Inc.
Senior Vice President and Treasurer/Manager, Investment Accounting of Delaware
Distributors, L.P., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Capital Management, Inc. and Delaware Investment Advisers (a
series of Delaware Management Business Trust)
Senior Vice President and Assistant Treasurer of Founders CBO Corporation
Senior Vice President and Manager of Investment Accounting of Delaware International
Holdings Ltd.
Before joining Delaware Investments in 1995, Mr. Bishof was a Vice President for Bankers
Trust, New York, NY from 1994 to 1995, a Vice President for CS First Boston Investment
Management, New York, NY from 1993 to 1994 and an Assistant Vice President for Equitable
Capital Management Corporation, New York, NY from 1987 to 1993.
- ------------------------------------------- ----------------------------------------------------------------------------------------
Patrick P. Coyne (36) Vice President/Senior Portfolio Manager of the Trust and each of the other 32
investment companies in the Delaware Investments family, Delaware Capital Management,
Inc., Delaware Management Company, Inc., Delaware Management Company (a series of
Delaware Management Business Trust) and Delaware Investment Advisers (a series of
Delaware Management Business Trust).
During the past five years, Mr. Coyne has served in various capacities at different
times within the Delaware organization.
- ------------------------------------------- ----------------------------------------------------------------------------------------
Mitchell L. Conery (41) Vice President/Senior Portfolio Manager of the Trust and each of the other 32
investment companies in the Delaware Investments family, Delaware Capital Management,
Inc., Delaware Management Company, Inc., Delaware Management Company (a series of
Delaware Management Business Trust) and Delaware Investment Advisers (a series of
Delaware Management Business Trust)
Before joining the Delaware Investments in 1997, Mr. Conery was an investment officer
with Travelers Insurance from 1995 through 1996 and a research analyst with CS First
Boston from 1992 to 1995.
- ------------------------------------------- ----------------------------------------------------------------------------------------
</TABLE>
70
<PAGE>
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from the
Trust and the total compensation received from all investment companies in the
Delaware Investments family for which he or she serves as a trustee or
director for the fiscal year ended February 29, 2000 and an estimate of
annual benefits to be received upon retirement under the Delaware Group
Retirement Plan for Trustees/ Directors as of February 29, 2000. Only
the independent trustees of the Trust receive compensation from the Trust.
<TABLE>
<CAPTION>
- ------------------------------- ------------------- ---------------------- -------------------- --------------------
Total Compensation
Pension Retirement from Delaware
Aggregate Benefits Accrued as Estimated Annual Investments
Compensation from Part of Trust Benefits Upon Investment
Name(3) the Trust Expenses Retirement(1) Companies(2)
<S> <C> <C> <C> <C>
- ------------------------------- ------------------- ---------------------- -------------------- --------------------
Walter B. Babich $0,000 None $38,000 $00,000
- ------------------------------- ------------------- ---------------------- -------------------- --------------------
John H. Durham $0,000 None $32,180 $00,000
- ------------------------------- ------------------- ---------------------- -------------------- --------------------
Anthony D. Knerr $0,000 None $38,000 $00,000
- ------------------------------- ------------------- ---------------------- -------------------- --------------------
Ann R. Leven $0,000 None $38,000 $00,000
- ------------------------------- ------------------- ---------------------- -------------------- --------------------
Thomas F. Madison $0,000 None $38,000 $00,000
- ------------------------------- ------------------- ---------------------- -------------------- --------------------
Charles E. Peck $0,000 None $38,000 $00,000
- ------------------------------- ------------------- ---------------------- -------------------- --------------------
Janet L. Yeomans(4) $0,000 None $38,000 $00,000
- ------------------------------- ------------------- ---------------------- -------------------- --------------------
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Trustees/Directors, each disinterested trustee/director who, at
the time of his or her retirement from the Board, has attained the age
of 70 and served on the Board for at least five continuous years, is
entitled to receive payments from each investment company in the
Delaware Investments family for which he or she serves as a trustee
or director for a period equal to the lesser of the number of years
that such person served as a trustee or 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
trustees/directors of each investment company at the time of such
person's retirement. If an eligible trustee/director retired as of
February 29, 2000 he or she would be entitled to annual payments
totaling the amount noted above, in the aggregate, from all of the
investment companies in the Delaware Investments family for which he or
she served as trustee or director , based on the number of
investment companies in the Delaware Investments family as of that
date.
(2) Each independent trustee/director (other than John H. Durham)
currently receives a total annual retainer fee of $38,000 for
serving as a trustee or director for all 33 investment
companies in Delaware Investments, plus $3,143 for each Board
Meeting attended. John H. Durham currently receives a total annual
retainer fee of $32,180 for serving as a trustee or director
for 19 investment companies in Delaware Investments, plus $1,810 for
each Board Meeting attended. Ann R. Leven, Charles E. Peck,
Anthony D. Knerr and Thomas F. Madison serve on the Fund's audit
committee; Ms. Leven is the chairperson. Members of the audit committee
currently receive additional annual compensation of $5,000 from all
investment companies, in the aggregate, with the exception of the
chairperson, who receives $6,000.
(3) W. Thacher Longstreth served as an independent trustee of the Trust
during its last fiscal year for the period March 1, 1999 through March
17, 1999, the date on which he retired. For this period,
71
<PAGE>
Mr. Longstreth received $000 from the Trust and $00,0000 for all
investment companies in the Delaware Investments family.
(4) Janet L. Yeomans joined the Boards of all investment companies in the
Delaware Investments family in March 1999 for some funds and in April
1999 for other funds.
72
<PAGE>
GENERAL INFORMATION
The Trust is an open-end management investment company. Each Fund's
portfolio of assets is nondiversified as defined by the 1940 Act. The Trust was
organized as a Pennsylvania business trust on November 23, 1976 and reorganized
as a Delaware business trust on April 29, 2000.
The Manager is the investment manager of the Funds. The Manager also
provides investment management services to certain of the other funds in the
Delaware Investments family. An affiliate of the Manager also manages private
investment accounts. While investment decisions of the Funds are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for the Funds.
The Manager, or its affiliate Delaware International Advisers Ltd.,
manages the investment options for Delaware-Lincoln Choice Plus and Delaware
Medallion(sm) III Variable Annuities. Medallion is issued by Allmerica Financial
Life Insurance and Annuity Company (First Allmerica Financial Life Insurance
Company in New York and Hawaii). Delaware Medallion offers various investment
series ranging from domestic equity funds, international equity and bond funds
and domestic fixed income funds. Each investment series available through
Medallion utilizes an investment strategy and discipline the same as or similar
to one of the Delaware Investments mutual funds available outside the annuity.
The Manager or Delaware International Advisers also manage many of the
investment options for the Delaware-Lincoln Choice Plus Variable Annuity. Choice
Plus is issued and distributed by Lincoln National Life Insurance Company.
Choice Plus offers a variety of different investment styles managed by ten
leading money managers. See Delaware Group Premium Fund in Appendix C.
Access persons and advisory persons of the Delaware Investments family
of funds, as those terms are defined in SEC Rule 17j-1 under the 1940 Act, who
provide services to the Manager, Delaware International Advisers Ltd. or their
affiliates, are permitted to engage in personal securities transactions subject
to the exceptions set forth in Rule 17j-1 and the following general restrictions
and procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions by certain covered persons in certain securities 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.
73
<PAGE>
The Distributor acts as national distributor for the Funds and for the
other mutual funds in the Delaware Investments family. The Distributor received
net commissions from each Fund on behalf of Class A Shares, after reallowances
to dealers, as follows:
Delaware Tax-Free Pennsylvania Fund Class A Shares
Total Amount Amounts Net
of Underwriting Reallowed Commission
Fiscal Year Ended Commissions to Dealers to DDLP/DDI
- ----------------- ----------- ---------- -----------
2/29/00 $000,000 $000,000 $000,000
2/28/99 $706,030 $605,153 $100,877
2/28/98 $854,358 $720,774 $133,584
Delaware Tax-Free New Jersey Fund Class A Shares
Total Amount Amounts Net
of Underwriting Reallowed Commission
Fiscal Year Ended Commissions to Dealers to DDLP/DDI
- ----------------- ----------- ---------- -----------
2/29/00 $00,000 $00,000 $000
2/28/99 $16,524 $14,793 $131
2/28/98* $1,217 $1,039 $178
* Date of initial public offering of New Jersey Fund Class A Shares was
September 2, 1997.
Delaware Tax-Free Ohio Fund Class A Shares
Total Amount Amounts Net
of Underwriting Reallowed Commission
Fiscal Year Ended Commissions to Dealers to DDLP/DDI
- ----------------- ----------- ---------- -----------
2/29/00 $0,000 $0,000 $000
2/28/99 $2,854 $2,471 $383
2/28/98* $370 $325 $45
*Date of initial public offering of Ohio Fund Class A Shares was September
3, 1997.
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The Distributor and, in its capacity as such, DDI received in the
aggregate Limited CDSC payments with respect to Class A Shares of each Fund as
follows:
Delaware Tax-Free Pennsylvania Fund
Limited CDSC Payments
Fiscal Year Ended Class A Shares
----------------- --------------
2/29/00 $-0-
2/28/99 $-0-
2/28/98 $-0-
Delaware Tax-Free New Jersey Fund
Limited CDSC Payments
Fiscal Year Ended Class A Shares
----------------- --------------
2/29/00 $-0-
2/28/99 $-0-
2/28/98* $-0-
*Date of initial public offering of New Jersey Fund Class A Shares was September
2, 1997.
Delaware Tax-Free Ohio Fund
Limited CDSC Payments
Fiscal Year Ended Class A Shares
----------------- --------------
2/29/00 $-0-
2/28/99 $-0-
2/28/98* $-0-
*Date of initial public offering of Ohio Fund Class A Shares was September 3,
1997.
The Distributor and, in its capacity as such, DDI received in the
aggregate CDSC payments with respect to Class B Shares of Pennsylvania Fund
, New Jersey Fund and Ohio Fund as follows:
DelawareTax-Free Pennsylvania Fund
CDSC Payments
Fiscal Year Ended Class B Shares
----------------- --------------
2/29/00 $00,000
2/28/99 $91,889
2/28/98 $80,989
Delaware Tax-Free New Jersey Fund
CDSC Payments
Fiscal Year Ended Class B Shares
----------------- --------------
2/29/00 $0,000
2/28/99 $4,551
2/28/98* $-0-
* Date of initial public offering of New Jersey Fund Class B Shares
was September 2, 1997.
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Delaware Tax-Free Ohio Fund
CDSC Payments
Fiscal Year Ended Class A Shares
--------------------- --------------
2/29/00 $-0-
2/28/99 $-0-
2/28/98* $-0-
*Date of initial public offering of Ohio Fund Class B Shares was September 3,
1997.
The Distributor received CDSC payments with respect to Class C Shares
of Pennsylvania Fund, New Jersey Fund and Ohio Fund as follows:
Delaware Tax-Free Pennsylvania Fund
CDSC Payments
Fiscal Year Ended Class C Shares
----------------- --------------
2/29/00 $000
2/28/99 $623
2/28/98 $2,620
*Date of initial public offering of Tax-Free Pennsylvania Fund Class C Shares
was November 29, 1995.
Fiscal Year Ended Class B Shares
----------------- --------------
2/29/00 $00,000
2/28/99 $91,889
2/28/98 $80,989
Delaware Tax-Free New Jersey Fund
CDSC Payments
Fiscal Year Ended Class B Shares
----------------- --------------
2/29/00 $0,000
2/28/99 $-0-
2/28/98* $-0-
* Date of initial public offering of New Jersey Fund Class B Shares was
September 2, 1997.
Delaware Tax-Free Ohio Fund
CDSC Payments
Fiscal Year Ended Class A Shares
2/29/00 $-0-
2/28/99 $-0-
2/28/98* $-0-
*Date of initial public offering of Ohio Fund Class B Shares was September 3,
1997.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Funds and for the
other mutual funds in the Delaware Investments family. The Transfer
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Agent is paid a fee by the Funds 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. The
Transfer Agent also provides accounting services to the Funds. Those services
include performing all functions related to calculating a Fund's net asset value
and providing all financial reporting services, regulatory compliance testing
and other related accounting services. For its services, the Transfer Agent is
paid a fee based on total assets of all funds in the Delaware Investments family
for which it provides such accounting services. Such fee is equal to 0.25%
multiplied by the total amount of assets in the complex for which the Transfer
Agent furnishes accounting services, where such aggregate complex assets are $10
billion or less, and 0.20% of assets if such aggregate complex assets exceed $10
billion. The fees are charged to each fund, including the Funds, on an aggregate
pro-rata basis. The asset-based fee payable to the Transfer Agent is subject to
a minimum fee calculated by determining the total number of investment
portfolios and associated classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of the Trust's advisory
relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause the Trust to delete the
words "Delaware Group" from the Trust's name.
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245 is custodian of each Fund's securities and cash. As custodian for a
Fund, Chase maintains a separate account or accounts for the Fund; receives,
holds and releases portfolio securities on account of the Fund; receives and
disburses money on behalf of the Fund; and collects and receives income and
other payments and distributions on account of the Fund's portfolio securities.
Capitalization
The Trust currently offers three series of shares, Delaware Tax-Free
Pennsylvania Fund, Delaware Tax-Free New Jersey Fund and Delaware Tax-Free
Ohio Fund. Each Fund currently offers three classes of shares and has a present
unlimited authorized number of shares of beneficial interest with no par value
allocated to each Class. All shares have equal voting rights, except as noted
below, 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 a Fund and have the same voting and
other rights and preferences, as the other classes of that Fund. As a general
matter, shareholders of 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 of a Fund may vote on any
proposal to increase materially the fees to be paid by that Fund under the Plan
relating to Class A Shares. General expenses of a Fund will be allocated on a
pro-rata basis to the Classes according to asset size, except that expenses of
the Rule 12b-1 Plans of Class A Shares, Class B Shares and Class C Shares will
be allocated solely to those classes.
Prior to September 2, 1997, Delaware Group State Tax-Free Income Trust
was known as DMC Tax-Free Income Trust - Pennsylvania. From May 18, 1992 to
August 29, 1997, DMC Tax-Free Income Trust-Pennsylvania was known as and did
business as Tax-Free Pennsylvania Fund. Prior to May 2, 1994, Tax-Free
Pennsylvania Fund A Class was known as Tax-Free Pennsylvania Fund.
Noncumulative Voting
The Trust's 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 directors 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.
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This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditor for Delaware Group
State Tax-Free Income Trust and, in its capacity as such, audits the annual
financial statements contained in the Funds' Annual Report. Each Fund's
Statement of Net Assets, Statement of Operations, Statements of Changes in Net
Assets, Financial Highlights and Notes to Financial Statements, as well as the
report of Ernst & Young LLP, independent auditors, for the fiscal year ended
February 29, 2000, are included in the Funds' Annual Report to
shareholders. The financial statements and financial highlights, 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.
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APPENDIX A - INVESTING IN PENNSYLVANIA, NEW JERSEY AND OHIO TAX-EXEMPT
OBLIGATIONS
Investing in Pennsylvania Tax-Exempt Obligations
The following information constitutes only a brief summary, does not
purport to be a complete description, and is derived from official statements
prepared in connection with the issuance of bonds and notes of the Commonwealth
of Pennsylvania (the "Commonwealth") and other sources that are generally
available to investors. The information is provided as general information
intended to give a recent historical description and is not intended to indicate
future or continuing trends in the financial or other positions of the
Commonwealth or of local government units located in the Commonwealth. The Fund
has not independently verified this information.
Pennsylvania is the fifth most populous state, behind California, New
York, Texas and Florida. Pennsylvania is an established yet growing state with a
diversified economy.
The General Fund, the Commonwealth's largest fund, receives all tax
revenues, non-tax revenues and federal grants and entitlements that are not
specified by law to be deposited elsewhere. The majority of the Commonwealth's
operating and administrative expenses are payable from the General Fund. Debt
service on all bonded indebtedness of the Commonwealth, except that issued for
highway purposes or for the benefit of other special revenue funds, is payable
from the General Fund.
The period from fiscal 1993 through fiscal 1997 was a time of steady,
modest economic growth and low rates of inflation. These economic conditions,
together with tax reductions in the several years following the tax rate
increases and tax base expansions enacted in fiscal 1991 for the General Fund,
produced tax revenue gains averaging 4.1% per year during the period. Total
revenues during the same period increased by an average annual rate of 4.7%.
Intergovernmental revenues increased by an average annual rate of 8.1% due, in
part, to an accounting change.
Expenditures and other uses during the fiscal 1993 through fiscal 1997
period rose at an average annual rate of 4.9%, led by increases of 13.8% for
protection of persons and property. Public health and welfare program costs
expanded an average 5.4% annually during this period. Efforts to control costs
for various social programs and the presence of favorable economic conditions
have helped restrain these costs.
The fund balance at June 30, 1997 totaled $1,364.9 million, an increase
of $729.7 million over the $635.2 million balance at June 30, 1996. The fiscal
1997 unappropriated surplus of $187.3 million is the largest balance recorded
since 1987.
The unappropriated balance of Commonwealth revenues increased during
the 1997 fiscal year by $432.9 million to $591.4 million (prior to reserves for
transfer to the Tax Stabilization Reserve Fund) at the close of the fiscal year.
Higher than estimated revenues and slightly lower expenditures than budgeted
caused the increase. Transfers to the Tax Stabilization Reserve Fund for fiscal
1997 operations will be $88.7 million representing the normal fifteen percent of
the ending unappropriated balance, plus an additional $100 million authorized by
the General Assembly when it enacted the fiscal 1998 budget.
Commonwealth revenues (prior to tax refunds) during the fiscal year
totaled $17,320.6 million, $576.1 million (3.4%) above the estimate made at the
time the budget was enacted. Revenue from taxes was the largest contributor to
higher than estimated receipts. Tax revenue in fiscal 1997 grew 6.1% over tax
revenues in fiscal 1996. This rate of increase was not adjusted for legislated
tax reductions that affected receipts during both of those fiscal years and
therefor understates the actual underlying rate of growth of tax revenue during
fiscal 1997. Non-tax revenues were $19.8 million (5.8%) over estimate mostly due
to higher than anticipated interest earnings.
Expenditures from Commonwealth revenues (excluding pooled financing
expenditures) during fiscal 1997 totaled $16,347.7 million and were close to the
estimate made in February 1997 with the presentation of
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the Governor's fiscal 1998 budget request. Total expenditures represent an
increase over fiscal 1996 expenditures of 1.7%. Lapses of appropriation
authority during the fiscal year totaled $200.6 million compared to an estimate
of $100 million. The higher amount of appropriation lapses was used to support
an additional $79.8 million in fiscal 1997 supplemental appropriations over the
February 1997 estimates. Supplemental appropriations for fiscal 1997 totaled
$169.3 million.
For GAAP purposes, assets in fiscal 1997 increased $563.4 million and
liabilities declined $166.3 million to produce a $729.7 million increase in the
fund balance at June 30, 1997. Total revenues and other sources rose 3.5% for
fiscal 1997. An increase of 5.5% in tax revenue aided by and improving state
economy was partially offset by a $175.2 million decline in intergovernmental
revenues. Expenditures and other uses increased by 1% for the fiscal year.
For GAAP purposes, assets increased $563.4 million and liabilities
declined $166.3 million to produce a $729.7 million increase in fund balance at
June 30, 1997. The fund balance increase during fiscal 1997 resulted in a
restoration of the undesignated-unreserved balance of $187.3 million (the first
such balance since fiscal 1994 and the largest since fiscal 1987). Total
revenues and other sources rose 3.5% for fiscal 1997. Expenditures and uses
increased by 1% for the fiscal year.
Operations during the 1998 fiscal year increased the unappropriated
balance of Commonwealth revenues by $86.4 million to $488.7 million at June 30,
1998 (prior to transfers). Higher than estimated revenues, offset in part by
increased reserves for tax refunds, and slightly lower expenditures than
budgeted were responsible for the increase. Transfers to the Tax Stabilization
Reserve Fund for fiscal 1998 operations will total $223.3 million consisting of
$73.3 million representing the normal 15% of the ending unappropriated surplus
balance, plus an additional $150 million authorized by the General Assembly when
it enacted the fiscal 1999 budget. With these transfers, the balance in the Tax
Stabilization Reserve Fund will exceed $664 million and represents 3.7% of
fiscal 1998 revenues.
Commonwealth revenues (prior to tax refunds) during the fiscal year
totaled $18,123.2 million, $676.1 million (3.9%) above the estimate made at the
time the budget was enacted. Tax revenue in fiscal 1998 grew 4.8% over tax
revenues during fiscal 1997. This rate of increase includes the effect
legislated tax reductions that affected receipts during both fiscal years and
therefore understates the actual underlying rate of growth of tax revenue for
fiscal 1998. Non-tax revenues were $27.5 (8.6%) over estimate, mostly due to
greater than anticipated interest earnings for the fiscal year.
Reserves established during 1998 for tax refunds totaled $910 million.
This amount is a $370 million increase of tax refund reserves for fiscal 1997
(representing a 68.5% increase). The fiscal 1998 amount includes a one-time
addition intended to fund all fiscal 1998 tax refund liabilities, including that
portion to be paid during fiscal 1999.
Expenditures from all fiscal 1998 appropriations (excluding pooled
financing expenditures and net of current year lapses) totaled $17,229.8
million. This represents an increase of 4.5% over fiscal 1997 appropriations
expenditures. Lapses of appropriation authority during the fiscal year totaled
$161.8 million including $58.8 million from fiscal 1998 appropriations. These
appropriation lapses were used to fund $120.5 million of supplemental fiscal
1998 appropriations.
The budget for fiscal 1999 was enacted in April 1998 at which time the
official revenue estimate for the 1999 fiscal year was established at $18,456.6
million. The estimate was reduced by $1.1 million in November 1998 due to the
passage of tax legislation. The official revenue estimate is based on an
economic forecast for national gross domestic product, on a year-over-year
basis, to slow from an estimated annualized 3.9% rate in the fourth quarter of
1997 to a projected 1.8% annualized growth rate by the second quarter of 1999.
The forecast of slowing economic activity is based on the expectation that
consumers will reduce their pace of spending, particularly on motor vehicles,
housing and other durable goods. Business is also expected to trim its spending
on
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fixed investments. Foreign demand for domestic goods is expected to decline
in reaction to economic difficulties in Asia and Latin America, while an
economic recovery in Europe is expected to proceed slowly.
Appropriations enacted for fiscal 1999 are 4.1% ($705.1 million) above
appropriations enacted for fiscal 1998 (including supplemental appropriations).
Major increases in expenditures budgeted for fiscal 1999 include (i) funds for
direct support of local school district education costs, (ii) funds for higher
education, including scholarship grants, (iii) amounts to fund the correctional
system, (iv) funds for long-term care medical assistance costs, (v) funds for
technology and Year 2000 investments, (vi) amounts to fund the first year's cost
of a July 1, 1998 annuitant cost of living increase for state and school
district employees and, (vii) funds to replace bond funding for equipment loans
for volunteer fire and rescue companies. The balance of the increase is spread
over many departments and program operations.
The enacted fiscal 1999 budget assumes the drawn-down of the $265.4
million beginning budgetary balance by $143.9 million to an estimated closing
balance (prior to transfers) of $124.3 million. The amount of the anticipated
draw-down does not consider the availability of appropriation lapses normally
occurring during the fiscal year and used to fund supplemental appropriations or
increase unappropriated surplus.
Tax reductions included in the enacted 1999 fiscal year budget totaled
an estimated $241 million for fiscal 1999. The major tax changes were enacted
with January 1, 1998 effective dates. Consequently, the costs of these changes
during fiscal 1999 may be above the expected annualized cost. In addition, in
the fall 1998, Pennsylvania enacted the Keystone Opportunity Zone Act, which
provides for the creation of 12 "keystone opportunities zones" designed to spur
economic development by foregoing state and local taxes under certain
circumstances. The legislation provides for relief from, among other things,
corporate net income taxes, capital stock/foreign franchise taxes, personal
income taxes and sales and use taxes (on purchases used and consumed by
businesses in the zone).
Reserves for tax refunds for fiscal 1999 total $603.9 million. This
includes $33.1 million of tax refunds anticipated to be due to the enacted
fiscal 1999 tax changes and included in the estimated cost of those changes.
Reserves for tax refunds for fiscal 1999 are $306.1 million below the reserve
established for fiscal 1998. The fiscal 1998 amount includes a one-time addition
intended to fund all fiscal 1998 tax refund liabilities, including that portion
to be paid during fiscal 1999.
According to the Pennsylvania Secretary of Revenue, for the fiscal year
through January 1999, General Fund revenues totaled $9.8 billion.
Pennsylvania has historically been identified as a heavy industry state
although that reputation has changed over the last thirty years as the coal,
steel and railroad industries declined and the Commonwealth's business
environment readjusted to reflect a more diversified industrial base. The
economic readjustment was a direct result of a long-term shift in jobs,
investment and workers away from the northeast part of the nation. Currently,
the major source of growth in Pennsylvania are in the service sector, including
trade, medical and the health services, education and financial institutions.
Non-agricultural employment in Pennsylvania over the ten years ending in 1997
increased at an annual rate of 0.76%. This compares to a 0.17% for the Middle
Atlantic region and 1.69% for the United States as a whole during the period
1988 through 1997. For the five years ending with 1997, employment in the
Commonwealth has increased 5.4%. The growth in employment during this period is
higher than the 4.8% growth in the Middle Atlantic region. The unemployment rate
in Pennsylvania for October 1998 stood at a seasonably adjusted rate of 4.7%
compared to 4.6% for the United States.
The current Constitutional provisions pertaining to Commonwealth debt
permit the issuance of the following types of debt: (i) debt to suppress
insurrection or rehabilitate areas affected by disaster; (ii)
electorate-approved debt; (iii) debt for capital projects subject to an
aggregate debt limit of 1.75 times the annual average tax revenues of the
preceding five fiscal years; and (iv) tax anticipation notes payable in the
fiscal year of issuance. All debt except tax anticipation notes must be
amortized in substantial and regular amounts.
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Debt service on all bonded indebtedness of Pennsylvania, except that
issued for highway purposes or the benefit of other special revenue funds, is
payable from Pennsylvania's General Fund, which receives all Commonwealth
revenues that are not specified by law to be deposited elsewhere. As of June 30,
1998, the Commonwealth had $4,724.5 million of general obligation debt
outstanding.
Other state-related obligations include "moral obligations." Moral
obligation indebtedness may be issued by the Pennsylvania Housing Finance Agency
("PHFA"), a state-created agency that provides financing for housing for lower
and moderate income families, and The Hospitals and Higher Education Facilities
Authority of Philadelphia, a municipal authority organized by the City of
Philadelphia to, among other things, acquire and prepare various sites for use
as intermediate care facilities for the mentally handicapped. PHFA's bonds, but
not its notes, are partially secured by a capital reserve fund required to be
maintained by PHFA in an amount equal to the maximum annual debt service on its
outstanding bonds in any succeeding calendar year. PHFA is not permitted to
borrow additional funds as long as any deficiency exists in the capital reserve
fund.
The Commonwealth, through several of its departments and agencies, has
entered into various agreements to lease, as lessee, certain real property and
equipment, and to make lease payments for the use of such property and
equipment. Some of these leases and their respective lease payments are, with
Commonwealth approval, pledged as security for debt obligations issued by
certain public authorities or other entities within the state. All lease
payments due from Commonwealth departments and agencies are subject to and
dependent upon an annual spending authorization approved through the
Commonwealth's annual budget process. The Commonwealth is not required by law to
appropriate or otherwise provide monies from which the lease payments are to be
made. The obligations to be paid from such lease payments are not bonded debt of
the Commonwealth.
Certain state-created agencies have statutory authorization to incur
debt for which state appropriations to pay debt service thereon is not required.
The debt of these agencies is supported by assets of, or revenues derived from,
the various projects financed and is not a statutory or moral obligation of the
Commonwealth. Some of these agencies, however, are indirectly dependent on
Pennsylvania appropriations. In addition, the Commonwealth maintains pension
plans covering state employees, public school employees and employees of certain
state-related organizations. For their fiscal years ended in 1997 the State
Employees' Retirement System a total unfunded actuarial accrued surplus of
$1,277 million and the Public School Employees' Retirement System had a total
unfunded actuarial accrued surplus of $1,663 million.
The City of Philadelphia is the largest city in the Commonwealth with
an estimated population of 1,585,577 according to the 1990 Census. Legislation
providing for the establishment of Pennsylvania Intergovernmental Cooperation
Authority ("PICA") to assist Philadelphia in remedying fiscal emergencies was
enacted by the Pennsylvania General Assembly and approved by the Governor in
June 1991. PICA is designed to provide assistance through the issuance of
funding debt and to make factual findings and recommendations to Philadelphia
concerning its budgetary and fiscal affairs. At this time, Philadelphia is
operating under a five year fiscal plan approved by PICA on June 9, 1998.
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PICA has issued $1.76 billion of its Special Tax Revenue Bonds. This
financial assistance has included the refunding of certain general obligation
bonds, funding of capital projects and the liquidation of the cumulative General
Fund balance deficit as of June 30, 1992 of $224.9 million. The audited General
Fund balance of Philadelphia as of June 30, 1997 showed a surplus of
approximately $128.8 million.
No further bonds are to be issued by PICA for the purpose of financing
a capital project or deficit as the authority for such bond sales expired
December 31, 1994. PICA's authority to issue debt for the purpose of financing a
cash flow deficit expired on December 31, 1996. Its ability to refund existing
outstanding debt is unrestricted. PICA had $1,055 million in special revenue
bonds outstanding as of June 30, 1998.
There is various litigation pending against the Commonwealth, its
officers and employees. In 1978, the Pennsylvania General Assembly approved a
limited waiver of sovereign immunity. Damages for any loss are limited to
$250,000 for each person and $1 million for each accident. The Supreme Court
held that this limitation is constitutional. Approximately 3,500 suits against
the Commonwealth are pending, some of which, if decided adversely to the
Commonwealth, could have a material adverse impact on governmental operations.
Investing in New Jersey Tax-Exempt Obligations
The following information constitutes only a brief summary of some of
the many complex factors that may affect issuers of New Jersey obligations. This
information is derived from official statements published in connection with the
issuance of bonds and notes of the State of New Jersey and from other publicly
available information. It is believed to be accurate, although no independent
verification has been made of any of the following information. The information
is intended to provide a general recent historical description and is not
intended to indicate future or continuing trends in the positions of the State
of New Jersey or local governments.
New Jersey is located at the center of the megalopolis which extends
from Boston to Washington. The extensive facilities of the Port Authority of New
York and New Jersey, the Delaware River Port Authority and the South Jersey Port
Corporation across the Delaware River from Philadelphia augment the air, land
and water transportation complex which has influenced much of the State's
economy. This central location in the northeastern corridor, the transportation
and port facilities and proximity to New York City make the State an attractive
location for corporate headquarters and international business offices. A number
of Fortune Magazine's top 500 companies maintain headquarters or major
facilities in New Jersey, and many foreign-owned firms have located facilities
in the State.
The State's economic base is diversified, consisting of a variety of
manufacturing, construction and service industries, supplemented by rural areas
with selective commercial agriculture. New Jersey has the Atlantic seashore on
the east and lakes and mountains in the north and northwest, which provide
recreation for residents as well as for out-of-state visitors. In 1976, voters
approved casino gambling for Atlantic City, which has become an important State
tourist attraction.
New Jersey's population grew rapidly in the years following World War
II, before slowing to an annual rate of 0.27 percent in the 1970s. Between 1980
and 1990, the annual growth rose to 0.49 percent and between 1990 and 1996,
accelerated to .53 percent.1 While this rate of growth is less than that for the
United States, it compares favorably with other Middle Atlantic States. New York
has shown a 0.17 percent annual rate of increase since 1990 and Pennsylvania's
population has increased 0.23 percent per year.
The small increase in the State's total population during the past
quarter century masks the redistribution of population within the State. There
has been a significant shift from the northeastern industrial areas toward the
four coastal counties (Cape May, Atlantic, Ocean and Monmouth) and toward the
central New Jersey counties of Hunterdon, Somerset and Middlesex.
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After enjoying an extraordinary boom during the mid-1980s, New Jersey
as well as the rest of the Northeast slipped into a slowdown well before the
onset of the national recession which officially began in July 1990 (according
to the National Bureau of Economic Research). By the beginning of the national
recession of 1990-1991, construction activity had already been declining in New
Jersey for nearly two years, growth had tapered off markedly in the service
sectors and the long-term downward trend of factory employment had accelerated,
partly because of a leveling off of industrial demand nationally. The onset of
recession caused an acceleration of New Jersey's job losses in construction and
manufacturing, as well as an employment downturn in such previously growing
sectors as wholesale trade, retail trade, finance, utilities, trucking and
warehousing. The net effect was a decline in the State's total nonfarm wage and
salary employment2 from a peak of 3,689,800 in 1989 to a low of 3,457,900 in
1992. This loss was followed by an employment gain of 255,600 from May 1992 to
June 1997, a recovery of 97.5% of the jobs lost during the recession.
- ----------------------
(1) U.S. Census Bureau, Population Division, 1996 estimates.
(2) New Jersey Department of Labor, Division of Labor Market and Demographic
Research.
The State has benefited from the national recovery. New Jersey's
recovery is in its seventh year and appears to be sustainable now that the
national economy has "soft landed."
Business investment expenditures and consumer spending have increased
substantially in the nation as well as in the State. Capital and consumer
spending may very well continue to rise due to the sustained character of the
recovery, although the interest-sensitive homebuilding industry may provide only
a moderate amount of stimulus both nationally and in New Jersey. It is expected
that the employment and income growth that has and is taking place will lead to
further growth in consumer outlays. Reasons for cautious optimism in New Jersey
include increasing employment levels, a low jobless rate, and a
higher-than-national level of per capita personal income.
Inflation-adjusted gross domestic product slowed significantly in the
second quarter of 1998 from the robust 5.9% growth in the first quarter of 1998.
However, the State's economy should have enough momentum to keep its trend line
pointing upwards. Its growth potential is not yet limited by the labor supply
constraints beginning to affect some other parts of the country.
Looking further ahead, prospects for New Jersey appear favorable. While
growth is likely to be slower than in the nation, the locational advantages that
have served New Jersey well for many years will still be there. Structural
changes that have been going on for years can be expected to continue, with job
creation concentrated most heavily in the service industries.
The Director of the Division of Budget and Accounting in the New Jersey
Department of the Treasury (the "Budget Director") prescribes and approves the
accounting policies of the State and directs their implementation.
The State prepares its financial statements on a "modified accrual"
basis utilizing the fund method of accounting. The National Council on
Governmental Accounting in its publication entitled Statement I. - Governmental
Accounting and Financial Reporting Principles defines a fund as a fiscal and
accounting entity with a self-balancing set of accounts recording cash and other
financial resources together with all related liabilities and residual equities
or balances, and changes therein, which are segregated for the purpose of
carrying on specific activities or attaining certain objectives in accordance
with special regulations, restrictions or limitations. The State's financial
statements reflect financial reporting practices in accordance with that
definition. Accordingly, the State prepares separate statements for the General
Fund, Special Revenue Funds, Debt Service Funds, Capital Project Funds, Trust
and Agency Funds, Component Units-Authorities Funds, College and University
Funds, General Fixed Asset Account Group and its General Long-Term Debt Account
Group, and its component units.
The General Fund is the fund into which all State revenues not
otherwise restricted by statute are deposited and from which appropriations are
made. The largest part of the total financial operations of the State is
accounted
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for in the General Fund. Revenues received from taxes and unrestricted by
statute, most federal revenue and certain miscellaneous revenue items are
recorded in the General Fund. The appropriations act provides the basic
framework for the operation of the General Fund.
Special Revenue Funds are used to account for resources legally
restricted to expenditure for specified purposes. Special Revenue Funds include
the Casino Control Fund, the Casino Revenue Fund, the Gubernatorial Elections
Fund and the Property Tax Relief Fund. Other Special Revenue Funds have been
created which are either reported ultimately in the General Fund or are created
to hold revenues derived from private sources. Debt Service Funds are used to
account for the accumulation of resources for, and the payment of, principal and
redemption premium, if any, and interest on general obligation bonds. Capital
Project Funds are used to account for financial resources to be used for the
acquisition or construction of major State capital facilities. Trust and Agency
Funds are used to account for assets held in a trust capacity or as an agent for
individuals, private organizations, other governments and/or other funds. The
General Fixed Asset Account Group accounts for the State's fixed assets acquired
or constructed for general governmental purposes. The General Long-Term Debt
Account Group accounts for the unmatured general long-term liabilities of the
State.
For the fiscal 1997 year, the undesignated General Fund balance was
$281 million (the undesignated balances for fiscal years 1995 and 1996 was $569
million and $442 million, respectively). The undesignated balance for fiscal
1998 is estimated to be $144 million and the undesignated balance for fiscal
1999 is estimated to be $199 million.
Should revenues be less than the amount anticipated in the budget for a
fiscal year, the Governor may, pursuant to statutory authority, prevent any
expenditure under any appropriation. There are additional means by which the
Governor may ensure that the State is operated efficiently and does not incur a
deficit. No supplemental appropriation may be enacted after adoption of an
appropriations act except where there are sufficient revenues on hand or
anticipated, as certified by the Governor, to meet such appropriation. In the
past when actual revenues have been less than the amount anticipated in the
budget, the Governor has exercised her plenary powers leading to, among other
actions, implementation of a hiring freeze for all State departments and the
discontinuation of programs for which appropriations were budgeted but not yet
spent.
Significant statutory limitations are on local appropriations. However,
proceeds from a number of state taxes are shared with New Jersey municipalities.
These funds are primarily used for local education programs, homestead rebates,
Medicaid and welfare programs.
The State finances certain capital projects through the sale of the
general obligation bonds of the State. These bonds are backed by the full faith
and credit of the State. Certain state tax revenues and certain other fees are
pledged to meet the principal payments, interest payments and if provided,
redemption premium payments, if any, required to fully pay the bonds. In
addition to payments from bond proceeds, capital construction can also be funded
by appropriation of current revenues on a pay-as-you-go basis.
The following are cases presently pending or threatened in which the
State has the potential for either a significant loss of revenue or a
significant unanticipated expenditure.
At any given time, there are various numbers of claims and cases
pending against the State, State agencies and employees, seeking recovery of
monetary damages that are primarily paid out of the fund created pursuant to the
New Jersey Tort Claims Act (N.J.S.A. 59:1-1, et seq.). The State does not
formally estimate its reserve representing potential exposure for these claims
and cases. The State is unable to estimate its exposure for these claims and
cases.
The State routinely receives notices of claim seeking substantial sums
of money. The majority of those claims have historically proven to be of
substantially less value than the amount originally claimed. Under the New
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Jersey Tort Claims Act, any tort litigation against the State must be preceded
by a notice of claim, which affords the State the opportunity for a six-month
investigation prior to the filing of any suit against it.
In addition, at any given time, there are various numbers of contract
and other claims against the State and State agencies, including environmental
claims asserted against the State, among other parties, arising from the alleged
disposal of hazardous waste. Claimants in such matters are seeking recovery of
monetary damages or other relief which, if granted, would require the
expenditure of funds. The State is unable to estimate its exposure for these
claims.
At any given time, there are various numbers of claims and cases
pending against the University of Medicine and Dentistry and its employees,
seeking recovery of monetary damages that are primarily paid out of the Self
Insurance Reserve Fund created pursuant to the New Jersey Tort Claims Act
(N.J.S.A. 59:1-1, et seq.). An independent study estimated an aggregate
potential exposure of $85,300,000 for tort and medical malpractice claims
pending as of December 31, 1997. In addition, at any given time, there are
various numbers of contract and other claims against the University of Medicine
and Dentistry, seeking recovery of monetary damages or other relief which, if
granted, would require the expenditure of funds. The State is unable to estimate
its exposure for these claims.
Investing in Ohio Tax-Exempt Obligations
As described above, the Ohio Fund will invest most of its net assets in
securities issued by or on behalf of (or in certificates of participation in
lease-purchase obligations of) the State of Ohio, political subdivisions of the
State, or agencies or instrumentalities of the State or its political
subdivisions (Ohio Obligations). The Ohio Fund is therefore susceptible to
general or particular economic, political or regulatory factors that may affect
issuers of Ohio Obligations. The following information constitutes only a brief
summary of some of the many complex factors that may have an effect. The
information does not apply to "conduit" obligations on which the public issuer
itself has no financial responsibility. This information is derived from
official statements of certain Ohio issuers published in connection with their
issuance of securities and from other publicly available information, and is
believed to be accurate. No independent verification has been made of any of the
following information.
Generally, the creditworthiness of Ohio Obligations of local issuers is
unrelated to that of obligations of the State itself, and the State has no
responsibility to make payments on those local obligations.
There may be specific factors that at particular times apply in
connection with investment in particular Ohio Obligations or in those
obligations of particular Ohio issuers. It is possible that the investment may
be in particular Ohio Obligations, or in those of particular issuers, as to
which those factors apply. However, the information below is intended only as a
general summary, and is not intended as a discussion of any specific factors
that may affect any particular obligation or issuer.
Ohio is the seventh most populous state. The 1990 Census count of
10,847,000 indicated a 0.5% population increase from 1980. The Census estimate
for 1997 is 11,186,000.
While diversifying more into the service and other non-manufacturing
areas, the Ohio economy continues to rely in part on durable goods manufacturing
largely concentrated in motor vehicles and equipment, steel, rubber products and
household appliances. As a result, general economic activity, as in many other
industrially-developed states, tends to be more cyclical than in some other
states and in the nation as a whole. Agriculture is an important segment of the
economy, with over half the State's area devoted to farming and approximately
16% of total employment in agribusiness.
In prior years, the State's overall unemployment rate was commonly
somewhat higher than the national figure. For example, the reported 1990 average
monthly State rate was 5.7%, compared to the 5.5 % national figure. However, in
recent years the State rates were below the national rates 4.2% versus 4.5% in
1998. The unemployment rate and its effects vary among geographic areas of the
State.
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There can be no assurance that future national, regional or state-wide
economic difficulties, and the resulting impact on State or local government
finances generally, will not adversely affect the market value of Ohio
Obligations held in the Ohio Fund or the ability of particular obligors to make
timely payments of debt service on (or lease payments relating to) those
Obligations.
The State operates on the basis of a fiscal biennium for its
appropriations and expenditures, and is precluded by law from ending its July 1
to June 30 fiscal year (FY) or fiscal biennium in a deficit position. Most State
operations are financed through the General Revenue Fund (GRF), for which the
personal income and sales-use taxes are the major sources. Growth and depletion
of GRF ending fund balances show a consistent pattern related to national
economic conditions, with the ending FY balance reduced during less favorable
and increased during more favorable economic periods. The State has
well-established procedures for, and has timely taken, necessary actions to
ensure resource/expenditure balances during less favorable economic periods.
Those procedures included general and selected reductions in appropriations
spending.
The 1992-93 biennium, presented significant challenges to State
finances, successfully addressed. To allow time to resolve certain budget
differences an interim appropriations act was enacted effective July 1, 1991; it
included GRF debt service and lease rental appropriations for the entire
biennium, while continuing most other appropriations for a month. Pursuant to
the general appropriations act for the entire biennium, passed on July 11, 1991,
$200 million was transferred from the Budget Stabilization Fund (BSF, a cash and
budgetary management fund) to the GRF in FY 1992.
Based on updated results and forecasts in the course of that FY, both
in light of a continuing uncertain nationwide economic situation, there was
projected and then timely addressed an FY 1992 imbalance in GRF resources and
expenditures. In response, the Governor ordered most State agencies to reduce
GRF spending in the last six months of FY 1992 by a total of approximately $184
million; the $100.4 million BSF balance and additional amounts from certain
other funds were transferred late in the FY to the GRF, and adjustments were
made in the timing of certain tax payments.
A significant GRF shortfall (approximately $520 million) was then
projected for FY 1993. It was addressed by appropriate legislative and
administrative actions, including the Governor's ordering $300 million in
selected GRF spending reductions and subsequent executive and legislative action
(a combination of tax revisions and additional spending reductions). The June
30, 1993 ending GRF fund balance was approximately $111 million, of which, as a
first step to replenishment, $21 million was deposited in the BSF.
None of the spending reductions were applied to appropriations needed
for debt service or lease rentals relating to any State obligations.
The 1994-95 biennium presented a more affirmative financial picture.
Based on June 30, 1994 balances, an additional $260 million was deposited in the
BSF. The biennium ended June 30, 1995 with a GRF ending fund balance of $928
million, of which $535.2 million was transferred into the BSF. The significant
GRF fund balance, after leaving in the GRF an unreserved and undesignated
balance of $70 million, was transferred to the BSF and other funds including
school assistance funds and, in anticipation of possible federal program
changes, a human services stabilization fund.
From a higher than forecast 1996-97 mid-biennium GRF fund balance, $100
million was transferred for elementary and secondary school computer network
purposes and $30 million to a new State transportation infrastructure fund.
Approximately $400.8 million served as a basis for temporary 1996 personal
income tax reductions aggregating that amount. The 1996-97 biennium-ending GRF
fund balance was $834.9 million. Of that, $250 million went to school building
construction and renovation, $94 million to the school computer network, $44.2
million for school textbooks and instructional materials and a distance learning
program, and $34 million to the BSF, and the $263 million balance to a State
income tax reduction fund.
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The GRF appropriations act for the 1998-99 biennium was passed on June
25, 1997 and promptly signed (after selective vetoes) by the Governor. All
necessary GRF appropriations for State debt service and lease rental payments
then projected for the biennium were included in that act. Subsequent
legislation increased the fiscal year 1999 GRF appropriation level for
elementary and secondary education, with the increase funded in part by mandated
small percentage reductions in State appropriations for various State agencies
and institutions. Expressly exempt from those reductions are all appropriations
for debt service, including lease rental payments.
The BSF had a March 25, 1999 balance of over $906 million.
The State's incurrence or assumption of debt without a vote of the
people is, with limited exceptions, prohibited by current State constitutional
provisions. The State may incur debt, limited in amount to $750,000, to cover
casual deficits or failures in revenues or to meet expenses not otherwise
provided for. The Constitution expressly precludes the State from assuming the
debts of any local government or corporation. (An exception is made in both
cases for any debt incurred to repel invasion, suppress insurrection or defend
the State in war.)
By 14 constitutional amendments approved from 1921 to date (the latest
adopted in 1995) Ohio voters authorized the incurrence of State debt and the
pledge of taxes or excises to its payment. At March 25, 1999, almost $1.11
billion (excluding certain highway bonds payable primarily from highway use
receipts) of this debt was outstanding. The only such State debt at that date
still authorized to be incurred were portions of the highway bonds, and the
following: (a) up to $100 million of obligations for coal research and
development may be outstanding at any one time ($23.9 million outstanding); (b)
$240 million of obligations previously authorized for local infrastructure
improvements, no more than $120 million of which may be issued in any calendar
year (over $1 billion outstanding) and (c) up to $200 million in general
obligation bonds for parks, recreation and natural resources purposes which may
be outstanding at any one time ($82.7 million outstanding, with no more than $50
million to be issued in any one year).
The electors in 1995 approved a constitutional amendment extending the
local infrastructure bond program (authorizing an additional $1.2 billion of
State full faith and credit obligations to be issued over 10 years for the
purpose), and authorizing additional highway bonds (expected to be payable
primarily from highway use receipts). The latter supersedes the prior $500
million outstanding authorization, and authorizes not more than $1.2 billion to
be outstanding at any time and not more than $220 million to be issued in a
fiscal year.
The Constitution also authorizes the issuance of State obligations for
certain purposes, the owners of which do not have the right to have excises or
taxes levied to pay debt service. Those special obligations include obligations
issued by the Ohio Public Facilities Commission and the Ohio Building Authority,
and certain obligations issued by the State Treasurer, over $5.3 billion of
which were outstanding or awaiting delivery at March 25, 1999.
Aggregate FY 1998 rental payments under various capital lease and lease
purchase agreements were approximately $9.1 million. In recent years, State
agencies have also participated in transportation and office building projects
that may have some local as well as State use and benefits, in connection with
which the State enters into lease purchase agreements with terms ranging from 7
to 20 years. Certificates of participation, or special obligation bonds of the
State or local agency, are issued that represent fractionalized interests in or
are payable from the State's anticipated payments. The State estimates highest
future FY payments under those agreements (as of March 25, 1999) to be
approximately $25.8 million (of which $22 million is payable from sources other
than the GRF, such as federal highway money distributions). State payments under
all those agreements are subject to biennial appropriations, with the lease
terms being two years subject to renewal if appropriations are made.
A 1990 constitutional amendment authorizes greater State and political
subdivision participation (including financing) in the provision of housing. The
General Assembly may for that purpose authorize the issuance of State
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obligations secured by a pledge of all or such portion as it authorizes of State
revenues or receipts (but not by a pledge of the State's full faith and credit).
A 1994 constitutional amendment pledges the full faith and credit and
taxing power of the State to meeting certain guarantees under the State's
tuition credit program which provides for purchase of tuition credits, for the
benefit of State residents, guaranteed to cover a specified amount when applied
to the cost of higher education tuition. (A 1965 constitutional provision that
authorized student loan guarantees payable from available State moneys has never
been implemented, apart from a "guarantee fund" approach funded essentially from
program revenues.)
State and local agencies issue obligations that are payable from
revenues from or relating to certain facilities (but not from taxes). By
judicial interpretation, these obligations are not "debt" within constitutional
provisions. In general, payment obligations under lease-purchase agreements of
Ohio public agencies (in which certificates of participation may be issued) are
limited in duration to the agency's fiscal period, and are renewable only upon
appropriations being made available for the subsequent fiscal period.
Local school districts in Ohio receive a major portion (state-wide
aggregate approximately 46% in recent years) of their operating moneys from
State subsidies, but are dependent on local property taxes, and in 119 districts
(as of March 25, 1999) from voter-authorized income taxes, for significant
portions of their budgets. Litigation, similar to that in other states, has been
pending questioning the constitutionality of Ohio's system of school funding.
The Ohio Supreme Court has concluded that aspects of the system (including basic
operating assistance and the loan program referred to below) are
unconstitutional, and ordered the State to provide for and fund a system
complying with the Ohio Constitution, staying its order to permit time for
responsive corrective actions. After a further hearing, the trial court has
decided that steps taken to date by the State to enhance school funding have not
met the requirements of the Supreme Court decision; the State has filed a notice
of appeal with the Supreme Court, and the trial court has issued a stay, pending
appeal, of the implementation of much of its order. A small number of the
State's 612 local school districts have in any year required special assistance
to avoid year-end deficits. A program has provided for school district cash need
borrowing directly from commercial lenders, with diversion of State subsidy
distributions to repayment if needed. Recent borrowings under this program
totaled $71.1 million for 29 districts in FY 1995 (including $29.5 million for
one), and $87.2 million for 20 districts in FY 1996 (including $42.1 million for
one), $113.2 million for 12 districts in FY 1997 (including $90 million to one
for restructuring its prior loans) and $23.4 million for 10 districts in FY
1998.
Ohio's 943 incorporated cities and villages rely primarily on property
and municipal income taxes for their operations. With other subdivisions, they
also receive local government support and property tax relief moneys distributed
by the State.
For those few municipalities and school districts that on occasion have
faced significant financial problems, there are statutory procedures for a joint
State/local commission to monitor the fiscal affairs and for development of a
financial plan to eliminate deficits and cure any defaults. (Similar procedures
have recently been extended to counties and townships.) Since inception for
municipalities in 1979, these "fiscal emergency" procedures have been applied to
26 cities and villages; for 20 of them the fiscal situation was resolved and the
procedures terminated (two cities are in preliminary "fiscal watch" status). As
of March 25, 1999, a school district "fiscal emergency" provision was applied to
eight districts, and 10 were on preliminary "fiscal watch" status.
At present the State itself does not levy ad valorem taxes on real or
tangible personal property. Those taxes are levied by political subdivisions and
other local taxing districts. The Constitution has since 1934 limited to 1% of
true value in money the amount of the aggregate levy (including a levy for
unvoted general obligations) of property taxes by all overlapping subdivisions,
without a vote of the electors or a municipal charter provision, and statutes
limit the amount of that aggregate levy to 10 mills per $1 of assessed valuation
(commonly referred to as the "ten-mill limitation"). Voted general obligations
of subdivisions are payable from property taxes that are unlimited as to amount
or rate.
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APPENDIX B--DESCRIPTION OF RATINGS
The following paragraphs contain excerpts from Moody's and S&P's
rating descriptions. These credit ratings evaluate only the safety of principal
and interest and do not consider the market value risk associated with high
yield securities.
General Rating Information
MOODY'S INVESTORS SERVICE, INC.
BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than Aaa
bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements which make the long-term
risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa: Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate,
and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this
class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
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Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
SHORT-TERM DEBT RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers
to repay punctually senior obligations which have an original maturity not
exceeding one year.
P-1: Issuers rated "PRIME-1" or "P-1" (or supporting institutions) have
superior ability for repayment of senior short-term debt
obligations.
P-2: Issuers rated "PRIME-2" or "P-2" (or supporting institutions) have a
strong ability for repayment of senior short-term debt obligations.
P-3: Issuers rated "PRIME-3" or "P-3" (or supporting institutions) have
an acceptable ability for repayment of senior short-term debt
obligations.
MUNICIPAL NOTE RATINGS
Issuers or the features associated with Moody's MIG or VMIG ratings are
identified by date of issue, date of maturity or maturities or rating expiration
date and description to distinguish each rating from other ratings. Each rating
designation is unique with no implication as to any other similar issue of the
same obligor. MIG ratings terminate at the retirement of the obligation while
VMIG rating expiration will be a function of each issue's specific structural or
credit features.
MIG 1/VMIG 1: This designation denotes best quality. There is
present strong protection by established cash flows,
superior liquidity support, or demonstrated broad-based
access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes high quality. Margins of
protection are ample although not so large as in the
preceding group.
MIG 3/VMIG 3: This designation denotes favorable quality. All
security elements are accounted for but there is lacking the
undeniable strength of the preceding grades. Liquidity and
cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
MIG 4/VMIG 4: This designation denotes adequate quality.
Protection commonly regarded as required of an investment
security is present and although not distinctly or
predominantly speculative, there is specific risk.
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STANDARD & POOR'S
BOND RATINGS
AAA: Debt rated AAA has the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is
extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small
degree.
A: Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest an repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher rated categories.
BB, B, Debt rated BB, B, or CC is regarded, on balance, as CCC
CCC predominately speculative with respect to capacity to pay
and CC: 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: This rating is reserved for income bonds on which no interest is
being paid.
D: Debt rated D is in default, and payment of interest and/or
repayment of principal is in arrears.
FITCH IBCA, INC.
AAA Highest quality; obligor has exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA Very high quality; obligor's ability to pay interest and repay
principal is very strong. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated
F-1+.
A High quality; obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than
higher-rated bonds.
BBB Satisfactory credit quality; obligor's ability to pay interest
and repay principal is considered adequate. Unfavorable changes
in economic conditions and circumstances are more likely to
adversely affect these bonds and impair timely payment. The
likelihood that the ratings of these bonds will fall below
investment grade is higher than for higher-rated bonds.
BB, Not investment grade; predominantly speculative with respect to
CCC, the issuer's capacity to repay interest and repay principal
CC, C in accordance with the terms of the obligation for bond
issues not in default. BB is the least speculative. C is the most
speculative.
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COMMERCIAL PAPER RATINGS
S&P's commercial paper ratings are current assessments of the
likelihood of timely payment of debt having an original maturity of no more than
365 days.
A-1: The A-1 designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. A plus (+)
designation is applied only to those issues rated A-1 which
possess an overwhelming degree of safety.
A-2: Capacity for timely payment on issues with the designation A-2 is
strong. However, the relative degree of safely is not as high as
for issues designated A-1.
A-3: Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to
the adverse effects of changes in circumstances than obligations
carrying the higher designations.
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MUNICIPAL NOTE RATINGS
An S&P municipal note rating reflects the liquidity concerns and market
access risks unique to notes. Notes due in 3 years or less will likely receive a
note rating. Notes maturing beyond 3 years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:
Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).
Sources of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
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.
SP-3: Speculative capacity to pay principal and interest.
APPENDIX C--INVESTMENT OBJECTIVES OF THE OTHER FUNDS IN THE DELAWARE INVESTMENTS
FAMILY
Following is a summary of the investment objectives of the funds in the
Delaware Investments family:
Delaware Balanced Fund seeks long-term growth by a balance of Diversified
Growth, 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.
Delaware Trend Fund seeks long-term growth by investing in common
stocks issued by emerging growth companies exhibiting strong capital
appreciation potential. Delaware Technology and Innovation Fund seeks to
provide long-term capital growth by investing primarily in stocks the investment
adviser believes will benefit from technological advances and improvements.
Delaware Small Cap Value Fund seeks capital appreciation by investing
primarily in common stocks whose market values appear low relative to their
underlying value or future potential.
Delaware 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.
Delaware Decatur Equity Income Fund seeks the highest possible
current income by investing primarily in common stocks that provide the
potential for income and capital appreciation without undue risk to principal.
Delaware Growth and Income Fund seeks long-term growth by investing primarily
in securities that provide the potential for income and capital appreciation
without undue risk to principal. Delaware Blue Chip Fund seeks to achieve
long-term capital appreciation. Current income is a secondary objective. It
seeks to achieve these objectives by investing primarily in equity securities
and any securities that are convertible into equity securities. Delaware
Social Awareness Fund seeks to achieve long-term capital appreciation. It seeks
to achieve this objective by investing primarily in equity securities of medium-
to large-sized companies expected to grow over time that meet the Fund's "Social
Criteria" strategy.
Delaware Delchester Fund seeks as high a current income as possible
by investing principally in high yield, high risk corporate bonds, and also in
U.S. government securities and commercial paper. Delaware Strategic Income
Fund seeks to provide investors with high current income and total return by
using a multi-
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<PAGE>
sector investment approach, investing principally in three sectors
of the fixed-income securities markets: high yield, higher risk securities,
investment grade fixed-income securities and foreign government and other
foreign fixed-income securities. Delaware High-Yield Opportunities Fund seeks
to provide investors with total return and, as a secondary objective, high
current income. Delaware Corporate Bond Fund seeks to provide investors with
total return by investing primarily in corporate bonds. Delaware Extended
Duration Bond Fund seeks to provide investors with total return by investing
primarily in corporate bonds
Delaware American Government Bond 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.
Delaware Limited-Term Government Fund seeks high, stable income by
investing primarily in a portfolio of short- and intermediate-term securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
and instruments secured by such securities.
Delaware Cash Reserve Fund seeks the highest level of income
consistent with the preservation of capital and liquidity through investments in
short-term money market instruments, while maintaining a stable net asset value.
REIT Fund seeks to achieve maximum long-term total return with capital
appreciation as a secondary objective. It seeks to achieve its objectives
by investing in securities of companies primarily engaged in the real estate
industry.
Delaware 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.
Delaware Tax-Free USA Fund seeks high current income exempt from
federal income tax by investing in municipal bonds of geographically-diverse
issuers. Delaware 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. Delaware 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.
Delaware Tax-Free Pennsylvania Fund seeks a high level of current
interest income exempt from federal and, to the extent possible, certain
Pennsylvania state and local taxes, consistent with the preservation of capital.
Delaware Tax-Free New Jersey Fund seeks a high level of current interest income
exempt from federal income tax and New Jersey state and local taxes, consistent
with preservation of capital. Delaware Tax-Free Ohio Fund seeks a high level
of current interest income exempt from federal income tax and Ohio state and
local taxes, consistent with preservation of capital.
Foundation Funds are "fund of funds" which invest in other funds in the
Delaware Investments family (referred to as "Underlying Funds"). Foundation
Funds Delaware Income Portfolio seeks a combination of current income and
preservation of capital with capital appreciation by investing primarily in a
mix of fixed income and domestic equity securities, including fixed income and
domestic equity Underlying Funds. Foundation Funds Delaware Balanced Portfolio
seeks capital appreciation with current income as a secondary objective by
investing primarily in domestic equity and fixed income securities, including
domestic equity and fixed income Underlying Funds. Foundation Funds Delaware
Growth Portfolio seeks long-term capital growth by investing primarily in
equity securities, including equity Underlying Funds, and, to a lesser extent,
in fixed income securities, including fixed-income Underlying Funds.
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<PAGE>
Delaware 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.
Delaware 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.
Delaware Global Equity Fund seeks to achieve long-term total return by
investing in global securities that provide the potential for capital
appreciation and income. Delaware Emerging Markets Fund seeks long-term
capital appreciation by investing primarily in equity securities of issuers
located or operating in emerging countries.
Delaware U.S. Growth Fund seeks to maximize capital appreciation by
investing in companies of all sizes which have low dividend yields, strong
balance sheets and high expected earnings growth rates relative to their
industry. Delaware Overseas Equity Fund seeks to maximize total return
(capital appreciation and income), principally through investments in an
internationally diversified portfolio of equity securities. Delaware New
Pacific Fund seeks long-term capital appreciation by investing primarily in
companies which are domiciled in or have their principal business activities in
the Pacific Basin.
Delaware Group Premium Fund offers various funds
available exclusively as funding vehicles for certain insurance company separate
accounts. Growth and 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. Delchester Series seeks as
high a current income as possible by investing in rated and unrated corporate
bonds, U.S. government securities and commercial paper. Capital Reserves Series
seeks a high stable level of current income while minimizing fluctuations in
principal by investing in a diversified portfolio of short- and
intermediate-term securities. Cash Reserve Series seeks the highest level of
income consistent with preservation of capital and liquidity through investments
in short-term money market instruments. DelCap Series seeks long-term capital
appreciation by investing its assets in a diversified portfolio of securities
exhibiting the potential for significant growth. Delaware Balanced Series seeks
a balance of capital appreciation, income and preservation of capital. It uses a
dividend-oriented valuation strategy to select securities issued by established
companies that are believed to demonstrate potential for income and capital
growth. International Equity Series seeks long-term growth without undue risk to
principal by investing primarily in equity securities of foreign issuers that
provide the potential for capital appreciation and income. Small Cap Value
Series seeks capital appreciation by investing primarily in small-cap common
stocks whose market values appear low relative to their underlying value or
future earnings and growth potential. Emphasis will also be placed on securities
of companies that may be temporarily out of favor or whose value is not yet
recognized by the market. Trend Series seeks long-term capital appreciation by
investing primarily in small-cap common stocks and convertible securities of
emerging and other growth-oriented companies. These securities will have been
judged to be responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Social Awareness Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in securities
of companies primarily engaged in the real estate industry. Aggressive Growth
Series seeks long-term capital appreciation. The Series attempts to achieve its
investment objective by investing primarily in equity securities of companies
which the manager believes have the potential for high earnings growth. U.S.
Growth Series seeks to maximize capital appreciation. The Series seeks to
achieve its investment objective by investing in companies of all sizes which
have low dividend yields, strong balance sheets and high expected earnings
growth rates relative to their industry.
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Delaware U.S. Government Securities Fund seeks to provide a high
level of current income consistent with the prudent investment risk by investing
in U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
Delaware Tax-Free Arizona Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware Minnesota Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Minnesota personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Minnesota Intermediate Fund seeks to provide a
high level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
Delaware Tax-Free California Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the California
personal income tax, consistent with the preservation of capital. Delaware
Tax-Free Florida Insured Fund seeks to provide a high level of current income
exempt from federal income tax, consistent with the preservation of capital. The
Fund will seek to select investments that will enable its shares to be exempt
from the Florida intangible personal property tax. Delaware Tax-Free Florida
Fund seeks to provide a high level of current income exempt from federal income
tax, consistent with the preservation of capital. The Fund will seek to select
investments that will enable its shares to be exempt from the Florida intangible
personal property tax. Delaware Tax-Free Kansas Fund seeks to provide a high
level of current income exempt from federal income tax, the Kansas personal
income tax and the Kansas intangible personal property tax, consistent with the
preservation of capital. Delaware Tax-Free Missouri Insured Fund seeks to
provide a high level of current income exempt from federal income tax and the
Missouri personal income tax, consistent with the preservation of capital.
Delaware Tax-Free New Mexico Fund seeks to provide a high level of current
income exempt from federal income tax and the New Mexico personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Oregon Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Oregon personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Arizona Fund seeks to provide a high level of
current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware Tax-Free
California Fund seeks to provide a high level of current income exempt from
federal income tax and the California personal income tax, consistent with the
preservation of capital. Delaware Tax-Free Iowa Fund seeks to provide a high
level of current income exempt from federal income tax and the Iowa personal
income tax, consistent with the preservation of capital. Delaware Tax-Free
Idaho Fund seeks to provide a high level of current income exempt from federal
income tax and the Idaho personal income tax, consistent with the preservation
of capital. Delaware Minnesota High-Yield Municipal Bond Fund seeks to
provide a high level of current income exempt from federal income tax and the
Minnesota personal income tax primarily through investment in medium and lower
grade municipal obligations. Delaware National High-Yield Municipal Fund
seeks to provide a high level of income exempt from federal income tax,
primarily through investment in medium and lower grade municipal obligations.
Delaware Tax-Free New York Fund seeks to provide a high level of current
income exempt from federal income tax and the personal income tax of the state
of New York and the city of New York, consistent with the preservation of
capital. Delaware Tax-Free Wisconsin Fund seeks to provide a high level of
current income exempt from federal income tax and the Wisconsin personal income
tax, consistent with the preservation of capital. Delaware Montana
Municipal Bond Fund seeks as high a level of current income exempt from federal
income tax and from the Montana personal income tax, as is consistent with
preservation of capital.
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<PAGE>
Delaware Tax-Free Colorado Fund seeks to provide a high level of
current income exempt from federal income tax and the Colorado personal income
tax, consistent with the preservation of capital.
Delaware Select Growth Fund seeks long-term capital appreciation,
which the Fund attempts to achieve by investing primarily in equity securities
believed to have the potential for high earnings growth. Although the Fund, in
seeking its objective, may receive current income from dividends and interest,
income is only an incidental consideration in the selection of the Fund's
investments. Delaware Growth Stock Fund has an objective of long-term capital
appreciation. The Fund seeks to achieve its objective from equity securities
diversified among individual companies and industries. Delaware Tax-Efficient
Equity Fund seeks to obtain for taxable investors a high total return on an
after-tax basis. The Fund will attempt to achieve this objective by seeking to
provide a high long-term after-tax total return through managing its portfolio
in a manner that will defer the realization of accrued capital gains and
minimize dividend income.
Delaware Tax-Free Minnesota Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax, consistent with the preservation of capital. Delaware Tax-Free North
Dakota Fund seeks to provide a high level of current income exempt from federal
income tax and the North Dakota personal income tax, consistent with the
preservation of capital.
For more complete information about any of the funds in the Delaware
Investments family, including charges and expenses, you can obtain a prospectus
from the Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in the Funds' prospectus(es).
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<PAGE>
Delaware Investments includes funds with a wide range of investment objectives.
Stock funds, income funds, national and state-specific tax-exempt funds, money
market funds, global and
international funds and closed-end funds give investors the
ability to create a portfolio that fits their personal financial
goals. For more information, shareholders of the Fund Classes
should contact their financial adviser or call Delaware
Investments at 800-523-1918.
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
<PAGE>
DELAWARE GROUP STATE-TAX FREE INCOME TRUST
DELAWARE TAX-FREE PENNSYLVANIA FUND
DELAWARE TAX-FREE OHIO FUND
DELAWARE TAX-FREE NEW JERSEY FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
PART B
STATEMENT OF
ADDITIONAL INFORMATION
April 29, 2000
[GRAPHIC OMITTED]
<PAGE>
PART C
------
Other Information
-----------------
Item 23. Exhibits
(a) Agreement and Declaration of Trust.
(1) Agreement and Declaration of Trust (December 17, 1998)
attached as Exhibit.
(2) Certificate of Trust (December 17, 1998) attached as Exhibit.
(b) By-Laws. By-Laws (December 17, 1998) attached as Exhibit.
(c) Copies of All Instruments Defining the Rights of Holders.
(1) Agreement and Declaration of Trust. Articles III, V and VI
of Agreement and Declaration of Trust attached as
Exhibit (a)(1).
(2) By-Laws. Article II of By-Laws attached as Exhibit (b).
(d) Investment Management Agreement.
-------------------------------
(1) Form of Investment Management Agreement (April 2000) between
Delaware Management Company and the Registrant on behalf of
each Fund attached as Exhibit.
(e) (1) Distribution Agreement.
----------------------
(i) Form of Distribution Agreement (April 2000) on behalf
of Tax-Free Pennsylvania Fund incorporated into this
filing by reference to Post-Effective Amendment No. 35
filed November 27, 1995.
(ii) Form of Distribution Agreement (April 2000) between
Delaware Distributors, L.P. and the Registrant on
behalf of Tax-Free New Jersey Fund incorporated into
this filing by reference to Post-Effective Amendment
No. 40 filed March 31, 1998 and Post-Effective
Amendment No. 35 filed November 27, 1995.
(iii) Form of Distribution Agreement (April 2000) between
Delaware Distributors, L.P. and the Registrant on
behalf of Tax-Free Ohio Fund incorporated into this
filing by reference to Post-Effective Amendment No. 40
filed March 31, 1998 and Post-Effective Amendment No.
35 filed November 27, 1995.
(2) Administration and Service Agreement. Form of Administration
and Service Agreement (as amended November 1995) incorporated
into this filing by reference to Post-Effective Amendment No.
35 filed November 27, 1995.
<PAGE>
(3) Dealer's Agreement. Form of Dealer's Agreement (as amended
November 1995) incorporated into this filing by reference to
Post-Effective Amendment No. 35 filed November 27, 1995.
(4) Form of Mutual Fund Agreement for the Delaware Group of Funds
(as amended November 1995) (Module) incorporated into this
filing by reference to Post-Effective Amendment No. 36 filed
April 29, 1996.
(f) Inapplicable.
(g) Custodian Agreement.
-------------------
(1) Form of Custodian Agreement (April 2000) between The Chase
Manhattan Bank and the Registrant incorporated into this filing
by reference to Post-Effective Amendment No. 40 filed March 31,
1998.
(h) Other Material Contracts.
------------------------
(1) Form of Shareholders Services Agreement (April 2000) between
Delaware Service Company, Inc. and the Registrant on behalf
of each Fund incorporated into this filing by reference to
Post-Effective Amendment No. 40 filed March 31, 1998.
(2) Form of Fund Accounting Agreement (April 2000) between
Delaware Service Company, Inc. and the Registrant on behalf
of each Fund incorporated into this filing by reference to
Post-Effective Amendment No. 40 filed March 31, 1998.
(i) Opinion of Counsel. Attached as Exhibit.
------------------
(j) Consent of Auditors. To be filed by Amendment.
-------------------
(k-l) Inapplicable.
(m) Plans under Rule 12b-1.
----------------------
(1) Form of Plan under Rule 12b-1 for Class A (April 2000) on
behalf of Tax-Free Pennsylvania Fund incorporated into this
filing by reference to Post-Effective Amendment No. 35 filed
November 27, 1995.
(2) Form of Plan under Rule 12b-1 for Class B (April 2000) on
behalf of Tax-Free Pennsylvania Fund incorporated into this
filing by reference to Post-Effective Amendment No. 35 filed
November 27, 1995.
(3) Form of Plan under Rule 12b-1 for Class C (April 2000) on
behalf of Tax-Free Pennsylvania Fund incorporated into this
filing by reference to Post-Effective Amendment No. 35 filed
November 27, 1995.
(4) Form of Plan under Rule 12b-1 for Class A (April 2000) on
behalf of Tax-Free New Jersey Fund incorporated into this
filing by reference to Post-Effective Amendment No. 40 filed
March 31, 1998.
(5) Form of Plan under Rule 12b-1 for Class B (April 2000) on
behalf of Tax-Free New Jersey Fund incorporated into this
filing by reference to Post-Effective Amendment No. 40 filed
March 31, 1998.
<PAGE>
(6) Form of Plan under Rule 12b-1 for Class C (April 2000) on
behalf of Tax-Free New Jersey Fund incorporated into this
filing by reference to Post-Effective Amendment No. 40 filed
March 31, 1998.
(7) Form of Plan under Rule 12b-1 for Class A (April 2000) on
behalf of Tax-Free Ohio Fund incorporated into this filing by
reference to Post-Effective Amendment No. 40 filed March 31,
1998.
(8) Form of Plan under Rule 12b-1 for Class B (April 2000) on
behalf of Tax-Free Ohio Fund incorporated into this filing by
reference to Post-Effective Amendment No. 40 filed March 31,
1998.
(9) Form of Plan under Rule 12b-1 for Class C (April 2000) on
behalf of Tax-Free Ohio Fund incorporated into this filing by
reference to Post-Effective Amendment No. 40 filed March 31,
1998.
(o) Inapplicable.
(p) Other: Trustees' Power of Attorney. Attached as Exhibit.
---------------------------
Item 24. Persons Controlled by or under Common Control with Registrant. None.
-------------------------------------------------------------
Item 25. Indemnification. Article VI of the By-Laws attached as Exhibit (b).
---------------
Item 26. Business and Other Connections of Investment Adviser.
----------------------------------------------------
(a) Delaware Management Company (the "Manager"), a series of Delaware
Management Business Trust, serves as investment manager to the
Registrant and also serves as investment manager or sub-adviser to
certain of the other funds in the Delaware Investments family
(Delaware Group Equity Funds I, Delaware Group Equity Funds II,
Delaware Group Equity Funds III, Delaware Group Equity Funds IV,
Delaware Group Equity Funds V, Delaware Group Government Fund,
Delaware Group Income Funds, Delaware Group Limited-Term Government
Funds, Delaware Group Cash Reserve, Delaware Group Tax-Free Fund,
Delaware Group State Tax-Free Income Trust, Delaware Group Tax-Free
Money Fund, Delaware Group Premium Fund, Delaware Group Global &
International Funds, Delaware Group Adviser Funds, Delaware Group
Dividend and Income Fund, Delaware Group Global Dividend and Income
Fund, Delaware Group Foundation Funds, Voyageur Intermediate
Tax-Free Funds, Voyageur Tax-Free Funds, Voyageur Funds, Voyageur
Insured Funds, Voyageur Investment Trust, Voyageur Investment Trust
II, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur
Mutual Funds III, Voyageur Arizona Municipal Income Fund, Inc.,
Voyageur Colorado Insured Municipal Income Fund, Inc., Voyageur
Florida Insured Municipal Income Fund, Voyageur Minnesota Municipal
Fund, Voyageur Minnesota Municipal Fund II, Inc. and Voyageur
Minnesota Municipal Fund III, Inc.). In addition, certain officers
of the Manager also serve as trustees of the other funds in the
Delaware Investments family, and certain officers are also officers
of these other funds. A company indirectly owned by the Manager's
indirect parent company acts as principal underwriter to the mutual
funds in the Delaware Investments family (see Item 27 below) and
another such company acts as the shareholder services, dividend
disbursing, accounting servicing and transfer agent for all of the
mutual funds in the Delaware Investments family.
<PAGE>
The following persons serving as officers of the Manager have held the
following positions during the past two years. The business address of each is
1818 Market Street, Philadelphia, PA 19103.
<TABLE>
<CAPTION>
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Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates and other
Positions and Offices Held
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<S> <C>
Charles E. Haldeman, Jr.(1) Chief Executive Officer of Delaware Management Company (a series of Delaware Management
Business Trust); President, Chief Executive Officer and Director of Delaware Management
Holdings, Inc.; Chief Executive Officer and Director of DMH Corp.; Chief Executive
Officer and Director of Delvoy, Inc.; Chief Executive Officer and Director of Delaware
Management Company, Inc.; Chief Executive Officer and Trustee of Delaware Management
Business Trust, Director of Delaware Service Company, Inc.; Director of Delaware
Capital Management; Director of Retirement Financial Services, Inc.; Director of
Delaware Distributors, Inc.; Chief Executive Officer and Director of Delaware
International Holdings, Inc.; Chief Executive Officer of Delaware General Management
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David K. Downes President of Delaware Management Company (a series of Delaware Management Business
Trust); President and Director of Delaware Management Company, Inc.; President, Chief
Executive Officer and Director of Delaware Capital Management, Inc.; Chairman,
President, Chief Executive Officer and Director of Delaware Service Company, Inc.;
President, Chief Operating Officer, Chief Financial Officer and Director of Delaware
International Holdings Ltd.; President, Chief Operating Officer and Director of
Delaware General Management, Inc.; Chairman and Director of Delaware Management Trust
Company; Chairman and Director of Retirement Financial Services, Inc.; Executive Vice
President, Chief Operating Officer, Chief Financial Officer of Delaware Management
Holdings, Inc.; Executive Vice President, Chief Operating Officer, Chief Financial
Officer of Founders CBO Corporation; Executive Vice President, Chief Operating Officer,
Chief Financial Officer of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Trustee/Director of DMH Corp.; Executive Vice President, Chief
Operating Officer, Chief Financial Officer and Trustee/Director of Delaware
Distributors, Inc.; Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Trustee/Director of Delaware Distributors, L.P.; Executive Vice President,
Chief Operating Officer, Chief Financial Officer and Trustee/Director of Founders
Holdings, Inc.; Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Trustee/Director of Delvoy, Inc.; Executive Vice President, Chief Operating
Officer, Chief Financial Officer and Trustee/Director of Delaware Management Business
Trust; Director of Delaware International Advisers Ltd.; President, Chief Executive
Officer, Chief Financial Officer and Trustee/Director of each fund in the Delaware
Investments family
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8 Clayton Place,
Newtown Square, PA
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John C. E. Campbell Executive Vice President/Global Marketing and Client Services of Delaware Management
Company (a series of Delaware Management Business Trust); Executive Vice
President/Global Marketing and Client Services of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Director of Delaware International
Advisers Ltd.
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William E. Dodge (2) Executive Vice President and Chief Investment Officer, DMC - Equity of Delaware
Management Company (a series of Delaware Management Business Trust); Executive Vice
President of Delaware Management Business Trust; President and Chief Investment
Officer, DIA - Equity of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Executive Vice President of Delaware Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates and other
Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Richard J. Flannery Executive Vice President and General Counsel of Delaware Management Company (a series
of Delaware Management Business Trust); Executive Vice President and General Counsel
of Delaware Management Holdings, Inc.; Executive Vice President and General Counsel of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Executive Vice President and General Counsel of Founders CBO Corporation; Executive
Vice President/General Counsel and Director/Trustee of Delaware International Holdings
Ltd.; Executive Vice President/General Counsel and Director/Trustee of Founders
Holdings, Inc.; Executive Vice President/General Counsel and Director/Trustee of
Delvoy, Inc.; Executive Vice President/General Counsel and Director/Trustee of DMH
Corp.; Executive Vice President/General Counsel and Director/Trustee of Delaware
Management Company, Inc.; Executive Vice President/General Counsel and
Director/Trustee of Delaware Management Business Trust; Executive Vice
President/General Counsel and Director/Trustee of Delaware Service Company, Inc.;
Executive Vice President/General Counsel and Director/Trustee of Delaware Capital
Management, Inc.; Executive Vice President/General Counsel and Director/Trustee of
Retirement Financial Services, Inc.; Executive Vice President/General Counsel and
Director/Trustee of Delaware Distributors, Inc.; Executive Vice President/General
Counsel and Director/Trustee of Delaware Distributors, L.P.; Executive Vice
President/General Counsel and Director/Trustee of Delaware Management Trust Company;
Executive Vice President/General Counsel and Director/Trustee of Delaware General
Management, Inc.; Director of Delaware International Advisers Ltd.; Director of HYPPCO
Finance Company Ltd.; Executive Vice President and General Counsel of each fund in the
Delaware Investments family
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverson, PA;
Director and Member of Executive Committee of Stonewall Links, Inc. since 1991,
Bulltown Rd., Elverson, PA
- ------------------------------------------------------------------------------------------------------------------------------------
H. Thomas McMeekin (3) Executive Vice President/Chief Investment Officer, DMC-Fixed Income of Delaware
Management Company (a series of Delaware Management Business Trust); Executive Vice
President/Chief Investment Officer, DIA-Fixed Income of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Executive Vice President and Director of
Delaware Management Holdings, Inc.; Executive Vice President of Delaware Management
Business Trust; Executive Vice President of Delaware Capital Management, Inc.;
Executive Vice President and Chief Investment Officer, Fixed Income of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard G. Unruh Executive Vice President/Chief Investment Officer of Delaware Management Company (a
series of Delaware Management Business Trust); Chief Executive Officer/Chief Investment
Officer of Delaware Investment Advisers (a series of Delaware Management Business
Trust); Executive Vice President and Director/Trustee of Delaware Management Business
Trust; Executive Vice President of Delaware Management Holdings, Inc.; Executive Vice
President of Delaware Capital Management, Inc.; Director of Delaware International
Advisers Ltd.; Executive Vice President and Chief Investment Officer, Equity for each
fund in the Delaware Investments family.
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company since
1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Chairman of Finance
Committee, AAA Mid Atlantic, Inc. since 1989, 2040 Market Street, Philadelphia, PA;
Board of Directors, Metron, Inc. since 1995, 11911 Freedom Drive, Reston, VA
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company (a series of Delaware
Management Business Trust); Senior Vice President/Operations of Delaware Service
Company, Inc.; Senior Vice President/Operations of Retirement Financial Services, Inc.;
Senior Vice President/Operations and Director of Delaware Management Trust Company.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates and other
Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Michael P. Bishof Senior Vice President/Investment Accounting of Delaware Management Company (a series
of Delaware Management Business Trust); Senior Vice President/Investment Accounting of
Delaware Service Company, Inc.; Senior Vice President/Investment Accounting of Delaware
Capital Management, Inc.; Senior Vice President/Investment Accounting of Delaware
Distributors, L.P.; Senior Vice President/Investment Accounting of Founders Holdings,
Inc.; Senior Vice President and Treasurer/ Investment Accounting of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Senior Vice
President/Manager of Investment Accounting of Delaware International Holdings, Inc.;
Senior Vice President and Assistant Treasurer of Founders CBO Corporation; Senior Vice
President and Treasurer of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley Senior Vice President/Compliance Director of Delaware Management Company (a series of
Delaware Management Business Trust); Senior Vice President/Compliance Director of
Delaware Management Holdings, Inc.; Senior Vice President/Compliance Director of DMH
Corp.; Senior Vice President/Compliance Director of Delvoy, Inc.; Senior Vice
President/Compliance Director of Delaware Management Company, Inc.; Senior Vice
President/Compliance Director of Delaware Management Business Trust; Senior Vice
President/Compliance Director of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President/Compliance Director of Delaware
Service Company, Inc.; Senior Vice President/Compliance Director of Delaware Capital
Management, Inc.; Senior Vice President/Compliance Director of Retirement Financial
Services, Inc.; Senior Vice President/Compliance Director and Assistant Secretary of
Delaware Management Trust Company; Senior Vice President/Compliance Director of
Delaware Distributors, Inc.; Senior Vice President/Compliance Director of Delaware
Distributors, L.P.; Senior Vice President/Compliance Director of Delaware General
Management, Inc.; Senior Vice President/Compliance Director of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert J. DiBraccio Senior Vice President/Head of Equity Trading of Delaware Management Company (a series
of Delaware Management Business Trust); Senior Vice President/Head of Equity Trading
of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Senior Vice President/Head of Equity Trading of Delaware Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
John B. Fields Senior Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Trustee of Delaware Management Business
Trust; Senior Vice President/Senior Portfolio Manager of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Senior Vice President/Senior
Portfolio Manager of Delaware Capital Management, Inc.; Senior Vice President/Senior
Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Gerald S. Frey Senior Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President/Senior Portfolio
Manager of Delaware Investment Advisers (a series of Delaware Management Business
Trust); Senior Vice President/Senior Portfolio Manager of each fund in the Delaware
Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Susan L. Hanson Senior Vice President/Global Marketing and Client Services of Delaware Management
Company (a series of Delaware Management Business Trust); Senior Vice President/Global
Marketing and Client Services of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates and other
Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Joseph H. Hastings Senior Vice President/Corporate Controller and Treasurer of Delaware Management Company
(a series of Delaware Management Business Trust); Senior Vice President/Corporate
Controller and Treasurer of Delaware Management Holdings, Inc.; Senior Vice
President/Corporate Controller and Treasurer of DMH Corp.; Senior Vice
President/Corporate Controller and Treasurer of Delaware Management Company, Inc.;
Senior Vice President/Corporate Controller and Treasurer of Delaware Distributors,
L.P.; Senior Vice President/Corporate Controller and Treasurer of Delaware
Distributors, Inc.; Senior Vice President/Corporate Controller and Treasurer of
Delaware Service Company, Inc.; Senior Vice President/Corporate Controller and
Treasurer of Delaware Capital Management, Inc.; Senior Vice President/Corporate
Controller and Treasurer of Delaware International Holdings Ltd.; Senior Vice
President/Corporate Controller and Treasurer of Delvoy, Inc.; Senior Vice
President/Corporate Controller and Treasurer of Founders Holdings, Inc.; Senior Vice
President/Corporate Controller and Treasurer of Delaware Management Business Trust;
Senior Vice President/Corporate Controller and Treasurer of Delaware General
Management, Inc.; Executive Vice President/Chief Financial Officer/Treasurer of
Delaware Management Trust Company; Chief Financial Officer of Retirement Financial
Services, Inc.; Senior Vice President/Assistant Treasurer of Founders CBO Corporation;
Senior Vice President/Corporate Controller of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Senior Vice President/Corporate Controller of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources of Delaware Management Company (a series of
Delaware Management Business Trust); Senior Vice President/Human Resources of Delaware
Management Holdings, Inc.; Senior Vice President/Human Resources of DMH Corp.; Senior
Vice President/Human Resources of Delvoy, Inc.; Senior Vice President/Human Resources
of Delaware Management Company, Inc.; Senior Vice President/Human Resources of
Delaware Management Business Trust; Senior Vice President/Human Resources of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Senior Vice
President/Human Resources of Delaware Service Company, Inc.; Senior Vice
President/Human Resources of Delaware Capital Management, Inc.; Senior Vice
President/Human Resources of Delaware Retirement Financial Services, Inc.; Senior Vice
President/Human Resources of Delaware Management Trust Company; Senior Vice
President/Human Resources of Delaware Distributors, Inc.; Senior Vice President/Human
Resources of Delaware Distributors, L.P.; Senior Vice President/Human Resources of
Delaware General Management, Inc.; Senior Vice President/Human Resources of each fund
in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Karina J. Istvan Senior Vice President/Strategic Planning of Delaware Management Company (a series of
Delaware Management Business Trust); Senior Vice President/Strategic Planning of
Delaware Management Holdings, Inc.; Senior Vice President/Strategic Planning of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Senior
Vice President/Strategic Planning of Delaware Service Company, Inc.; Senior Vice
President/Strategic Planning of Delaware Capital Management, Inc.; Senior Vice
President/Strategic Planning of Retirement Financial Services, Inc.; Senior Vice
President/Strategic Planning of Delaware Management Trust Company; Senior Vice
President/Strategic Planning of Delaware Distributors, L.P.; Senior Vice
President/Strategic Planning of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates and other
Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Richelle S. Maestro Senior Vice President, Secretary and Deputy General Counsel of Delaware Management
Company (a series of Delaware Management Business Trust); Senior Vice President,
Secretary and Deputy General Counsel of Delaware Management Holdings, Inc.; Senior Vice
President, Secretary and Deputy General Counsel of DMH Corp.; Senior Vice President,
Secretary and Deputy General Counsel of Delvoy, Inc.; Senior Vice President, Secretary
and Deputy General Counsel of Delaware Management Company, Inc.; Senior Vice President,
Secretary and Deputy General Counsel of Delaware Management Business Trust; Senior Vice
President, Secretary and Deputy General Counsel of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Senior Vice President, Secretary and
Deputy General Counsel of Delaware Service Company, Inc.; Senior Vice President,
Secretary and Deputy General Counsel of Delaware Capital Management, Inc.; Senior Vice
President, Secretary and Deputy General Counsel of Retirement Financial Services, Inc.;
Senior Vice President, Secretary and Deputy General Counsel of Delaware Distributors,
Inc.; Senior Vice President, Secretary and Deputy General Counsel of Delaware
Distributors, L.P.; Senior Vice President and Secretary of Delaware International
Holdings Ltd.; Senior Vice President, Secretary and Deputy General Counsel of Founders
Holdings, Inc.; Secretary of Founders CBO Corporation; Senior Vice President, Secretary
and Deputy General Counsel of Delaware Management Trust Company; Senior Vice President,
Secretary and Deputy General Counsel of Delaware General Management, Inc.; Senior Vice
President, Assistant Secretary and Deputy General Counsel of each fund in the Delaware
Investments family.
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane, Philadelphia, PA.
- ------------------------------------------------------------------------------------------------------------------------------------
Eric E. Miller Senior Vice President/Deputy General Counsel and Assistant Secretary of Delaware
Management Company (a series of Delaware Management Business Trust); Senior Vice
President/Deputy General Counsel and Assistant Secretary of Delaware Management
Holdings, Inc.; Senior Vice President/Deputy General Counsel and Assistant Secretary of
DMH Corp.; Senior Vice President/Deputy General Counsel and Assistant Secretary of
Delvoy, Inc.; Senior Vice President/Deputy General Counsel and Assistant Secretary of
Delaware Management Company, Inc.; Senior Vice President/Deputy General Counsel and
Assistant Secretary of Delaware Management Business Trust; Senior Vice President/Deputy
General Counsel and Assistant Secretary of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Senior Vice President/Deputy General Counsel and
Assistant Secretary of Delaware Service Company, Inc.; Senior Vice President/Deputy
General Counsel and Assistant Secretary of Delaware Capital Management, Inc.; Senior
Vice President/Deputy General Counsel and Assistant Secretary of Retirement Financial
Services, Inc.; Senior Vice President/Deputy General Counsel and Assistant Secretary of
Delaware Distributors, Inc.; Senior Vice President/Deputy General Counsel and Assistant
Secretary of Delaware Distributors, L.P.; Senior Vice President/Deputy General Counsel
and Assistant Secretary of Founders Holdings, Inc.; Senior Vice President/Deputy
General Counsel and Assistant Secretary of Delaware General Management, Inc.; Senior
Vice President/Deputy General Counsel and Secretary of each fund in Delaware
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
Paul M. Ross Senior Vice President/Global Marketing and Client Services of Delaware Management
Company (a series of Delaware Management Business Trust); Senior Vice President/Global
Marketing and Client Services of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates and other
Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
James L. Shields Senior Vice President, Chief Information Officer of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President, Chief Information
Officer of Delaware Investment Advisers (a series of Delaware Management Business
Trust); Senior Vice President, Chief Information Officer of Delaware Service Company,
Inc.; Senior Vice President, Chief Information Officer of Delaware Capital Management
Company, Inc.; Senior Vice President, Chief Information Officer of Retirement Financial
Services, Inc.; Senior Vice President, Chief Information Officer of Delaware
Distributors, L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
Gary T. Abrams Vice President/Equity Trader of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Equity Trader of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher S. Adams Vice President/Equity Analyst of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Equity Analyst of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Damon J. Andres Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of Delaware Capital Management, Inc.; Vice President/Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert L. Arnold Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of Delaware Capital Management, Inc., Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Marshall T. Bassett Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher S. Beck Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
Trustee of New Castle County Pension Board since October 1992, Wilmington DE.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard E. Biester Vice President/Trading Operations of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Trading Operations of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent A. Brancaccio Vice President/Equity Trader of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Equity Trader of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Michael P. Buckley Vice President/Portfolio Manager and Senior Municipal Bond Analyst of Delaware
Management Company (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager and Senior Municipal Bond Analyst of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager and Senior Municipal Bond Analyst of each fund in the Delaware Investments
family
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates and other
Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
MaryEllen M. Carrozza Vice President/Client Services of Delaware Management Company (a series of Delaware
Management Business Trust);Vice President/Client Services of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Client
Services of Delaware Distributors, Inc.; Vice President/Client Services of Delaware
General Management, Inc.; Vice President/Client Services of each fund in the Delaware
Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen R. Cianci Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Mitchell L. Conery Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Timothy G. Connors Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager for each fund in the Delaware Investments family
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of Delaware Capital Management, Inc.; Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
George E. Deming Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust);
Director of Delaware International Advisers Ltd; Vice President/Senior Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
James P. Dokas Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael J. Dugan Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates and other
Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Joel A. Ettinger Vice President/Taxation of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Taxation of Delaware Management Holdings, Inc.; Vice
President/Taxation of DMH Corp.; Vice President/Taxation of Delvoy, Inc.; Vice
President/Taxation of Delaware Management Company, Inc.; Vice President/Taxation of
Delaware Management Business Trust; Vice President/Taxation of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Taxation of
Delaware Service Company, Inc.; Vice President/Taxation of Delaware Capital Management,
Inc.; Vice President/Taxation of Retirement Financial Services, Inc.; Vice
President/Taxation of Delaware Distributors, Inc.; Vice President/Taxation of Delaware
Distributors, L.P.; Vice President/Taxation of Founders Holdings, Inc.; Vice
President/Taxation of Founders CBO Corporation; Vice President/Taxation of Delaware
General Management, Inc.; Vice President/Taxation of each fund in the Delaware
Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph Fiorilla Vice President/Performance Analyst of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Performance Analyst of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Charles E. Fish Vice President/Equity Trader of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Equity Trader of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
James A. Furgele Vice President/Investment Accounting of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Investment Accounting of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Investment Accounting of Delaware Service Company, Inc.; Vice
President/Investment Accounting of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas C. Gariepy(4) Vice President/Director of Corporate Communications of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Director of Corporate
Communications of Delaware Investment Advisers (a series of Delaware Management
Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Stuart M. George Vice President/Equity Trading of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Equity Trading of Delaware Investment
Advisers (a series of Delaware Management Business Trust).
- ------------------------------------------------------------------------------------------------------------------------------------
Andrea Giles Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of Delaware Capital Management, Inc.; Vice President/Portfolio Manager of each
fund in the Delaware Investments family
- ------------------------------------------------------------------------------------------------------------------------------------
Barry Gladstein Vice President/Business Manager - Equity of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Business Manager - Equity of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Paul Grillo Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of Delaware Capital Management, Inc.; Vice President/Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Brian T. Hannon Vice President/Equity Analyst of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Equity Analyst of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates and other
Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
John A. Heffern Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Stuart N. Hosansky Vice President/Senior Credit Analyst of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Credit Analyst of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice President/
Senior Credit Analyst of each fund in the Delaware Investments family
- ------------------------------------------------------------------------------------------------------------------------------------
Elizabeth H. Howell Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey Hynoski Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Cynthia Isom Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Audrey E. Kohart Vice President/Assistant Controller, Corporate Accounting of Delaware Management
Company (a series of Delaware Management Business Trust); Vice President/Assistant
Controller, Corporate Accounting of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Steven T. Lampe Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of Delaware Capital Management, Inc.; Vice President/Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Philip Y. Lin Vice President, Assistant Secretary and Associate General Counsel of Delaware
Management Company (a series of Delaware Management Business Trust); Vice President,
Assistant Secretary and Associate General Counsel of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Vice President, Assistant Secretary and
Associate General Counsel of Delaware Service Company, Inc.; Vice President, Assistant
Secretary and Associate General Counsel of Delaware Capital Management, Inc.; Vice
President, Assistant Secretary and Associate General Counsel of Retirement Financial
Services, Inc.; Vice President, Assistant Secretary and Associate General Counsel of
Delaware Management Trust Company; Vice President, Assistant Secretary and Associate
General Counsel of Delaware Distributors, L.P.; Vice President, Assistant Secretary and
Associate General Counsel of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates and other
Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Michael D. Mabry Vice President, Assistant Secretary and Associate General Counsel of Delaware
Management Company (a series of Delaware Management Business Trust); Vice President,
Assistant Secretary and Associate General Counsel of Delaware Management Holdings,
Inc.; Vice President, Assistant Secretary and Associate General Counsel of Delvoy,
Inc.; Vice President, Assistant Secretary and Associate General Counsel of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice President,
Assistant Secretary and Associate General Counsel of Delaware Service Company, Inc.;
Vice President, Assistant Secretary and Associate General Counsel of Delaware Capital
Management, Inc.; Vice President, Assistant Secretary and Associate General Counsel of
Retirement Financial Services, Inc.; Vice President, Assistant Secretary and Associate
General Counsel of Delaware Distributors, L.P.; Vice President, Assistant Secretary and
Associate General Counsel of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of Founders Holdings, Inc., President and Director
of Founders CBO Corporation; Vice President/Senior Portfolio Manager of each fund in
the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew M. McCullagh, Jr. Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Francis X Morris Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of Founders Holdings, Inc., Treasurer, Assistant
Secretary and Director of Founders CBO Corporation; Vice President/Senior Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Norton, Jr. Vice President/Equity Analyst of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Equity Analyst of Delaware Investment
Advisers (a series of Delaware Management Business Trust).
- ------------------------------------------------------------------------------------------------------------------------------------
David P. O'Connor Vice President, Assistant Secretary and Associate General Counsel of Delaware
Management Company (a series of Delaware Management Business Trust); Vice President,
Assistant Secretary and Associate General Counsel of Delaware Management Holdings,
Inc.; Vice President, Assistant Secretary and Associate General Counsel of Delvoy,
Inc.; Vice President, Assistant Secretary and Associate General Counsel of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice President,
Assistant Secretary and Associate General Counsel of Delaware Service Company, Inc.;
Vice President, Assistant Secretary and Associate General Counsel of Delaware Capital
Management, Inc.; Vice President, Assistant Secretary and Associate General Counsel of
Retirement Financial Services, Inc.; Vice President, Assistant Secretary and Associate
General Counsel of Delaware Distributors, L.P.; Vice President, Assistant Secretary and
Associate General Counsel of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates and other
Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
John J. O'Connor Vice President/Investment Accounting of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Investment Accounting/Assistant
Treasurer of Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Investment Accounting of Delaware Service Company, Inc.; Vice
President/Assistant Treasurer of each fund in the Delaware Investments family
- ------------------------------------------------------------------------------------------------------------------------------------
Donald G. Padilla Vice President/Assistant Controller/Assistant Treasurer of Delaware Management Company
(a series of Delaware Management Business Trust); Vice President/Assistant
Controller/Assistant Treasurer of DMH Corp.; Vice President/Assistant
Controller/Assistant Treasurer of Delvoy, Inc.; Vice President/Assistant
Controller/Assistant Treasurer of Delaware Management Company, Inc.; Vice
President/Assistant Controller/Assistant Treasurer of Delaware Management Business
Trust; Vice President/Assistant Controller/Assistant Treasurer of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Assistant
Controller/Assistant Treasurer of Delaware Service Company, Inc.; Vice
President/Assistant Controller/Assistant Treasurer of Delaware Capital Management,
Inc.; Vice President/Assistant Controller/Assistant Treasurer of Retirement Financial
Services, Inc.; Vice President/Assistant Controller/Assistant Treasurer of Delaware
Management Trust Company; Vice President/Assistant Controller/Assistant Treasurer of
Delaware Distributors, L.P.; Assistant Vice President/Assistant Controller of Delaware
International Holdings Ltd.; Assistant Vice President/Assistant Controller of Founders
Holdings, Inc.; Vice President/Assistant Controller/Assistant Treasurer of Delaware
General Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of Delaware Capital Management, Inc.; Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Salus Vice President/Assistant Controller of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Assistant Controller of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Assistant Controller of Delaware Management Trust Company; Vice
President/Assistant Controller of Delaware Management Business Trust; Vice
President/Assistant Controller of Delaware Service Company, Inc.; Vice
President/Assistant Controller of Delaware Capital Management, Inc.; Vice
President/Assistant Controller of Retirement Financial Services, Inc.; Vice
President/Assistant Controller of Delaware Distributors, L.P.; Vice
President/Assistant Controller of Delaware Distributors, Inc.; Vice
President/Assistant Controller of Delaware International Holdings Ltd.; Vice
President/Assistant Controller of Delaware General Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard D. Seidel Vice President/Assistant Controller/Manager Payroll of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Assistant
Controller/Manager Payroll of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Michael T. Taggart Vice President/Facilities and Administration Services of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Facilities and
Administration Services of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Facilities and Administration Services of
Delaware Service Company, Inc.; Vice President/Facilities and Administration Services
of Delaware Distributors, L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates and other
Positions and Offices Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Thomas J. Trotman Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Lori P. Wachs Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) PRINCIPAL/PARTNER/DIRECTOR, Cooke & Bieler, Inc., Philadelphia, PA
1976-1998. PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR, United Asset
Management, Boston, MA March 1998-January 2000.
(2) PRESIDENT AND DIRECTOR, Lincoln Investment Management, Inc. 1987 to present.
EXECUTIVE VICE PRESIDENT/CHIEF INVESTMENT OFFICER of Lincoln National
Corporation 1992 to present.
(3) PRESIDENT, DIRECTOR OF MARKETING AND SENIOR PORTFOLIO MANAGER, Marvin &
Palmer Associates, Wilmington, DE 1996-1998.
(4) VICE PRESIDENT/DIRECTOR OF PUBLIC RELATIONS, Liberty Funds Distributor, Inc.
Boston, MA, 1996-1998.
- --------------------------------------------------------------------------------
<PAGE>
Item 27. Principal Underwriters.
----------------------
(a) Delaware Distributors, L.P. serves as principal underwriter for all
the mutual funds in the Delaware Investments family.
(b) Information with respect to each director, officer or partner of
principal underwriter:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Investment Advisers Limited Partner None
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Capital Management, Inc. Limited Partner None
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce D. Barton President and Chief Executive Officer None
- ------------------------------------------------------------------------------------------------------------------------------------
David K. Downes Executive Vice President/Chief Operating President/Chief Executive Officer/Chief
Officer/Chief Financial Officer Financial Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Richard J. Flannery Executive Vice President/General Counsel Executive Vice President/General Counsel
- ------------------------------------------------------------------------------------------------------------------------------------
Diane M. Anderson Senior Vice President/Retirement None
Operations
- ------------------------------------------------------------------------------------------------------------------------------------
Michael P. Bishof Senior Vice President/Investment Senior Vice President/Treasurer
Accounting
- ------------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley Senior Vice President/Compliance Director Senior Vice President/Compliance Director
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel J. Brooks III Senior Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Larry Carr Senior Vice President/Variable Annuity None
Sales Manager
- ------------------------------------------------------------------------------------------------------------------------------------
Terrence P. Cunningham Senior Vice President/National Sales None
Director, Financial Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas R. Glennon Senior Vice President/Regional Consultant None
- ------------------------------------------------------------------------------------------------------------------------------------
Darryl S. Grayson Senior Vice President/Director, Internal None
Sales
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph H. Hastings Senior Vice President/Treasurer/Corporate Senior Vice President/Corporate Controller
Controller
- ------------------------------------------------------------------------------------------------------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources Senior Vice President/Human Resources
- ------------------------------------------------------------------------------------------------------------------------------------
Karina J. Istvan Senior Vice President/Strategic Planning Senior Vice President/Strategic Planning
- ------------------------------------------------------------------------------------------------------------------------------------
Bradley L. Kolstoe Senior Vice President/Western Division None
Sales Manager, IPI Channel
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen W. Long Senior Vice President/National Sales None
Director, Wirehouse/Regional Channel
- ------------------------------------------------------------------------------------------------------------------------------------
Richelle S. Maestro Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Mac McAulliffe Senior Vice President/Divisional Sales None
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
J. Chris Meyer Senior Vice President/Director, Product None
Management
- ------------------------------------------------------------------------------------------------------------------------------------
Eric E. Miller Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/Assistant Secretary Counsel/Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick L. Murphy Senior Vice president/Regional Consultant None
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen C. Nell Senior Vice President/National Retirement None
Sales
- ------------------------------------------------------------------------------------------------------------------------------------
Henry W. Orvin Senior Vice President/Eastern Division None
Sales Manager
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher H. Price Senior Vice President/Insurance Products None
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas E. Sawyer Senior Vice President/Director, National None
Sales
- ------------------------------------------------------------------------------------------------------------------------------------
James L. Shields Senior Vice President/Chief Information None
Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Steven Sorenson Senior Vice President/National Sales None
Director, Independent Planner Channel
- ------------------------------------------------------------------------------------------------------------------------------------
Richard P. Allen Vice President/Wholesaler, Midwest None
- ------------------------------------------------------------------------------------------------------------------------------------
David P. Anderson, Jr. Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey H. Arcy Vice President/Wholesaler, South East None
Region
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick A. Bearss Vice President/Wholesaler - Midwest None
- ------------------------------------------------------------------------------------------------------------------------------------
Larry Bridwell Vice President/Financial Institutions None
Wholesaler
- ------------------------------------------------------------------------------------------------------------------------------------
Terrance L. Bussard Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel H. Carlson Vice President/Marketing Services None
- ------------------------------------------------------------------------------------------------------------------------------------
William S. Carroll Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Matthew Coldren Vice President/National Accounts None
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick A Connelly Vice President/RIA Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
Jessie V. Emery Vice President/Marketing Communications None
- ------------------------------------------------------------------------------------------------------------------------------------
Joel A. Ettinger Vice President/Taxation Vice President/Taxation
- ------------------------------------------------------------------------------------------------------------------------------------
Edward A. Foley Vice President/Marketing Communications None
- ------------------------------------------------------------------------------------------------------------------------------------
Susan T. Friestedt Vice President/Retirement Services None
- ------------------------------------------------------------------------------------------------------------------------------------
Rhonda J. Guido Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Haimowitz Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Edward J. Hecker Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
John R. Herron Vice President/Senior Regional Consultant None
- ------------------------------------------------------------------------------------------------------------------------------------
Steven N. Horton Vice President/ Senior Regional Consultant None
- ------------------------------------------------------------------------------------------------------------------------------------
Dinah J. Huntoon Vice President/Product Manager, Equities None
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas Intoccia Vice President/Independent Planner & None
Insurance Key Accounts
- ------------------------------------------------------------------------------------------------------------------------------------
Chirstopher L. Johnston Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Michael J. Jordan Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Carolyn Kelly Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Richard M. Koerner Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Ellen M. Krott Vice President/Marketing None
- ------------------------------------------------------------------------------------------------------------------------------------
John Leboeuf Vice President/IPI Sales - East None
- ------------------------------------------------------------------------------------------------------------------------------------
SooHee Lee Vice President/Fixed Income & None
International Product Manager
- ------------------------------------------------------------------------------------------------------------------------------------
Philip Y. Lin Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
John R. Logan Vice President/ Senior Regional Consultant None
- ------------------------------------------------------------------------------------------------------------------------------------
Michael D. Mabry Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Theodore T. Malone Vice President/IPI Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Raymond G. McCarthy Vice President/National Accounts, IPI None
Channel
- ------------------------------------------------------------------------------------------------------------------------------------
Joanne C. McCranie Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Nathan W. Medin Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Scott L. Metzger Vice President/Business Development None
- ------------------------------------------------------------------------------------------------------------------------------------
Jamie L. Meyer Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Roger J. Miller Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher W. Moore Vice President/ Senior Regional Consultant None
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew F. Morris Vice President/ Senior Regional Consultant None
- ------------------------------------------------------------------------------------------------------------------------------------
Scott E. Naughton Vice President/ Senior Regional Consultant None
- ------------------------------------------------------------------------------------------------------------------------------------
Nancy Nawn Vice President/Wrap Product Manager None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Julie Nusbaum Vice President/Wholesaler, Financial None
Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
Julie A. Nye Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel J. O'Brien Vice President/Insurance Products None
- ------------------------------------------------------------------------------------------------------------------------------------
David P. O'Connor Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph T. Owczarek Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Donald G. Padilla Vice President/Assistant None
Controller/Assistant Treasurer
- ------------------------------------------------------------------------------------------------------------------------------------
Otis S. Page Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Scott P. Passias Vice President/Associate Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Eric Preus Vice President/Wrap Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Philip G. Rickards Vice President/Regional Consultant None
- ------------------------------------------------------------------------------------------------------------------------------------
Laura E. Roman Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Rosso Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Terri Lynn Sabby Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Salus Vice President/Assistant Controller None
- ------------------------------------------------------------------------------------------------------------------------------------
Linda D. Shulz Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Gordon E. Searles Vice President/Client Services None
- ------------------------------------------------------------------------------------------------------------------------------------
Catherine A. Seklecki Vice President/Retirement Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
John C. Shalloe Vice President/Wrap Fee Wholesaler, None
Western Region
- ------------------------------------------------------------------------------------------------------------------------------------
Edward B. Sheridan Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Darren Smith Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Kimberly M. Spangler Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Robert E. Stansbury Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Michael T. Taggart Vice President/Facilities and None
Administration Services
- ------------------------------------------------------------------------------------------------------------------------------------
Bryon Townsend Vice President/Variable Annuity Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Julia R. Vander-Els Vice President/Retirement Plan None
Communications
- ------------------------------------------------------------------------------------------------------------------------------------
John A. Wells Vice President/Marketing Technology None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Courtney S. West Vice President/Institutional Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew J. Whitaker Vice President/Wholesaler, Financial None
Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
Scott Whitehouse Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Wesley Williams Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Theodore V. Wood Vice President/Technical Systems Officer 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.
(d) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of removal
of any trustee when requested in writing to do so by the record
holders of not less than 10% of the outstanding shares.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in this City of Philadelphia, Commonwealth of Pennsylvania on
this 28th day of February, 2000.
DELAWARE GROUP STATE TAX-FREE
INCOME TRUST
By:/s/David K. Downes
------------------
David K. Downes
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------------------------- ------------------------------------ -------------------
<S> <C> <C>
President/Chief Executive Officer/
Chief Financial Officer and Trustee
(Principal Executive Officer,
Principal Financial Officer
/s/David K. Downes and Principal Accounting Officer) February 28, 2000
- -----------------------------------------
David K. Downes
/s/Wayne A. Stork * Trustee February 28, 2000
- -----------------------------------------
Wayne A. Stork
/s/Walter P. Babich * Trustee February 28, 2000
- -----------------------------------------
Walter P. Babich
/s/Anthony D. Knerr * Trustee February 28, 2000
- -----------------------------------------
Anthony D. Knerr
/s/Ann R. Leven * Trustee February 28, 2000
- -----------------------------------------
Ann R. Leven
/s/Thomas F. Madison * Trustee February 28, 2000
- -----------------------------------------
Thomas F. Madison
/s/John H. Durham * Trustee February 28, 2000
- -----------------------------------------
John H. Durham
/s/Charles E. Peck * Trustee February 28, 2000
- -----------------------------------------
Charles E. Peck
/s/Janet L. Yeomans * Trustee February 28, 2000
- -----------------------------------------
Janet L. Yeomans
*By: /s/David K. Downes
------------------
David K. Downes
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
Exhibit No. Exhibit
- ----------- -------
EX-99.A1 Agreement and Declaration of Trust (December 17, 1998)
EX-99.A2 Certificate of Trust (December 17, 1998)
EX-99.B By-Laws
EX-99.D1 Form of Investment Management Agreement (April 2000)
between Delaware Management Company and the Registrant on
behalf of each Fund
EX-99.I Legal Opinion Act of 1933
EX-99.O Trustees' Power of Attorney
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
----------------------------------
of
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
a Delaware Business Trust
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. Name and Definitions............................................................................1
Section 1. Name....................................................................................1
Section 2. Registered Agent and Registered Office; Principal Place of
Business................................................................................2
(a) Registered Agent and Registered Office..................................................2
(b) Principal Place of Business.............................................................2
Section 3. Definitions.............................................................................2
(a) "1940 Act"..............................................................................2
(b) "Affiliate".............................................................................2
(c) "Board of Trustees".....................................................................2
(d) "By-Laws"...............................................................................2
(e) "Certificate of Trust"..................................................................2
(f) "Code"..................................................................................2
(g) "Commission"............................................................................2
(h) "DBTA"..................................................................................2
(i) "Declaration of Trust"..................................................................3
(j) "General Liabilities"...................................................................3
(k) "Interested Person".....................................................................3
(l) "Investment Adviser" or "Adviser".......................................................3
(m) "National Financial Emergency"..........................................................3
(n) "Person"................................................................................3
(o) "Principal Underwriter".................................................................3
(p) "Series"................................................................................3
(q) "Shares"................................................................................3
(r) "Shareholder"...........................................................................3
(s) "Trust".................................................................................3
(t) "Trust Property"........................................................................4
(u) "Trustee" or "Trustees".................................................................4
ARTICLE II. Purpose of Trust...............................................................................4
ARTICLE III. Shares........................................................................................8
Section 1. Division of Beneficial Interest........................................................8
Section 2. Ownership of Shares....................................................................9
Section 3. Investments in the Trust...............................................................9
Section 4. Status of Shares and Limitation of Personal Liability.................................10
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 5. Power of Board of Trustees to Change Provisions Relating to Shares....................10
Section 6. Establishment and Designation of Series...............................................11
(a) Assets Held with Respect to a Particular Series.......................................11
(b) Liabilities Held with Respect to a Particular Series..................................12
(c) Dividends, Distributions, Redemptions and Repurchases.................................13
(d) Voting................................................................................13
(e) Equality..............................................................................13
(f) Fractions.............................................................................14
(g) Exchange Privilege....................................................................14
(h) Combination of Series.................................................................14
(i) Elimination of Series.................................................................14
Section 7. Indemnification of Shareholders.......................................................14
ARTICLE IV.................................................................................................14
The Board of Trustees......................................................................................15
Section 1. Number, Election and Tenure...........................................................15
Section 2. Effect of Death, Resignation, Removal, etc. of a Trustee.............................15
Section 3. Powers................................................................................16
Section 4. Payment of Expenses by the Trust......................................................17
Section 5. Payment of Expenses by Shareholders...................................................18
Section 6. Ownership of Trust Property...........................................................18
Section 7. Service Contracts.....................................................................18
ARTICLE V. Shareholders' Voting Powers and Meetings.......................................................20
Section 1. Voting Powers.........................................................................20
Section 2. Meetings..............................................................................20
Section 3. Quorum and Required Vote..............................................................21
Section 4. Shareholder Action by Written Consent without a Meeting...............................21
Section 5. Record Dates..........................................................................21
Section 6. Additional Provisions.................................................................22
ARTICLE VI. Net Asset Value, Distributions and Redemptions................................................22
Section 1. Determination of Net Asset Value, Net Income and Distributions........................22
Section 2. Redemptions at the Option of a Shareholder............................................23
Section 3. Redemptions at the Option of the Trust................................................24
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VII. Compensation and Limitation of Liability of Officers and Trustees............................24
Section 1. Compensation..........................................................................24
Section 2. Indemnification and Limitation of Liability...........................................25
Section 3. Officers and Trustees' Good Faith Action, Expert Advice, No Bond or Surety............25
Section 4. Insurance.............................................................................26
ARTICLE VIII. Miscellaneous...............................................................................26
Section 1. Liability of Third Persons Dealing with Trustees......................................26
Section 2. Dissolution of Trust or Series........................................................26
Section 3. Merger and Consolidation; Conversion..................................................27
(a) Merger and Consolidation..............................................................27
(b) Conversion............................................................................27
Section 4. Reorganization........................................................................28
Section 5. Amendments............................................................................29
Section 6. Filing of Copies, References, Headings................................................29
Section 7. Applicable Law........................................................................29
Section 8. Provisions in Conflict with Law or Regulations........................................30
Section 9. Business Trust Only...................................................................30
Section 10. Use of the Names "Delaware Group" and "Delaware Investments".........................30
</TABLE>
iii
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
OF
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
AGREEMENT AND DECLARATION OF TRUST made as of this 17th day of
December, 1998, by the Trustees hereunder, and by the holders of shares of
beneficial interest to be issued hereunder as hereinafter provided. This
Declaration of Trust shall be effective upon the filing of the Certificate of
Trust in the office of the Secretary of State of the State of Delaware.
W I T N E S S E T H:
WHEREAS this Trust has been formed to carry on the business of an
investment company; and
WHEREAS this Trust is authorized to issue its shares of beneficial
interest in separate Series, and to issue classes of Shares of any Series or
divide Shares of any Series into two or more classes, all in accordance with the
provisions hereinafter set forth; and
WHEREAS the Trustees have agreed to manage all property coming into
their hands as trustees of a Delaware business trust in accordance with the
provisions of the Delaware Business Trust Act (12 Del. C. ss.3801, et seq.), as
from time to time amended and including any successor statute of similar import
(the "DBTA"), and the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust and the Series created
hereunder as hereinafter set forth.
ARTICLE I.
Name and Definitions
Section 1. Name. This trust shall be known as "Delaware Group State
Tax-Free Income Trust" and the Trustees shall conduct the business of the Trust
under that name, or any other name as they may from time to time determine.
<PAGE>
Section 2. Registered Agent and Registered Office; Principal Place of
Business.
(a) Registered Agent and Registered Office. The name of the registered
agent of the Trust and the address of the registered office of the Trust are as
set forth on the Certificate of Trust.
(b) Principal Place of Business. The principal place of business of the
Trust is One Commerce Square, Philadelphia, Pennsylvania, 19103 or such other
location within or outside of the State of Delaware as the Board of Trustees may
determine from time to time.
Section 3. Definitions. Whenever used herein, unless otherwise required
by the context or specifically provided:
(a) "1940 Act" shall mean the Investment Company Act of 1940 and the
rules and regulations thereunder, all as adopted or amended from time to time;
(b) "Affiliate" shall have the meaning given to it in Section 2(a)(3)
of the 1940 Act when used with reference to a specified Person.
(c) "Board of Trustees" shall mean the governing body of the Trust,
which is comprised of the Trustees of the Trust;
(d) "By-Laws" shall mean the By-Laws of the Trust, as amended from time
to time in accordance with Article X of the By-Laws, and incorporated herein by
reference;
(e) "Certificate of Trust" shall mean the certificate of trust filed
with the Office of the Secretary of State of the State of Delaware as required
under the DBTA to form the Trust;
(f)"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder;
(g) "Commission" shall have the meaning given it in Section 2(a)(7) of
the 1940 Act;
(h) "DBTA" shall mean the Delaware Business Trust Act, (12 Del.
C.ss.3801, et seq.), as amended from time to time;
2
<PAGE>
(i) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust, as amended or restated from time to time;
(j) "General Liabilities" shall have the meaning given it in Article
III, Section 6(b) of this Declaration Trust;
(k) "Interested Person" shall have the meaning given it in Section
2(a)(19) of the 1940 Act;
(l) "Investment Adviser" or "Adviser" shall mean a party furnishing
services to the Trust pursuant to any contract described in Article IV, Section
7(a) hereof;
(m) "National Financial Emergency" shall mean the whole or any part of
any period set forth in Section 22(e) of the 1940 Act. The Board of Trustees
may, in its discretion, declare that the suspension relating to a national
financial emergency shall terminate, as the case may be, on the first business
day on which the New York Stock Exchange shall have reopened or the period
specified in Section 22(e) of the 1940 Act shall have expired (as to which, in
the absence of an official ruling by the Commission, the determination of the
Board of Trustees shall be conclusive);
(n) "Person" shall include a natural person, partnership, limited
partnership, trust, estate, association, corporation, custodian, nominee or any
other individual or entity in its own or any representative capacity;
(o) "Principal Underwriter" shall have the meaning given to it in
Section 2(a)(29) of the 1940 Act;
(p) "Series" shall refer to each Series of Shares established and
designated under or in accordance with the provisions of Article III and shall
mean an entity such as that described in Section 18(f)(2) of the 1940 Act, and
subject to Rule 18f-2 thereunder;
(q) "Shares" shall mean the outstanding shares of beneficial interest
into which the beneficial interest in the Trust shall be divided from time to
time, and shall include fractional and whole shares;
(r) "Shareholder" shall mean a record owner of Shares;
(s)"Trust" shall refer to the Delaware business trust established by
this Declaration of Trust, as amended from time to time;
3
<PAGE>
(t) "Trust Property" shall mean any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or one or more of any Series, including, without limitation, the rights
referenced in Article VIII, Section 2 hereof;
(u) "Trustee" or "Trustees" shall refer to each signatory to this
Declaration of Trust as a trustee, so long as such signatory continues in office
in accordance with the terms hereof, and all other Persons who may, from time to
time, be duly elected or appointed, qualified and serving on the Board of
Trustees in accordance with the provisions hereof. Reference herein to a Trustee
or the Trustees shall refer to such Person or Persons in their capacity as
trustees hereunder.
ARTICLE II.
Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on the
business of a registered management investment company registered under the 1940
Act through one or more Series investing primarily in securities and, in
addition to any authority given by law, to exercise all of the powers and to do
any and all of the things as fully and to the same extent as any private
corporation organized for profit under the general corporation law of the State
of Delaware, now or hereafter in force, including, without limitation, the
following powers:
(a) To invest and reinvest cash, to hold cash uninvested, and to
subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold,
pledge, sell, assign, mortgage, transfer, exchange, distribute, write options
on, lend or otherwise deal in or dispose of contracts for the future acquisition
or delivery of fixed income or other securities, and securities or property of
every nature and kind, including, without limitation, all types of bonds,
debentures, stocks, preferred stocks, negotiable or non-negotiable instruments,
obligations, evidences of indebtedness, certificates of deposit or indebtedness,
commercial paper, repurchase agreements, bankers' acceptances, and other
securities of any kind, issued, created, guaranteed, or sponsored by any and all
Persons, including, without limitation, states, territories, and possessions of
the United States and the District of Columbia and any political subdivision,
agency, or instrumentality thereof, any foreign government or any political
subdivision of the U.S. Government or any foreign government, or any
international instrumentality, or by any bank or savings institution, or by any
corporation or organization organized under the laws of the United States or of
4
<PAGE>
any state, territory, or possession thereof, or by any corporation or
organization organized under any foreign law, or in "when issued" contracts for
any such securities, to change the investments of the assets of the Trust;
(b) To exercise any and all rights, powers and privileges with
reference to or incident to ownership or interest, use and enjoyment of any of
such securities and other instruments or property of every kind and description,
including, but without limitation, the right, power and privilege to own, vote,
hold, purchase, sell, negotiate, assign, exchange, lend, transfer, mortgage,
hypothecate, lease, pledge or write options with respect to or otherwise deal
with, dispose of, use, exercise or enjoy any rights, title, interest, powers or
privileges under or with reference to any of such securities and other
instruments or property, the right to consent and otherwise act with respect
thereto, with power to designate one or more Persons, to exercise any of said
rights, powers, and privileges in respect of any of said instruments, and to do
any and all acts and things for the preservation, protection, improvement and
enhancement in value of any of such securities and other instruments or
property;
(c) To sell, exchange, lend, pledge, mortgage, hypothecate, lease or
write options with respect to or otherwise deal in any property rights relating
to any or all of the assets of the Trust or any Series, subject to any
requirements of the 1940 Act;
(d) 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
proxies or 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;
(e) To exercise powers and right of subscription or otherwise which in
any manner arise out of ownership of securities;
(f) To hold any security or property in a form not indicating that it
is trust property, whether in bearer, unregistered or other negotiable form, or
in its own name or in the name of a custodian or subcustodian or a nominee or
nominees or otherwise or to authorize the custodian or a subcustodian or a
nominee or nominees to deposit the same in a securities depository, subject in
each case to proper safeguards according to the usual practice of investment
companies or any rules or regulations applicable thereto;
(g) To consent to, or participate in, any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
5
<PAGE>
of property by such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;
(h) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees shall deem
proper;
(i) 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;
(j) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
(k) To endorse or guarantee the payment of any notes or other
obligations of any Person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;
(l) To purchase and pay for entirely out of Trust Property such
insurance as the Trustees may deem necessary or appropriate for the conduct of
the business, including, without limitation, insurance policies insuring the
assets of the Trust or payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, Investment Advisers, Principal Underwriters, or
independent contractors of the Trust, individually against all claims and
liabilities of every nature arising by reason of holding Shares, holding, being
or having held any such office or position, or by reason of any action alleged
to have been taken or omitted by any such Person as Trustee, officer, employee,
agent, Investment Adviser, Principal Underwriter, or independent contractor, to
the fullest extent permitted by this Declaration of Trust, the Bylaws and by
applicable law; and
(m) To adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and agents of the
Trust.
6
<PAGE>
(n) To purchase or otherwise acquire, own, hold, sell, negotiate,
exchange, assign, transfer, mortgage, pledge or otherwise deal with, dispose of,
use, exercise or enjoy, property of all kinds.
(o) To buy, sell, mortgage, encumber, hold, own, exchange, rent or
otherwise acquire and dispose of, and to develop, improve, manage, subdivide,
and generally to deal and trade in real property, improved and unimproved, and
wheresoever situated; and to build, erect, construct, alter and maintain
buildings, structures, and other improvements on real property.
(p) To borrow or raise moneys for any of the purposes of the Trust, and
to mortgage or pledge the whole or any part of the property and franchises of
the Trust, real, personal, and mixed, tangible or intangible, and wheresoever
situated.
(q) To enter into, make and perform contracts and undertakings of every
kind for any lawful purpose, without limit as to amount.
(r) To issue, purchase, sell and transfer, reacquire, hold, trade and
deal in Shares, bonds, debentures and other securities, instruments or other
property of the Trust, from time to time, to such extent as the Board of
Trustees shall, consistent with the provisions of this Declaration of Trust,
determine; and to repurchase, re-acquire and redeem, from time to time, its
Shares or, if any, its bonds, debentures and other securities.
The Trust shall not be limited to investing in obligations maturing
before the possible dissolution of the Trust or one or more of its Series. The
Trust shall not in any way be bound or limited by any present or future law or
custom in regard to investment by fiduciaries. Neither the Trust nor the
Trustees shall be required to obtain any court order to deal with any assets of
the Trust or take any other action hereunder.
The foregoing clauses shall each be construed as purposes, objects and
powers, and it is hereby expressly provided that the foregoing enumeration of
specific purposes, objects and powers shall not be held to limit or restrict in
any manner the powers of the Trust, and that they are in furtherance of, and in
addition to, and not in limitation of, the general powers conferred upon the
Trust by the DBTA and the other laws of the State of Delaware or otherwise; nor
shall the enumeration of one thing be deemed to exclude another, although it be
of like nature, not expressed.
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ARTICLE III.
Shares
Section 1. Division of Beneficial Interest. The beneficial interest in
the Trust shall at all times be divided into Shares, all without par value. The
number of Shares authorized hereunder is unlimited. The Board of Trustees may
authorize the division of Shares into separate and distinct Series and the
division of any Series into separate classes of Shares. The different Series and
classes shall be established and designated, and the variations in the relative
rights and preferences as between the different Series and classes shall be
fixed and determined by the Board of Trustees without the requirement of
Shareholder approval. If no separate Series or classes shall be established, the
Shares shall have the rights and preferences provided for herein and in Article
III, Section 6 hereof to the extent relevant and not otherwise provided for
herein, and all references to Series and classes shall be construed (as the
context may require) to refer to the Trust. The fact that a Series shall have
initially been established and designated without any specific establishment or
designation of classes (i.e., that all Shares of such Series are initially of a
single class) shall not limit the authority of the Board of Trustees to
establish and designate separate classes of said Series. The fact that a Series
shall have more than one established and designated class, shall not limit the
authority of the Board of Trustees to establish and designate additional classes
of said Series, or to establish and designate separate classes of the previously
established and designated classes.
The Board of Trustees shall have the power to issue Shares of the
Trust, or any Series or class thereof, from time to time for such consideration
(but not less than the net asset value thereof) and in such form as may be fixed
from time to time pursuant to the direction of the Board of Trustees.
The Board of Trustees may hold as treasury shares, reissue for such
consideration and on such terms as they may determine, or cancel, at their
discretion from time to time, any Shares of any Series reacquired by the Trust.
The Board of Trustees may classify or reclassify any unissued Shares or any
Shares previously issued and reacquired of any Series or class into one or more
Series or classes that may be established and designated from time to time.
Notwithstanding the foregoing, the Trust and any Series thereof may acquire,
hold, sell and otherwise deal in, for purposes of investment or otherwise, the
Shares of any other Series of the Trust or Shares of the Trust, and such Shares
shall not be deemed treasury shares or cancelled.
Subject to the provisions of Section 6 of this Article III, each Share
shall have voting rights as provided in Article V hereof, and the Shareholders
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of any Series shall be entitled to receive dividends and distributions, when, if
and as declared with respect thereto in the manner provided in Article IV,
Section 3 hereof. No Share shall have any priority or preference over any other
Share of the same Series or class with respect to dividends or distributions
paid in the ordinary course of business or distributions upon dissolution of the
Trust or of such Series or class made pursuant to Article VIII, Section 2
hereof. All dividends and distributions shall be made ratably among all
Shareholders of a particular class of Series from the Trust Property held with
respect to such Series according to the number of Shares of such class of such
Series held of record by such Shareholders on the record date for any dividend
or distribution. Shareholders shall have no preemptive or other right to
subscribe to new or additional Shares or other securities issued by the Trust or
any Series. The Trustees may from time to time divide or combine the Shares of
any particular Series into a greater or lesser number of Shares of that Series.
Such division or combination may not materially change the proportionate
beneficial interests of the Shares of that Series in the Trust Property held
with respect to that Series or materially affect the rights of Shares of any
other Series.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such Person is interested, may acquire, own, hold and dispose of
Shares of the Trust to the same extent as if such Person were not a Trustee,
officer or other agent of the Trust; and the Trust may issue and sell or cause
to be issued and sold and may purchase Shares from any such Person or any such
organization subject only to the general limitations, restrictions or other
provisions applicable to the sale or purchase of such Shares generally.
Section 2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust kept by the Trust or by a transfer or similar
agent for the Trust, which books shall be maintained separately for the Shares
of each Series and class thereof that has been established and designated. No
certificates certifying the ownership of Shares shall be issued except as the
Board of Trustees may otherwise determine from time to time. The Board of
Trustees may make such rules not inconsistent with the provisions of the 1940
Act as they consider appropriate for the issuance of Share certificates, the
transfer of Shares of each Series or class and similar matters. The record books
of the Trust as kept by the Trust or any transfer or similar agent, as the case
may be, shall be conclusive as to who are the Shareholders of each Series or
class thereof and as to the number of Shares of each Series or class thereof
held from time to time by each such Shareholder.
Section 3. Investments in the Trust. Investments may be accepted by the
Trust from such Persons, at such times, on such terms, and for such
consideration as the Board of Trustees may, from time to time, authorize. Each
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investment shall be credited to the individual Shareholder's account in the form
of full and fractional Shares of the Trust, in such Series or class as the
purchaser may select, at the net asset value per Share next determined for such
Series or class after receipt of the investment; provided, however, that the
Principal Underwriter may, in its sole discretion, impose a sales charge upon
investments in the Trust.
Section 4. Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving to Shareholders only the
rights provided in this Declaration of Trust and under applicable law. Every
Shareholder by virtue of having become a Shareholder shall be held to have
expressly assented and agreed to the terms hereof and to have become a party
hereto. The death of a Shareholder during the existence of the Trust shall not
operate to dissolve the Trust or any Series, nor entitle the representative of
any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees or any Series, but entitles such
representative only to the rights of said deceased Shareholder under this
Declaration of Trust. Ownership of Shares shall not entitle the Shareholder to
any title in or to the whole or any part of the Trust Property or right to call
for a partition or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders as partners. Neither the Trust
nor the Trustees, nor any officer, employee or agent of the Trust, shall have
any power to bind personally any Shareholder, nor, except as specifically
provided herein, to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at any
time personally agree to pay. All Shares when issued on the terms determined by
the Board of Trustees, shall be fully paid and nonassessable. As provided in the
DBTA, Shareholders of the Trust shall be entitled to the same limitation of
personal liability extended to stockholders of a private corporation organized
for profit under the general corporation law of the State of Delaware.
Section 5. Power of Board of Trustees to Change Provisions Relating to
Shares. Notwithstanding any other provisions of this Declaration of Trust and
without limiting the power of the Board of Trustees to amend this Declaration of
Trust or the Certificate of Trust as provided elsewhere herein, the Board of
Trustees shall have the power to amend this Declaration of Trust, or the
Certificate of Trust, at any time and from time to time, in such manner as the
Board of Trustees may determine in its sole discretion, without the need for
Shareholder action, so as to add to, delete, replace or otherwise modify any
provisions relating to the Shares contained in this Declaration of Trust,
provided that before adopting any such amendment without Shareholder approval,
the Board of Trustees shall determine that it is consistent with the fair and
equitable treatment of all Shareholders and that Shareholder approval is not
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otherwise required by the 1940 Act or other applicable law. If Shares have been
issued, Shareholder approval shall be required to adopt any amendments to this
Declaration of Trust which would adversely affect to a material degree the
rights and preferences of the Shares of any Series or class already issued;
provided, however, that in the event that the Board of Trustees determines that
the Trust shall no longer be operated as an investment company in accordance
with the provisions of the 1940 Act, the Board of Trustees may adopt such
amendments to this Declaration of Trust to delete those terms the Board of
Trustees identifies as being required by the 1940 Act.
Subject to the foregoing Paragraph, the Board of Trustees may amend the
Declaration of Trust to amend any of the provisions set forth in paragraphs (a)
through (i) of Section 6 of this Article III.
The Board of Trustees shall have the power, in its discretion, to make
such elections as to the tax status of the Trust as may be permitted or required
under the Code as presently in effect or as amended, without the vote of any
Shareholder.
Section 6. Establishment and Designation of Series. The establishment
and designation of any Series or class of Shares shall be effective upon the
resolution by a majority of the then Board of Trustees, adopting a resolution
which sets forth such establishment and designation and the relative rights and
preferences of such Series or class. Each such resolution shall be incorporated
herein by reference upon adoption.
Each Series shall be separate and distinct from any other Series and
shall maintain separate and distinct records on the books of the Trust, and the
assets and liabilities belonging to any such Series shall be held and accounted
for separately from the assets and liabilities of the Trust or any other Series.
Shares of each Series or class established pursuant to this Section 6,
unless otherwise provided in the resolution establishing such Series, shall have
the following relative rights and preferences:
(a) Assets Held with Respect to a Particular Series. All
consideration received by the Trust for the issue or sale of Shares of a
particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof from
whatever source derived, including, without limitation, any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may be,
shall irrevocably be held with respect to that Series for all purposes, subject
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only to the rights of creditors with respect to that Series, and shall be so
recorded upon the books of account of the Trust. Such consideration, assets,
income, earnings, profits and proceeds thereof, from whatever source derived,
including, without limitation, any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, are herein
referred to as "assets held with respect to" that Series. In the event that
there are any assets, income, earnings, profits and proceeds thereof, funds or
payments which are not readily identifiable as assets held with respect to any
particular Series (collectively "General Assets"), the Board of Trustees shall
allocate such General Assets to, between or among any one or more of the Series
in such manner and on such basis as the Board of Trustees, in its sole
discretion, deems fair and equitable, and any General Asset so allocated to a
particular Series shall be held with respect to that Series. Each such
allocation by the Board of Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes.
(b) Liabilities Held with Respect to a Particular Series. The
assets of the Trust held with respect to each particular Series shall be charged
against the liabilities of the Trust held with respect to that Series and all
expenses, costs, charges and reserves attributable to that Series, and any
liabilities, expenses, costs, charges and reserves of the Trust which are not
readily identifiable as being held with respect to any particular Series
(collectively "General Liabilities") shall be allocated and charged by the Board
of Trustees to and among any one or more of the Series in such manner and on
such basis as the Board of Trustees in its sole discretion deems fair and
equitable. The liabilities, expenses, costs, charges, and reserves so charged to
a Series are herein referred to as "liabilities held with respect to" that
Series. Each allocation of liabilities, expenses, costs, charges and reserves by
the Board of Trustees shall be conclusive and binding upon the Shareholders of
all Series for all purposes. All Persons who have extended credit which has been
allocated to a particular Series, or who have a claim or contract which has been
allocated to any particular Series, shall look, and shall be required by
contract to look exclusively, to the assets of that particular Series for
payment of such credit, claim, or contract. In the absence of an express
contractual agreement so limiting the claims of such creditors, claimants and
contract providers, each creditor, claimant and contract provider will be deemed
nevertheless to have impliedly agreed to such limitation unless an express
provision to the contrary has been incorporated in the written contract or other
document establishing the claimant relationship.
Subject to the right of the Board of Trustees in its discretion to
allocate General Liabilities as provided herein, the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing with
respect to a particular Series, whether such Series is now authorized and
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existing pursuant to this Declaration of Trust or is hereafter authorized and
existing pursuant to this Declaration of Trust, shall be enforceable against the
assets held with respect to that Series only, and not against the assets of any
other Series or the Trust generally and none of the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing with
respect to the Trust generally or any other Series thereof shall be enforceable
against the assets held with respect to such Series. Notice of this limitation
on liabilities between and among Series shall be set forth in the Certificate of
Trust of the Trust (whether originally or by amendment) as filed or to be filed
in the Office of the Secretary of State of the State of Delaware pursuant to the
DBTA, and upon the giving of such notice in the Certificate of Trust, the
statutory provisions of Section 3804 of the DBTA relating to limitations on
liabilities between and among Series (and the statutory effect under Section
3804 of setting forth such notice in the Certificate of Trust) shall become
applicable to the Trust and each Series.
(c) Dividends, Distributions, Redemptions and Repurchases.
Notwithstanding any other provisions of this Declaration of Trust, including,
without limitation, Article VI, no dividend or distribution including, without
limitation, any distribution paid upon dissolution of the Trust or of any Series
with respect to, nor any redemption or repurchase of, the Shares of any Series
or class shall be effected by the Trust other than from the assets held with
respect to such Series, nor, except as specifically provided in Section 7 of
this Article III, shall any Shareholder of any particular Series otherwise have
any right or claim against the assets held with respect to any other Series or
the Trust generally except to the extent that such Shareholder has such a right
or claim hereunder as a Shareholder of such other Series. The Board of Trustees
shall have full discretion, to the extent not inconsistent with the 1940 Act, to
determine which items shall be treated as income and which items as capital; and
each such determination and allocation shall be conclusive and binding upon the
Shareholders.
(d) Voting. All Shares of the Trust entitled to vote on a matter shall
vote on the matter, separately by Series and, if applicable, by class, subject
to: (1) where the 1940 Act requires all Shares of the Trust to be voted in the
aggregate without differentiation between the separate Series or classes, then
all of the Trust's Shares shall vote in the aggregate; and (2) if any matter
affects only the interests of some but not all Series or classes, then only the
Shareholders of such affected Series or classes shall be entitled to vote on the
matter.
(e) Equality. All Shares of each particular Series shall represent an
equal proportionate undivided beneficial interest in the assets held with
respect to that Series (subject to the liabilities held with respect to that
Series and such rights and preferences as may have been established and
designated with respect to classes of Shares within such Series), and each Share
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of any particular Series shall be equal to each other Share of that Series
(subject to the rights and preferences with respect to separate classes of such
Series).
(f) Fractions. Any fractional Share of a Series shall carry
proportionately all the rights and obligations of a whole Share of that Series,
including rights with respect to voting, receipt of dividends and distributions,
redemption of Shares and dissolution of the Trust or that Series.
(g) Exchange Privilege. The Board of Trustees shall have the authority
to provide that the holders of Shares of any Series shall have the right to
exchange said Shares for Shares of one or more other Series in accordance with
such requirements and procedures as may be established by the Board of Trustees,
and in accordance with the 1940 Act and the rules and regulations thereunder.
(h) Combination of Series. The Board of Trustees shall have the
authority, without the approval of the Shareholders of any Series unless
otherwise required by applicable law, to combine the assets and liabilities held
with respect to any two or more Series into assets and liabilities held with
respect to a single Series.
(i) Elimination of Series. At any time that there are no Shares
outstanding of any particular Series or class previously established and
designated, the Board of Trustees may by resolution of a majority of the then
Board of Trustees abolish that Series or class and rescind the establishment and
designation thereof.
Section 7. Indemnification of Shareholders. If any Shareholder or
former Shareholder shall be exposed to liability by reason of a claim or demand
relating solely to his or her being or having been a Shareholder of the Trust
(or by having been a Shareholder of a particular Series), and not because of
such Person's acts or omissions, the Shareholder or former Shareholder (or, in
the case of a natural person, his or her 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 to be held harmless
from and indemnified out of the assets of the Trust or out of the assets of the
applicable Series (as the case may be) against all loss and expense arising from
such claim or demand; provided, however, there shall be no liability or
obligation of the Trust (or any particular Series) arising hereunder to
reimburse any Shareholder for taxes paid by reason of such Shareholder's
ownership of any Shares.
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ARTICLE IV.
The Board of Trustees
Section 1. Number, Election and Tenure. The number of Trustees
constituting the Board of Trustees may be fixed from time to time by a written
instrument signed, or by resolution approved at a duly constituted meeting, by a
majority of the Board of Trustees, provided, however, that the number of
Trustees shall in no event be less than one (1) nor more than fifteen (15). The
Board of Trustees, by action of a majority of the then Trustees at a duly
constituted meeting, may fill vacancies in the Board of Trustees or remove any
Trustee with or without cause. The Shareholders may elect Trustees, including
filling any vacancies in the Board of Trustees, at any meeting of Shareholders
called by the Board of Trustees for that purpose. A meeting of Shareholders for
the purpose of electing one or more Trustees may be called by the Board of
Trustees or, to the extent provided by the 1940 Act and the rules and
regulations thereunder, by the Shareholders. Shareholders shall have the power
to remove a Trustee only to the extent provided by the 1940 Act and the rules
and regulations thereunder.
Each Trustee shall serve during the continued lifetime of the Trust
until he or she dies, resigns, is declared bankrupt or incompetent by a court of
appropriate jurisdiction, or is removed, or, if sooner than any of such events,
until the next meeting of Shareholders called for the purpose of electing
Trustees and until the election and qualification of his or her successor. Any
Trustee may resign at any time by written instrument signed by him or her and
delivered to any officer of the Trust or to a meeting of the Board of Trustees.
Such resignation shall be effective upon receipt unless specified to be
effective at some later time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period following any such event
or any right to damages on account of such events or any actions taken in
connection therewith following his or her resignation or removal.
Section 2. Effect of Death, Resignation, Removal, etc. of a Trustee.
The death, declination, resignation, retirement, removal, declaration as
bankrupt or incapacity of one or more Trustees, or of all of them, shall not
operate to dissolve the Trust or any Series or to revoke any existing agency
created pursuant to the terms of this Declaration of Trust. Whenever a vacancy
in the Board of Trustees shall occur, until such vacancy is filled as provided
in this Article IV, Section 1, the Trustee(s) in office, regardless of the
number, shall have all the powers granted to the Board of Trustees and shall
discharge all the duties imposed upon the Board of Trustees by this Declaration
of Trust. In the event of the death, declination, resignation, retirement,
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removal, declaration as bankrupt or incapacity of all of the then Trustees, the
Trust's Investment Adviser(s) is (are) empowered to appoint new Trustees subject
to the provisions of Section 16(a) of the 1940 Act.
Section 3. Powers. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Board of Trustees, and
such Board of Trustees shall have all powers necessary or convenient to carry
out that responsibility, including, without limitation, the power to engage in
securities or other transactions of all kinds on behalf of the Trust. The Board
of 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 it may consider
necessary or appropriate in connection with the administration of the Trust. The
Trustees shall not be bound or limited by present or future laws or customs with
regard to investment by trustees or fiduciaries, but shall have full authority
and absolute power and control over the assets of the Trust and the business of
the Trust to the same extent as if the Trustees were the sole owners of the
assets of the Trust and the business in their own right, including such
authority, power and control to do all acts and things as they, in their sole
discretion, shall deem proper to accomplish the purposes of this Trust. Without
limiting the foregoing, the Trustees may: (1) adopt, amend and repeal By-Laws
not inconsistent with this Declaration of Trust providing for the regulation and
management of the affairs of the Trust; (2) fill vacancies in or remove from
their number in accordance with this Declaration of Trust or the By-Laws, and
may elect and remove such officers and appoint and terminate such agents as they
consider appropriate; (3) appoint from their own number and establish and
terminate one or more committees consisting of two or more Trustees which may
exercise the powers and authority of the Board of Trustees to the extent that
the Board of Trustees determine; (4) employ one or more custodians of the Trust
Property and may authorize such custodians to employ subcustodians and to
deposit all or any part of such Trust Property in a system or systems for the
central handling of securities or with a Federal Reserve Bank; (5) retain a
transfer agent, dividend disbursing agent, a shareholder servicing agent or
administrative services agent, or all of them; (6) provide for the issuance and
distribution of Shares by the Trust directly or through one or more Principal
Underwriters or otherwise; (7) retain one or more Investment Adviser(s); (8)
redeem, repurchase and transfer Shares pursuant to applicable law; (9) set
record dates for the determination of Shareholders with respect to various
matters, in the manner provided in Article V, Section 5 of this Declaration of
Trust; (10) declare and pay dividends and distributions to Shareholders from the
Trust Property; (11) establish from time to time, in accordance with the
provisions of Article III, Section 6 hereof, any Series or class of Shares, each
such Series to operate as a separate and distinct investment medium and with
separately defined investment objectives and policies and distinct investment
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purposes; and (12) in general delegate such authority as they consider desirable
to any officer of the Trust, to any committee of the Board of Trustees and to
any agent or employee of the Trust or to any such custodian, transfer, dividend
disbursing or shareholder servicing agent, Principal Underwriter or Investment
Adviser. Any determination as to what is in the best interests of the Trust made
by the Board of Trustees in good faith shall be conclusive.
In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees. Unless
otherwise specified herein or required by law, any action by the Board of
Trustees shall be deemed effective if approved or taken by a majority of the
Trustees then in office.
Any action required or permitted to be taken by the Board of Trustees,
or a committee thereof, may be taken without a meeting if a majority of the
members of the Board of Trustees, or committee thereof, as the case may be,
shall individually or collectively consent in writing to that action. Such
action by written consent shall have the same force and effect as a majority
vote of the Board of Trustees, or committee thereof, as the case may be. Such
written consent or consents shall be filed with the minutes of the proceedings
of the Board of Trustees, or committee thereof, as the case may be.
The Trustees shall devote to the affairs of the Trust such time as may
be necessary for the proper performance of their duties hereunder, but neither
the Trustees nor the officers, directors, shareholders or partners of the
Trustees, shall be expected to devote their full time to the performance of such
duties. The Trustees, or any Affiliate shareholder, officer, director, partner
or employee thereof, or any Person owning a legal or beneficial interest
therein, may engage in or possess an interest in any other business or venture
of any nature and description, independently or with or for the account of
others.
Section 4. Payment of Expenses by the Trust. The Board of Trustees is
authorized to pay or cause to be paid out of the principal or income of the
Trust or any particular Series or class, or partly out of the principal and
partly out of the income of the Trust or any particular Series or class, and to
charge or allocate the same to, between or among such one or more of the Series
or classes that may be established or designated pursuant to Article III,
Section 6, as it deems fair, all expenses, fees, charges, taxes and liabilities
incurred by or arising in connection with the maintenance or operation of the
Trust or a particular Series or class, or in connection with the management
thereof, including, but not limited to, the Trustees' compensation and such
expenses, fees, charges, taxes and liabilities for the services of the Trust's
officers, employees, Investment Adviser, Principal Underwriter, auditors,
counsel, custodian, sub-custodian (if any), transfer agent, dividend disbursing
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agent, shareholder servicing agent, and such other agents or independent
contractors and such other expenses, fees, charges, taxes and liabilities as the
Board of Trustees may deem necessary or proper to incur.
Section 5. Payment of Expenses by Shareholders. The Board of Trustees
shall have the power, as frequently as it may determine, to cause each
Shareholder of the Trust, or each Shareholder of any particular Series, to pay
directly, in advance or arrears, for charges of the Trust's custodian or
transfer, dividend disbursing, shareholder servicing or similar agent, an amount
fixed from time to time by the Board of Trustees, by setting off such charges
due from such Shareholder from declared but unpaid dividends or distributions
owed such Shareholder and/or by reducing the number of Shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such charges due from such Shareholder.
Section 6. Ownership of Trust Property. Legal title to all of the Trust
Property shall at all times be considered to be vested in the Trust, except that
the Board of Trustees shall have the power to cause legal title to any Trust
Property to be held by or in the name of any Person as nominee, on such terms as
the Board of Trustees may determine, in accordance with applicable law.
Section 7. Service Contracts.
(a) Subject to such requirements and restrictions as may be set forth
in the By-Laws and/or the 1940 Act, the Board of Trustees may, at any time and
from time to time, contract for exclusive or nonexclusive advisory, management
and/or administrative services for the Trust or for any Series with any
corporation, trust, association or other organization, including any Affiliate;
and any such contract may contain such other terms as the Board of Trustees may
determine, including without limitation, authority for the Investment Adviser or
administrator to determine from time to time without prior consultation with the
Board of Trustees what securities and other instruments or property shall be
purchased or otherwise acquired, owned, held, invested or reinvested in, sold,
exchanged, transferred, mortgaged, pledged, assigned, negotiated, or otherwise
dealt with or disposed of, and what portion, if any, of the Trust Property shall
be held uninvested and to make changes in the Trust's or a particular Series'
investments, or such other activities as may specifically be delegated to such
party.
(b) The Board of Trustees may also, at any time and from time to time,
contract with any corporation, trust, association or other organization,
including any Affiliate, appointing it or them as the exclusive or nonexclusive
distributor or Principal Underwriter for the Shares of the Trust or one or more
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of the Series or classes thereof or for other securities to be issued by the
Trust, or appointing it or them to act as the custodian, transfer agent,
dividend disbursing agent and/or shareholder servicing agent for the Trust or
one or more of the Series or classes thereof.
(c) The Board of Trustees is further empowered, at any time and from
time to time, to contract with any Persons to provide such other services to the
Trust or one or more of its Series, as the Board of Trustees determines to be in
the best interests of the Trust or one or more of its Series.
(d) The fact that:
(i) any of the Shareholders, Trustees, employees or officers of
the Trust is a shareholder, director, officer, partner,
trustee, employee, manager, Adviser, Principal Underwriter,
distributor, or Affiliate or agent of or for any corporation,
trust, association, or other organization, or for any parent
or Affiliate of any organization with which an Adviser's,
management or administration contract, or Principal
Underwriter's or distributor's contract, or custodian,
transfer, dividend disbursing, shareholder servicing or other
type of service contract may have been or may hereafter be
made, or that any such organization, or any parent or
Affiliate thereof, is a Shareholder or has an interest in the
Trust, or that
(ii) any corporation, trust, association or other organization
with which an Adviser's, management or administration contract
or Principal Underwriter's or distributor's contract, or
custodian, transfer, dividend disbursing, shareholder
servicing or other type of service contract may have been or
may hereafter be made also has an Adviser's, management or
administration contract, or Principal Underwriter's or
distributor's contract, or custodian, transfer, dividend
disbursing, shareholder servicing or other service contract
with one or more other corporations, trusts, associations, or
other organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee, employee or officer of the Trust from voting upon or
executing the same, or create any liability or accountability to the Trust or
its Shareholders, provided that the establishment of and performance under each
such contract is permissible under the provisions of the 1940 Act.
(e) Every contract referred to in this Section 7 shall comply with such
requirements and restrictions as may be set forth in the By-Laws, the 1940 Act
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or stipulated by resolution of the Board of Trustees; and any such contract may
contain such other terms as the Board of Trustees may determine.
ARTICLE V.
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. Subject to the provisions of Article III,
Section 6(d), the Shareholders shall have power to vote only (i) for the
election of Trustees, including the filling of any vacancies in the Board of
Trustees, as provided in Article IV, Section 1; (ii) with respect to such
additional matters relating to the Trust as may be required by this Declaration
of Trust, the By-Laws, the 1940 Act or any registration statement of the Trust
filed with the Commission; and (iii) on such other matters as the Board of
Trustees may consider necessary or desirable. The Shareholder of record (as of
the record date established pursuant to Section 5 of this Article V) of each
Share shall be entitled to one vote for each full Share, and a fractional vote
for each fractional Share. Shareholders shall not be entitled to cumulative
voting in the election of Trustees or on any other matter. Shares may be voted
in person or by proxy.
Section 2. Meetings. Meetings of the Shareholders may be called by the
Board of Trustees for the purpose of electing Trustees as provided in Article
IV, Section 1 and for such other purposes as may be prescribed by law, by this
Declaration of Trust or by the By-Laws. Meetings of the Shareholders may also be
called by the Board of Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Board of Trustees to be necessary or
desirable.
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Section 3. Quorum and Required Vote. Except when a larger quorum is
required by applicable law, by the By-Laws or by this Declaration of Trust,
thirty-three and one-third percent (33-1/3%) of the Shares present in person or
represented by proxy and entitled to vote at a Shareholders' meeting shall
constitute a quorum at such meeting. When a separate vote by one or more Series
or classes is required, thirty-three and one-third percent (33-1/3%) of the
Shares of each such Series or class present in person or represented by proxy
and entitled to vote shall constitute a quorum at a Shareholders' meeting of
such Series or class. Subject to the provisions of Article III, Section 6(d),
Article VIII, Section 4 and any other provision of this Declaration of Trust,
the By-Laws or applicable law which requires a different vote: (1) in all
matters other than the election of Trustees, the affirmative vote of the
majority of votes cast at a Shareholders' meeting at which a quorum is present
shall be the act of the Shareholders; (2) Trustees shall be elected by a
plurality of the votes cast at a Shareholders' meeting at which a quorum is
present.
Section 4. Shareholder Action by Written Consent without a Meeting. Any
action which may be taken at any meeting of Shareholders may be taken without a
meeting and without prior notice if a consent in writing setting forth the
action so taken is signed by the holders of Shares having not less than the
minimum number of votes that would be necessary to authorize or take that action
at a meeting at which all Shares entitled to vote on that action were present
and voted. All such consents shall be filed with the secretary of the Trust and
shall be maintained in the Trust's records. Any Shareholder giving a written
consent or the Shareholder's proxy holders or a transferee of the Shares or a
personal representative of the Shareholder or its respective proxy-holder may
revoke the consent by a writing received by the secretary of the Trust before
written consents of the number of Shares required to authorize the proposed
action have been filed with the secretary.
If the consents of all Shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
Shareholders shall not have been received, the secretary shall give prompt
notice of the action taken without a meeting to such Shareholders. This notice
shall be given in the manner specified in the By-Laws.
Section 5. Record Dates. For purposes of determining the Shareholders
entitled to notice of any meeting or to vote or entitled to give consent to
action without a meeting, the Board of Trustees may fix in advance a record date
which shall not be more than one hundred eighty (180) days nor less than seven
(7) days before the date of any such meeting.
If the Board of Trustees does not so fix a record date:
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(a) The record date for determining Shareholders entitled to notice of
or to vote at a meeting of Shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day which is five (5) business
days next preceding to the day on which the meeting is held.
(b) The record date for determining Shareholders entitled to give
consent to action in writing without a meeting, (i) when no prior action by the
Board of Trustees has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action of the Board of Trustees has been
taken, shall be at the close of business on the day on which the Board of
Trustees adopts the resolution taking such prior action or the seventy-fifth
(75th) day before the date of such other action, whichever is later.
For the purpose of determining the Shareholders of any Series or class
who are entitled to receive payment of any dividend or of any other
distribution, the Board of Trustees may from time to time fix a date, which
shall be before the date for the payment of such dividend or such other
distribution, as the record date for determining the Shareholders of such Series
or class having the right to receive such dividend or distribution. Nothing in
this Section shall be construed as precluding the Board of Trustees from setting
different record dates for different Series or classes.
Section 6. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes, meetings and related matters.
ARTICLE VI.
Net Asset Value, Distributions and Redemptions
Section 1. Determination of Net Asset Value, Net Income and
Distributions. Subject to Article III, Section 6 hereof, the Board of Trustees
shall have the power to fix an initial offering price for the Shares of any
Series or class thereof which shall yield to such Series or class not less than
the net asset value thereof, at which price the Shares of such Series or class
shall be offered initially for sale, and to determine from time to time
thereafter the offering price which shall yield to such Series or class not less
than the net asset value thereof from sales of the Shares of such Series or
class; provided, however, that no Shares of a Series or class thereof shall be
issued or sold for consideration which shall yield to such Series or class less
than the net asset value of the Shares of such Series or class next determined
after the receipt of the order (or at such other times set by the Board of
Trustees), except in the case of Shares of such Series or class issued in
payment of a dividend properly declared and payable.
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Subject to Article III, Section 6 hereof, the Board of Trustees, in
their absolute discretion, may prescribe and shall set forth in the By-laws or
in a duly adopted vote of the Board of Trustees such bases and time for
determining the per Share or net asset value of the Shares of any Series or net
income attributable to the Shares of any Series, or the declaration and payment
of dividends and distributions on the Shares of any Series, as they may deem
necessary or desirable.
Section 2. Redemptions at the Option of a Shareholder. Unless otherwise
provided in the prospectus of the Trust relating to the Shares, as such
prospectus may be amended from time to time ("Prospectus"):
(a) The Trust shall purchase such Shares as are offered by any
Shareholder for redemption, upon the presentation of a proper instrument of
transfer together with a request directed to the Trust or a Person designated by
the Trust that the Trust purchase such Shares or in accordance with such other
procedures for redemption as the Board of Trustees may from time to time
authorize; and the Trust will pay therefor the net asset value thereof, in
accordance with the By-Laws and applicable law. Payment for said Shares shall be
made by the Trust to the Shareholder within seven days after the date on which
the request is received in proper form. The obligation set forth in this Section
2 is subject to the provision that in the event that any time the New York Stock
Exchange (the "Exchange") is closed for other than weekends or holidays, or if
permitted by the Rules of the Commission during periods when trading on the
Exchange is restricted or during any National Financial Emergency which makes it
impracticable for the Trust to dispose of the investments of the applicable
Series or to determine fairly the value of the net assets held with respect to
such Series or during any other period permitted by order of the Commission for
the protection of investors, such obligations may be suspended or postponed by
the Board of Trustees. If certificates have been issued to a Shareholder, any
such request by such Shareholder must be accompanied by surrender of any
outstanding certificate or certificates for such Shares in form for transfer,
together with such proof of the authenticity of signatures as may reasonably be
required on such Shares and accompanied by proper stock transfer stamps, if
applicable.
(b) Payments for Shares so redeemed by the Trust shall be made in cash,
except payment for such Shares may, at the option of the Board of Trustees, or
such officer or officers as it may duly authorize in its complete discretion, be
made in kind or partially in cash and partially in kind. In case of any payment
in kind, the Board of Trustees, or its delegate, shall have absolute discretion
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as to what security or securities of the Trust shall be distributed in kind and
the amount of the same; and the securities shall be valued for purposes of
distribution at the value at which they were appraised in computing the then
current net asset value of the Shares, provided that any Shareholder who cannot
legally acquire securities so distributed in kind by reason of the prohibitions
of the 1940 Act or the provisions of the Employee Retirement Income Security Act
("ERISA") shall receive cash. Shareholders shall bear the expenses of in-kind
transactions, including, but not limited to, transfer agency fees, custodian
fees and costs of disposition of such securities.
(c) Payment for Shares so redeemed by the Trust shall be made by the
Trust as provided above within seven days after the date on which the redemption
request is received in good order; provided, however, that if payment shall be
made other than exclusively in cash, any securities to be delivered as part of
such payment shall be delivered as promptly as any necessary transfers of such
securities on the books of the several corporations whose securities are to be
delivered practicably can be made, which may not necessarily occur within such
seven day period. Moreover, redemptions may be suspended in the event of a
National Financial Emergency. In no case shall the Trust be liable for any delay
of any corporation or other Person in transferring securities selected for
delivery as all or part of any payment in kind.
(d) The right of Shareholders to receive dividends or other
distributions on Shares may be set forth in a Plan adopted by the Board of
Trustees and amended from time to time pursuant to Rule 18f-3 of the 1940 Act.
The right of any Shareholder of the Trust to receive dividends or other
distributions on Shares redeemed and all other rights of such Shareholder with
respect to the Shares so redeemed by the Trust, except the right of such
Shareholder to receive payment for such Shares, shall cease at the time as of
which the purchase price of such Shares shall have been fixed, as provided
above.
Section 3. Redemptions at the Option of the Trust. The Board of
Trustees may, from time to time, without the vote or consent of the
Shareholders, and subject to the 1940 Act, redeem Shares or authorize the
closing of any Shareholder account, subject to such conditions as may be
established by the Board of Trustees.
ARTICLE VII.
Compensation and Limitation of Liability of
Officers and Trustees
Section 1. Compensation. Except as set forth in the last sentence of
this Section 1, the Board of Trustees may, from time to time, fix a reasonable
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amount of compensation to be paid by the Trust to the Trustees and officers of
the Trust. Nothing herein shall in any way prevent the employment of any Trustee
for advisory, management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Section 2. Indemnification and Limitation of Liability.
(a) To the fullest extent that limitations on the liability of Trustees
and officers are permitted by the DBTA, the officers and Trustees shall not be
responsible or liable in any event for any act or omission of: any agent or
employee of the Trust; any Investment Adviser or Principal Underwriter of the
Trust; or with respect to each Trustee and officer, the act or omission of any
other Trustee or officer, respectively. The Trust, out of the Trust Property,
shall indemnify and hold harmless each and every officer and Trustee from and
against any and all claims and demands whatsoever arising out of or related to
such officer's or Trustee's performance of his or her duties as an officer or
Trustee of the Trust. This limitation on liability applies to events occurring
at the time a Person serves as a Trustee or officer of the Trust whether or not
such Person is a Trustee or officer at the time of any proceeding in which
liability is asserted. Nothing herein contained shall indemnify, hold harmless
or protect any officer or Trustee from or against any liability to the Trust or
any Shareholder to which such Person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Person's office.
(b) Every note, bond, contract, instrument, certificate or undertaking
and every other act or document whatsoever issued, executed or done by or on
behalf of the Trust, the officers or the Trustees or any of them in connection
with the Trust shall be conclusively deemed to have been issued, executed or
done only in such Person's capacity as Trustee and/or as officer, and such
Trustee or officer, as applicable, shall not be personally liable therefore,
except as described in the last sentence of the first paragraph of this Section
2 of this Article VII.
Section 3. Officers and Trustees' Good Faith Action, Expert Advice, No
Bond or Surety. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. An officer or Trustee shall
be liable to the Trust and to any Shareholder solely for such officer's or
Trustee's own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of such officer or
Trustee, and for nothing else, and shall not be liable for errors of judgment or
mistakes of fact or law. The officers and Trustees may obtain the advice of
counsel or other experts with respect to the meaning and operation of this
Declaration of Trust and their duties as officers or Trustees. No such officer
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or Trustee shall be liable for any act or omission in accordance with such
advice and no inference concerning liability shall arise from a failure to
follow such advice. The officers and Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.
Section 4. Insurance. To the fullest extent permitted by applicable
law, the officers and Trustees shall be entitled and have the authority to
purchase with Trust Property, insurance for liability and for all expenses
reasonably incurred or paid or expected to be paid by a Trustee or officer in
connection with any claim, action, suit or proceeding in which such Person
becomes involved by virtue of such Person's capacity or former capacity with the
Trust, whether or not the Trust would have the power to indemnify such Person
against such liability under the provisions of this Article.
ARTICLE VIII.
Miscellaneous
Section 1. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any actions made or to be made by the Trustees.
Section 2. Dissolution of Trust or Series. Unless dissolved as provided
herein, the Trust shall have perpetual existence. The Trust may be dissolved at
any time by vote of a majority of the Shares of the Trust entitled to vote or by
the Board of Trustees by written notice to the Shareholders. Any Series may be
dissolved at any time by vote of a majority of the Shares of that Series or by
the Board of Trustees by written notice to the Shareholders of that Series.
Upon dissolution of the Trust (or a particular Series, as the case may
be), the Trustees shall (in accordance with ss. 3808 of the DBTA) pay or make
reasonable provision to pay all claims and obligations of each Series (or the
particular Series, as the case may be), including all contingent, conditional or
unmatured claims and obligations known to the Trust, and all claims and
obligations which are known to the Trust but for which the identity of the
claimant is unknown. If there are sufficient assets held with respect to each
Series of the Trust (or the particular Series, as the case may be), such claims
and obligations shall be paid in full and any such provisions for payment shall
be made in full. If there are insufficient assets held with respect to each
Series of the Trust (or the particular Series, as the case may be), such claims
and obligations shall be paid or provided for according to their priority and,
among claims and obligations of equal priority, ratably to the extent of assets
available therefor. Any remaining assets (including without limitation, cash,
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securities or any combination thereof) held with respect to each Series of the
Trust (or the particular Series, as the case may be) shall be distributed to the
Shareholders of such Series, ratably according to the number of Shares of such
Series held by the several Shareholders on the record date for such dissolution
distribution.
Section 3. Merger and Consolidation; Conversion.
(a) Merger and Consolidation. Pursuant to an agreement of merger or
consolidation, the Trust, or any one or more Series, may, by act of a majority
of the Board of Trustees, merge or consolidate with or into one or more business
trusts or other business entities formed or organized or existing under the laws
of the State of Delaware or any other state or the United States or any foreign
country or other foreign jurisdiction. Any such merger or consolidation shall
not require the vote of the Shareholders affected thereby, unless such vote is
required by the 1940 Act, or unless such merger or consolidation would result in
an amendment of this Declaration of Trust which would otherwise require the
approval of such Shareholders. In accordance with Section 3815(f) of the DBTA,
an agreement of merger or consolidation may effect any amendment to this
Declaration of Trust or the By-Laws or effect the adoption of a new declaration
of trust or by-laws of the Trust if the Trust is the surviving or resulting
business trust. Upon completion of the merger or consolidation, the Trustees
shall file a certificate of merger or consolidation in accordance with Section
3810 of the DBTA.
(b) Conversion. A majority of the Board of Trustees may, without the
vote or consent of the Shareholders, cause (i) the Trust to convert to a
common-law trust, a general partnership, limited partnership or a limited
liability company organized, formed or created under the laws of the State of
Delaware as permitted pursuant to Section 3821 of the DBTA; (ii) the Shares of
the Trust or any Series to be converted into beneficial interests in another
business trust (or series thereof) created pursuant to this Section 3 of this
Article VIII, or (iii) the Shares to be exchanged under or pursuant to any state
or federal statute to the extent permitted by law; provided, however, that if
required by the 1940 Act, no such statutory conversion, Share conversion or
Share exchange shall be effective unless the terms of such transaction shall
first have been approved at a meeting called for that purpose by the "vote of a
majority of the outstanding voting securities," as such phrase is defined in the
1940 Act, of the Trust or Series, as applicable; provided, further, that in all
respects not governed by statute or applicable law, the Board of Trustees shall
have the power to prescribe the procedure necessary or appropriate to accomplish
a sale of assets, merger or consolidation including the power to create one or
more separate business trusts to which all or any part of the assets,
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liabilities, profits or losses of the Trust may be transferred and to provide
for the conversion of Shares of the Trust or any Series into beneficial
interests in such separate business trust or trusts (or series thereof).
Section 4. Reorganization.
A majority of the Board of Trustees may cause the Trust to sell, convey
and transfer all or substantially all of the assets of the Trust, or all or
substantially all of the assets associated with any one or more Series, to
another trust, business trust, partnership, limited partnership, limited
liability company, association or corporation organized under the laws of any
state, or to one or more separate series thereof, or to the Trust to be held as
assets associated with one or more other Series of the Trust, in exchange for
cash, shares or other securities (including, without limitation, in the case of
a transfer to another Series of the Trust, Shares of such other Series) with
such transfer either (a) being made subject to, or with the assumption by the
transferee of, the liabilities associated with each Series the assets of which
are so transferred, or (b) not being made subject to, or not with the assumption
of, such liabilities; provided, however, that, if required by the 1940 Act, no
assets associated with any particular Series shall be so sold, conveyed or
transferred unless the terms of such transaction shall first have been approved
at a meeting called for that purpose by the "vote of a majority of the
outstanding voting securities," as such phrase is defined in the 1940 Act, of
that Series. Following such sale, conveyance and transfer, the Board of Trustees
shall distribute such cash, shares or other securities (giving due effect to the
assets and liabilities associated with and any other differences among the
various Series the assets associated with which have so been sold, conveyed and
transferred) ratably among the Shareholders of the Series the assets associated
with which have been so sold, conveyed and transferred (giving due effect to the
differences among the various classes within each such Series); and if all of
the assets of the Trust have been so sold, conveyed and transferred, the Trust
shall be dissolved.
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Section 5. Amendments.
Subject to the provisions of the second paragraph of this Section 5 of
this Article VIII, this Declaration of Trust may be restated and/or amended at
any time by an instrument in writing signed by a majority of the then Board of
Trustees and, if required, by approval of such amendment by Shareholders in
accordance with Article V, Section 3 hereof. Any such restatement and/or
amendment hereto shall be effective immediately upon execution and approval or
upon such future date and time as may be stated therein. The Certificate of
Trust of the Trust may be restated and/or amended by a similar procedure, and
any such restatement and/or amendment shall be effective immediately upon filing
with the Office of the Secretary of State of the State of Delaware or upon such
future date as may be stated therein.
Notwithstanding the above, the Board of Trustees expressly reserves the
right to amend or repeal any provisions contained in this Declaration of Trust
or the Certificate of Trust, in accordance with the provisions of Section 5 of
Article III hereof, and all rights, contractual and otherwise, conferred upon
Shareholders are granted subject to such reservation. The Board of Trustees
further expressly reserves the right to amend or repeal any provision of the
By-Laws pursuant to Article X of the By-Laws.
Section 6. Filing of Copies, References, Headings. The original or a
copy of this Declaration of Trust and of each restatement and/or amendment
hereto shall be kept at the principal executive office of the Trust where it may
be inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any such
restatements and/or amendments 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 an officer of the Trust to be a copy
of this instrument or of any such restatements and/or amendments. In this
Declaration of Trust and in any such restatements and/or amendments, references
to this instrument, and all expressions of similar effect to "herein," "hereof"
and "hereunder," shall be deemed to refer to this instrument as amended or
affected by any such restatements and/or amendments. Headings are placed herein
for convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this instrument.
Whenever the singular number is used herein, the same shall include the plural;
and the neuter, masculine and feminine genders shall include each other, as
applicable. This instrument may be executed in any number of counterparts, each
of which shall be deemed an original.
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Section 7. Applicable Law. This Declaration of Trust is created under
and is to be governed by and construed and administered according to the laws of
the State of Delaware and the applicable provisions of the 1940 Act and the
Code. The Trust shall be a Delaware business trust pursuant to the DBTA, and
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a business trust.
Section 8. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration of Trust are severable, and if
the Board of Trustees shall determine, with the advice of counsel, that any of
such provisions is in conflict with the 1940 Act, the Code, the DBTA, or with
other applicable laws and regulations, the conflicting provision shall be deemed
not to have constituted a part of this Declaration of Trust from the time when
such provisions became inconsistent with such laws or regulations; provided,
however, that such determination shall not affect any of the remaining
provisions of this Declaration of Trust or render invalid or improper any action
taken or omitted prior to such determination.
(b) If any provision of this Declaration of Trust shall be held invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration of Trust in any jurisdiction.
Section 9. Business Trust Only. It is the intention of the Trustees to
create a business trust pursuant to the DBTA, and thereby to create the
relationship of trustee and beneficial owners within the meaning of the DBTA
between the Trustees and each Shareholder. It is not the intention of the
Trustees to create a general or limited partnership, limited liability company,
joint stock association, corporation, bailment, or any form of legal
relationship other than a business trust pursuant to the DBTA. Nothing in this
Declaration of Trust shall be construed to make the Shareholders, either by
themselves or with the Trustees, partners or members of a joint stock
association.
Section 10. Use of the Names "Delaware Group" and "Delaware
Investments". The Trust expressly agrees and acknowledges that the names
"Delaware Group" and "Delaware Investments" are the sole property of Delaware
Management Holdings, Inc. ("DMH"), and, with respect to such names, that similar
names are used by funds in the investment business which are affiliated with
DMH. DMH has consented to the use by the Trust of the identifying words
"Delaware Group" and "Delaware Investments" and has granted to the Trust a
nonexclusive license to use the names "Delaware Group" and "Delaware
Investments" as part of the name of the Trust and the name of any Series of
Shares. The Trust further expressly agrees and acknowledges that the
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non-exclusive license granted herein may be terminated by DMH if the Trust
ceases to use an Affiliate of DMH as Investment Adviser or Delaware
Distributors, L.P. ("DDLP") as Principal Underwriter (or to use other Affiliates
or successors of DMH and DDLP for such purposes). In such event, the
non-exclusive license granted herein may be revoked by DMH and the Trust shall
cease using the names "Delaware Group" and "Delaware Investments" as part of its
name or the name of any Series of Shares, unless otherwise consented to by DMH
or any successor to its interests in such names.
The Trust further understands and agrees that so long as DMH and/or its
advisory Affiliates shall continue to serve as the Trust's Investment Adviser,
other mutual funds as may be sponsored or advised by DMH or its Affiliates shall
have the right permanently to adopt and to use the words "Delaware" in their
names and in the names of any Series or class of Shares of such funds.
IN WITNESS WHEREOF, the Trustees named below do hereby make and enter
into this Declaration of Trust as of the 17th day of December, 1998.
- ---------------------------- ---------------------------------
Wayne A. Stork Jeffrey J. Nick
Trustee Trustee
- ---------------------------- ---------------------------------
Walter P. Babich John H. Durham
Trustee Trustee
- ---------------------------- ---------------------------------
Anthony D. Knerr Ann R. Leven
Trustee Trustee
- ---------------------------- ---------------------------------
W. Thacher Longstreth Thomas F. Madison
Trustee Trustee
- ----------------------------
Charles E. Peck
Trustee
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CERTIFICATE OF TRUST OF
Delaware Group State Tax-Free Income Trust
This Certificate of Trust of Delaware Group State Tax-Free Income
Trust, a business trust (the "Trust"), executed by the undersigned trustees, and
filed under and in accordance with the provisions of the Delaware Business Trust
Act (12 Del. C.ss.3801 et seq.) (the "Act"), sets forth the following:
FIRST: The name of the business trust formed hereby is Delaware Group
State Tax-Free Income Trust.
SECOND: The address of the registered office of the Trust in the State
of Delaware is at 1209 Orange Street, Wilmington, Delaware 19801 and
the name and address of the registered agent for service of process on
the Trust in the State of Delaware is The Corporation Trust Company,
1209 Orange Street, Wilmington, Delaware 19801.
THIRD: The Trust formed hereby is or will become an investment company
registered under the Investment Company Act of 1940, as amended (15
U.S.C.ss.ss.80a-1 et seq.).
FOURTH: Pursuant to Section 3804 of the Act, the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing
with respect to a particular series, whether such series is now
authorized and existing pursuant to the governing instrument of the
Trust or is hereafter authorized and existing pursuant to said
governing instrument, shall be enforceable against the assets
associated with such series only, and not against the assets of the
Trust generally or any other series thereof, and, except as otherwise
provided in the governing instrument of the Trust, none of the debts,
liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to the Trust generally or any other
series thereof shall be enforceable against the assets of such series.
In witness whereof, the undersigned, being all of the trustees of
Delaware Group State Tax-Free Income Trust, have duly executed this Certificate
of Trust as of the 17th day of December, 1998.
By: By:
--------------------------------- ------------------------------
Wayne A. Stork Jeffrey J. Nick
Trustee Trustee
By: By:
--------------------------------- ------------------------------
Walter P. Babich John H. Durham
Trustee Trustee
By: By:
--------------------------------- ------------------------------
Anthony D. Knerr Ann R. Leven
Trustee Trustee
By: By:
--------------------------------- ------------------------------
W. Thacher Longstreth Thomas F. Madison
Trustee Trustee
By:
---------------------------------
Charles E. Peck
Trustee
<PAGE>
BY-LAWS
OF
Delaware Group state tax-free income trust
A Delaware Business Trust
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal executive office of Delaware
Group State Tax-Free Income Trust (the "Trust") shall be One Commerce Square,
Philadelphia, Pennsylvania, 19103. The board of trustees (the "Board of
Trustees") may, from time to time, change the location of the principal
executive office of the Trust to any place within or outside the State of
Delaware.
Section 2. OTHER OFFICES. The Board of Trustees may at any time
establish branch or subordinate offices at any place or places where the Trust
intends to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at
any place within or outside the State of Delaware designated by the Board of
Trustees. In the absence of any such designation by the Board of Trustees,
shareholders' meetings shall be held at the principal executive office of the
Trust. For purposes of these By-Laws, the term "shareholder" shall mean a record
owner of shares of the Trust.
Section 2. CALL OF MEETING. A meeting of the shareholders may be called
at any time by the Board of Trustees or by the chairperson of the board or by
the president. If the Trust is required under the Investment Company Act of
1940, as amended (the "1940 Act"), to hold a shareholders' meeting to elect
trustees, the meeting shall be deemed an "annual meeting" for that year for
purposes of the 1940 Act.
Section 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 4 of
this Article II not less than seven (7) nor more than ninety-three (93) days
before the date of the meeting. The notice shall specify (i) the place, date and
hour of the meeting, and (ii) the general nature of the business to be
transacted. The notice of any meeting at which trustees are to be elected also
shall include the name of any nominee or nominees whom at the time of the notice
are intended to be presented for election. Except with respect to adjournments
as provided herein, no business shall be transacted at such meeting other than
that specified in the notice.
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Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of shareholders shall be given either personally or by first-class mail,
courier or telegraphic, facsimile, electronic mail or other written
communication, charges prepaid, addressed to the shareholder at the address of
that shareholder appearing on the books of the Trust or its transfer agent or
given by the shareholder to the Trust for the purpose of notice. If no such
address appears on the Trust's books or is given, notice shall be deemed to have
been given if sent to that shareholder by first-class mail, courier, or
telegraphic, facsimile, electronic mail or other written communication to the
Trust's principal executive office. Notice shall be deemed to have been given at
the time when delivered personally or deposited in the mail, with a courier or
sent by telegram, facsimile, electronic mail or other means of written
communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Trust is returned to the Trust marked
to indicate that the notice to the shareholder cannot be delivered at that
address, all future notices or reports shall be deemed to have been duly given
without further mailing, or substantial equivalent thereof, if such notices
shall be available to the shareholder on written demand of the shareholder at
the principal executive office of the Trust for a period of one year from the
date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the Trust giving the notice and shall be filed and
maintained in the records of the Trust. Such affidavit shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
Section 5. ADJOURNED MEETING; NOTICE. Any shareholders' meeting,
whether or not a quorum is present, may be adjourned from time to time (and at
any time during the course of the meeting) by a majority of the votes cast by
those shareholders present in person or by proxy, or by the chairperson of the
meeting. Any adjournment may be with respect to one or more proposals, but not
necessarily all proposals, to be voted or acted upon at such meeting and any
adjournment will not delay or otherwise affect the effectiveness and validity of
a vote or other action taken at a shareholders' meeting prior to adjournment.
When any shareholders' meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed or unless the
adjournment is for more than one hundred eighty (180) days from the record date
set for the original meeting, in which case the Board of Trustees shall set a
new record date. If notice of any such adjourned meeting is required pursuant to
the preceding sentence, it shall be given to each shareholder of record entitled
to vote at the adjourned meeting in accordance with the provisions of Sections 3
and 4 of this Article II. At any adjourned meeting, the Trust may transact any
business which might have been transacted at the original meeting.
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Section 6. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of the
Declaration of Trust, as in effect at such time. The shareholders' vote may be
by voice vote or by ballot, provided, however, that any election for trustees
must be by ballot if demanded by any shareholder before the voting has begun. On
any matter other than elections of trustees, any shareholder may vote part of
the shares in favor of the proposal and refrain from voting the remaining shares
or vote them against the proposal, but if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
the total shares that the shareholder is entitled to vote on such proposal.
Abstentions and broker non-votes will be included for purposes of
determining whether a quorum is present at a shareholders' meeting. Abstentions
and broker non-votes will be treated as votes present at a shareholders'
meeting, but will not be treated as votes cast. Abstentions and broker
non-votes, therefore, will have no effect on proposals which require a plurality
or majority of votes cast for approval, but will have the same effect as a vote
"against" on proposals requiring a majority of outstanding voting securities for
approval.
Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The
transactions of a meeting of shareholders, however called and noticed and
wherever held, shall be valid as though transacted at a meeting duly held after
regular call and notice if a quorum be present either in person or by proxy.
Attendance by a person at a meeting shall also constitute a waiver of notice
with respect to that person of that meeting, except when the person objects at
the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened and except that such attendance is
not a waiver of any right to object to the consideration of matters not included
in the notice of the meeting if that objection is expressly made at the
beginning of the meeting. Whenever notice of a meeting is required to be given
to a shareholder under the Declaration of Trust or these By-Laws, a written
waiver thereof, executed before or after the meeting by such shareholder or his
or her attorney thereunto authorized and filed with the records of the meeting,
shall be deemed equivalent to such notice.
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Section 8. PROXIES. Every shareholder entitled to vote for trustees or
on any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the shareholder and filed
with the secretary of the Trust. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney-in-fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the shareholder executing it by a written notice delivered to the
Trust prior to the exercise of the proxy or by the shareholder's execution of a
subsequent proxy or attendance and vote in person at the meeting; or (ii)
written notice of the death or incapacity of the shareholder is received by the
Trust before the proxy's vote is counted; provided, however, that no proxy shall
be valid after the expiration of eleven (11) months from the date of the proxy
unless otherwise provided in the proxy. The revocability of a proxy that states
on its face that it is irrevocable shall be governed by the provisions of the
General Corporation Law of the State of Delaware.
With respect to any shareholders' meeting, the Board of Trustees may
act to permit the Trust to accept proxies by any electronic, telephonic,
computerized, telecommunications or other reasonable alternative to the
execution of a written instrument authorizing the proxy to act, provided the
shareholder's authorization is received within eleven (11) months before the
meeting. A proxy with respect to shares held in the name of two or more Persons
shall be valid if executed by any one of them unless at or prior to exercise of
the proxy the Trust receives a specific written notice to the contrary from any
one of them. A proxy purporting to be executed by or on behalf of a shareholder
shall be deemed valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest with the challenger.
Section 9. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the Board of Trustees may appoint any person other than nominees for office to
act as inspector of election at the meeting or its adjournment. If no inspector
of election is so appointed, the chairperson of the meeting may, and on the
request of any shareholder or a shareholder's proxy shall, appoint an inspector
of election at the meeting. If any person appointed as inspector fails to appear
or fails or refuses to act, the chairperson of the meeting may, and on the
request of any shareholder or a shareholder's proxy shall, appoint a person to
fill the vacancy.
The inspector shall:
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(a) determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising
in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
ARTICLE III
TRUSTEES
Section 1. POWERS. Subject to the applicable provisions of the
Declaration of Trust and these By-Laws relating to action required to be
approved by the shareholders, the business and affairs of the Trust shall be
managed and all powers shall be exercised by or under the direction of the Board
of Trustees.
Section 2. NUMBER OF TRUSTEES. The number of trustees constituting the
Board of Trustees shall be determined as set forth in the Declaration of Trust.
Section 3. VACANCIES. Vacancies in the Board of Trustees may be filled
by a majority of the remaining trustees, though less than a quorum, or by a sole
remaining trustee, unless the Board of Trustees calls a meeting of shareholders
for the purpose of filling such vacancies. Notwithstanding the above, whenever
and for so long as the Trust is a participant in or otherwise has in effect a
plan under which the Trust may be deemed to bear expenses of distributing its
shares as that practice is described in Rule 12b- 1 under the 1940 Act, then the
selection and nomination of the trustees who are not "interested persons" of the
Trust (as that term is defined in the 1940 Act) shall be, and is, committed to
the discretion of such disinterested trustees.
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Section 4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings of
the Board of Trustees may be held at any place within or outside the State of
Delaware that has been designated from time to time by resolution of the Board
of Trustees. In the absence of such a designation, regular meetings shall be
held at the principal executive office of the Trust. Any meeting, regular or
special, may be held by conference telephone or similar communication equipment,
so long as all trustees participating in the meeting can hear one another, and
all such trustees shall be deemed to be present in person at the meeting.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of Trustees
shall be held without call at such time as shall from time to time be fixed by
the Board of Trustees. Such regular meetings may be held without notice.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of Trustees
for any purpose or purposes may be called at any time by the chairperson of the
board or the president or any vice president or the secretary or any two (2)
trustees.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each trustee or sent by first-class mail, courier
or telegram, charges prepaid, or by facsimile or electronic mail, addressed to
each trustee at that trustee's address as it is shown on the records of the
Trust. In case the notice is mailed, it shall be deposited in the United States
mail at least seven (7) days before the time of the holding of the meeting. In
case the notice is delivered personally, by telephone, by courier, to the
telegraph company, or by express mail, facsimile, electronic mail or similar
service, it shall be delivered at least forty-eight (48) hours before the time
of the holding of the meeting. Any oral notice given personally or by telephone
may be communicated either to the trustee or to a person at the office of the
trustee who the person giving the notice has reason to believe will promptly
communicate it to the trustee. The notice need not specify the purpose of the
meeting or the place if the meeting is to be held at the principal executive
office of the Trust.
Section 7. QUORUM. A majority of the authorized number of trustees
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the trustees present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Board of Trustees, subject to the
provisions of the Declaration of Trust. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
trustees if any action taken is approved by at least a majority of the required
quorum for that meeting.
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Section 8. WAIVER OF NOTICE. Notice of any meeting need not be given to
any trustee who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Trust or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any trustee who attends the meeting without protesting
before or at its commencement about the lack of notice to that trustee.
Section 9. ADJOURNMENT. A majority of the trustees present, whether or
not constituting a quorum, may adjourn any matter at any meeting to another time
and place.
Section 10. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given unless the meeting is adjourned
for more than seven (7) days, in which case notice of the time and place shall
be given before the time of the adjourned meeting to the trustees who were
present at the time of the adjournment.
Section 11. FEES AND COMPENSATION OF TRUSTEES. Trustees and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board of Trustees. This Section 11 shall not be construed to preclude any
trustee from serving the Trust in any other capacity as an officer, agent,
employee, or otherwise and receiving compensation for those services.
Section 12. TRUSTEE EMERITUS. Upon retirement of a trustee, the Board
of Trustees may elect him or her to the position of Trustee Emeritus. Said
Trustee Emeritus shall serve for one year and may be reelected by the Board of
Trustees 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
of Trustees but shall receive fees paid to trustees for serving as such.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF TRUSTEES. The Board of Trustees may, by
resolution adopted by a majority of the authorized number of trustees, designate
one or more committees, each consisting of two (2) or more trustees, to serve at
the pleasure of the Board of Trustees. The Board of Trustees may designate one
or more trustees as alternate members of any committee who may replace any
absent member at any meeting of the committee. Any committee to the extent
provided in the resolution of the Board of Trustees, shall have the authority of
the Board of Trustees, except with respect to:
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(a) the approval of any action which under the Declaration of Trust or
applicable law also requires shareholders' approval or requires approval by a
majority of the entire Board of Trustees or certain members of said Board of
Trustees;
(b) the filling of vacancies on the Board of Trustees or in any
committee;
(c) the fixing of compensation of the trustees for serving on the Board
of Trustees or on any committee;
(d) the amendment or repeal of the Declaration of Trust or of the
By-Laws or the adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Board of Trustees
which by its express terms is not so amendable or repealable; or
(f) the appointment of any other committees of the Board of Trustees or
the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
any committee shall be governed by and held and taken in accordance with the
provisions of Article III of these By-Laws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Board of Trustees and its members, except that the time of regular meetings of
any committee may be determined either by resolution of the Board of Trustees or
by resolution of the committee. Special meetings of any committee may also be
called by resolution of the Board of Trustees, and notice of special meetings of
any committee shall also be given to all alternate members who shall have the
right to attend all meetings of the committee. The Board of Trustees may adopt
rules for the government of any committee not inconsistent with the provisions
of these By-Laws.
ARTICLE V
OFFICERS
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Section 1. OFFICERS. The officers of the Trust shall be a chairperson
of the board, a president and chief executive officer, a secretary, and a
treasurer. The Trust may also have, at the discretion of the Board of Trustees,
one or more vice presidents, one or more assistant vice presidents, one or more
assistant secretaries, one or more assistant treasurers, and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article V. Any number of offices may be held by the same person, except the
offices of president and vice president.
Section 2. ELECTION OF OFFICERS. The officers of the Trust shall be
chosen by the Board of Trustees, and each shall serve at the pleasure of the
Board of Trustees, subject to the rights, if any, of an officer under any
contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Trustees may appoint and
may empower the president to appoint such other officers as the business of the
Trust may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in these By-Laws or as the
Board of Trustees may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights,
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the Board of Trustees at any regular
or special meeting of the Board of Trustees, or by an officer upon whom such
power of removal may be conferred by the Board of Trustees.
Any officer may resign at any time by giving written notice to the
Trust. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Trust under any contract to which the officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled in
the manner prescribed in these By-Laws for regular appointment to that office.
Section 6. CHAIRPERSON OF THE BOARD. The chairperson of the board
shall, if present, preside at meetings of the Board of Trustees and exercise and
perform such other powers and duties as may be from time to time assigned to the
chairperson by the Board of Trustees or prescribed by the By-Laws. The
chairperson of the board shall be a member ex officio of all standing
committees. In the absence, resignation, disability or death of the president,
the chairperson shall exercise all the powers and perform all the duties of the
president until his or her return, or until such disability shall be removed or
until a new president shall have been elected.
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Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Trustees to the chairperson of the board, the
president shall be the chief executive officer of the Trust and shall, subject
to the control of the Board of Trustees, have general supervision, direction and
control of the business and the officers of the Trust. In the absence of the
chairperson of the board, he shall preside at all meetings of the shareholders
and at all meetings of the Board of Trustees. He shall have the general powers
and duties of management usually vested in the office of president of a
corporation and shall have such other powers and duties as may be prescribed by
the Board of Trustees or these By-Laws.
Section 8. VICE PRESIDENTS. In the absence or disability of the
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Trustees or if not ranked, a vice president designated by the Board of
Trustees, shall perform all the duties of the president and when so acting shall
have all powers of and be subject to all the restrictions upon the president.
The vice presidents shall have such other powers and perform such other duties
as from time to time may be prescribed for them respectively by the Board of
Trustees or by these By-Laws and the president or the chairperson of the board.
Section 9. SECRETARY. The secretary shall keep or cause to be kept at
the principal executive office of the Trust or such other place as the Board of
Trustees may direct a book of minutes of all meetings and actions of trustees,
committees of trustees and shareholders with the time and place of holding,
whether regular or special, and if special, how authorized, the notice given,
the names of those present at trustees' meetings or committee meetings, the
number of shares present or represented at shareholders' meetings, and the
proceedings.
The secretary shall cause to be kept at the principal executive office
of the Trust or at the office of the Trust's transfer agent or registrar, as
determined by resolution of the Board of Trustees, a share register or a
duplicate share register showing the names of all shareholders and their
addresses, the number, series and classes of shares held by each, the number and
date of certificates issued for the same and the number and date of cancellation
of every certificate surrendered for cancellation.
The secretary shall give or cause to be given notice of all meetings of
the shareholders and of the Board of Trustees required by these By-Laws or by
applicable law to be given and shall have such other powers and perform such
other duties as may be prescribed by the Board of Trustees or by these By-Laws.
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Section 10. TREASURER. The treasurer shall keep and maintain or cause
to be kept and maintained adequate and correct books and records of accounts of
the properties and business transactions of the Trust, including accounts of its
assets, liabilities, receipts, disbursements, gains, losses, capital, retained
earnings and shares. The books of account shall at all reasonable times be open
to inspection by any trustee.
The treasurer shall deposit all monies and other valuables in the name
and to the credit of the Trust with such depositories as may be designated by
the Board of Trustees. He shall disburse the funds of the Trust as may be
ordered by the Board of Trustees, shall render to the president and trustees,
whenever they request it, an account of all of his transactions and of the
financial condition of the Trust and shall have other powers and perform such
other duties as may be prescribed by the Board of Trustees or these By-Laws.
ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a trustee, officer, employee or
other agent of this Trust or is or was serving at the request of the Trust as a
trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes without limitation attorneys' fees and any expenses of
establishing a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. The Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of the Trust) by reason of
the fact that such person is or was an agent of the Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding if such person acted in good faith and in a
manner that such person reasonably believed to be in the best interests of the
Trust and in the case of a criminal proceeding, had no reasonable cause to
believe the conduct of such person was unlawful. The termination of any
proceeding by judgment, order, settlement, conviction or plea of nolo contendere
or its equivalent shall not of itself create a presumption that the person did
not act in good faith or in a manner which the person reasonably believed to be
in the best interests of the Trust or that the person had reasonable cause to
believe that the person's conduct was unlawful.
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Section 3. ACTIONS BY TRUST. The Trust shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action by or in the right of the Trust to procure a judgment in its
favor by reason of the fact that the person is or was an agent of the Trust,
against expenses actually and reasonably incurred by that person in connection
with the defense or settlement of that action if that person acted in good
faith, in a manner that person believed to be in the best interests of the Trust
and with such care, including reasonable inquiry, as an ordinarily prudent
person in a like position would use under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision
to the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with the Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue or matter as to which that person
shall have been adjudged to be liable in the performance of that person's duty
to the Trust, unless and only to the extent that the court in which that action
was brought shall determine upon application that in view of all the
circumstances of the case, that person was not liable by reason of the disabling
conduct set forth in the preceding paragraph and is fairly and reasonably
entitled to indemnity for the expenses which the court shall determine; or
(b) In respect of any claim, issue, or matter as to which that person
shall have been adjudged to be liable on the basis that personal benefit was
improperly received by him, whether or not the benefit resulted from an action
taken in the person's official capacity; or
(c) Of amounts paid in settling or otherwise disposing of a threatened
or pending action, with or without court approval, or of expenses incurred in
defending a threatened or pending action which is settled or otherwise disposed
of without court approval, unless the required approval set forth in Section 6
of this Article is obtained.
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Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
the Trust has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article or in defense of any claim, issue
or matter therein, before the court or other body before whom the proceeding was
brought, the agent shall be indemnified against expenses actually and reasonably
incurred by the agent in connection therewith, provided that the Board of
Trustees, including a majority who are disinterested, non-party trustees, also
determines that based upon a review of the facts, the agent was not liable by
reason of the disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by the Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of trustees who are not
parties to the proceeding and are not "interested persons" of the Trust (as
defined in the 1940 Act); or
(b) A written opinion by an independent legal counsel.
Section 7. ADVANCEMENT OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by the Trust before the final disposition of the
proceeding on receipt of an undertaking by or on behalf of the agent to repay
the amount of the advance unless it shall be determined ultimately that the
agent is entitled to be indemnified as authorized in this Article, provided the
agent provides a security for his undertaking, or a majority of a quorum of the
disinterested, non-party trustees, or an independent legal counsel in a written
opinion, determine that based on a review of readily available facts, there is
reason to believe that said agent ultimately will be found entitled to
indemnification.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than trustees
and officers of the Trust or any subsidiary thereof may be entitled by contract
or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Sections 5 or 6, in any circumstances
where it appears:
(a) That it would be inconsistent with a provision of the Declaration
of Trust, a resolution of the shareholders, or an agreement which prohibits or
otherwise limits indemnification which was in effect at the time of accrual of
the alleged cause of action asserted in the proceeding in which the expenses
were incurred or other amounts were paid; or
13
<PAGE>
(b) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees to purchase such insurance, the Trust shall purchase and
maintain insurance on behalf of any agent of the Trust against any liability
asserted against or incurred by the agent in such capacity or arising out of the
agent's status as such, but only to the extent that the Trust would have the
power to indemnify the agent against that liability under the provisions of this
Article.
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not
apply to any proceeding against any trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of the Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The Trust
shall keep at its principal executive office or at the office of its transfer
agent or registrar a record of its shareholders, providing the names and
addresses of all shareholders and the number, series and classes of shares held
by each shareholder.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Trust shall keep
at its principal executive office the original or a copy of these By-Laws as
amended to date, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The accounting
books and records and minutes of proceedings of the shareholders and the Board
of Trustees and any committee or committees of the Board of Trustees shall be
kept at such place or places designated by the Board of Trustees or in the
absence of such designation, at the principal executive office of the Trust. The
minutes shall be kept in written form and the accounting books and records shall
be kept either in written form or in any other form capable of being converted
into written form. The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate at any reasonable time during usual business hours for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or by
an agent or attorney and shall include the right to copy and make extracts.
14
<PAGE>
Section 4. INSPECTION BY TRUSTEES. Every trustee shall have the
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the Trust. This
inspection by a trustee may be made in person or by an agent or attorney and the
right of inspection includes the right to copy and make extracts of documents.
ARTICLE VIII
DIVIDENDS
Section 1. DECLARATION OF DIVIDENDS. Dividends upon the shares of
beneficial interest of the Trust may, subject to the provisions of the
Declaration of Trust, if any, be declared by the Board of Trustees at any
regular or special meeting, pursuant to applicable law. Dividends may be paid in
cash, in property, or in shares of the Trust.
Section 2. RESERVES. Before payment of any dividend there may be set
aside out of any funds of the Trust available for dividends such sum or sums as
the Board of Trustees may, from time to time, in its absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Trust, or for such other
purpose as the Board of Trustees shall deem to be in the best interests of the
Trust, and the Board of Trustees may abolish any such reserve in the manner in
which it was created.
ARTICLE IX
GENERAL MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks,
drafts, or other orders for payment of money, notes or other evidences of
indebtedness issued in the name of or payable to the Trust shall be signed or
endorsed by such person or persons and in such manner as from time to time shall
be determined by resolution of the Board of Trustees.
15
<PAGE>
Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of
Trustees, except as otherwise provided in these By-Laws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Trust and this authority may be
general or confined to specific instances; and unless so authorized or ratified
by the Board of Trustees or within the agency power of an officer, no officer,
agent, or employee shall have any power or authority to bind the Trust by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
Section 3. CERTIFICATES FOR SHARES. A certificate or certificates for
shares of beneficial interest in any series of the Trust may be issued to a
shareholder upon his request when such shares are fully paid. All certificates
shall be signed in the name of the Trust by the chairperson of the board or the
president or vice president and by the treasurer or an assistant treasurer or
the secretary or any assistant secretary, certifying the number of shares and
the series and class of shares owned by the shareholders. Any or all of the
signatures on the certificate may be facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
on a certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the Trust with
the same effect as if such person were an officer, transfer agent or registrar
at the date of issue. Notwithstanding the foregoing, the Trust may adopt and use
a system of issuance, recordation and transfer of its shares by electronic or
other means.
Section 4. LOST CERTIFICATES. Except as provided in this Section 4, no
new certificates for shares shall be issued to replace an old certificate unless
the latter is surrendered to the Trust and cancelled at the same time. The Board
of Trustees may in case any share certificate or certificate for any other
security is lost, stolen, or destroyed, authorize the issuance of a replacement
certificate on such terms and conditions as the Board of Trustees may require,
including a provision for indemnification of the Trust secured by a bond or
other adequate security sufficient to protect the Trust against any claim that
may be made against it, including any expense or liability on account of the
alleged loss, theft, or destruction of the certificate or the issuance of the
replacement certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY TRUST.
The chairperson of the board, the president or any vice president or any other
person authorized by resolution of the Board of Trustees or by any of the
foregoing designated officers, is authorized to vote or represent on behalf of
the Trust any and all shares of any corporation, partnership, trust, or other
entity, foreign or domestic, standing in the name of the Trust. The authority
granted may be exercised in person or by a proxy duly executed by such
designated person.
16
<PAGE>
Section 6. TRANSFER OF SHARES. Shares of the Trust shall be
transferable only on the record books of the Trust by the Person in whose name
such Shares are registered, or by his or her duly authorized attorney or
representative. In all cases of transfer by an attorney-in-fact, the original
power of attorney, or an official copy thereof duly certified, shall be
deposited and remain with the Trust, its transfer agent or other duly authorized
agent. In case of transfers by executors, administrators, guardians or other
legal representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Trust, its
transfer agent or other duly authorized agent. No transfer shall be made unless
and until the certificate issued to the transferor, if any, shall be delivered
to the Trust, its transfer agent or other duly authorized agent, properly
endorsed.
Section 7. HOLDERS OF RECORD. The Trust shall be entitled to treat the
holder of record of any share or shares as the owner thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not the Trust
shall have express or other notice thereof.
Section 8. FISCAL YEAR. The fiscal year of the Trust and each series
thereof shall end on the last day of February each year. The fiscal year of the
Trust or any series thereof may be refixed or changed from time to time by
resolution of the Board of Trustees. The fiscal year of the Trust shall be the
taxable year of each series of the Trust.
ARTICLE X
AMENDMENTS
Section 1. AMENDMENT. These By-laws may be restated and/or amended at
any time, without the approval of the shareholders, by an instrument in writing
signed by, or a resolution of, a majority of the then Board of Trustees.
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP STATE TAX-FREE INCOME
TRUST, a Delaware business trust (the "Trust") severally on behalf of each
series of shares of beneficial interest of the Trust that is listed on Exhibit A
to this Agreement, as that Exhibit may be amended from time to time (each such
series of shares is hereinafter referred to as a "Fund" and, together with other
series of shares listed on such Exhibit, the "Funds"), and DELAWARE MANAGEMENT
COMPANY, a series of Delaware Management Business Trust, a Delaware business
trust (the "Investment Manager").
W I T N E S S E T H:
WHEREAS, the Trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act") ;
WHEREAS, each Fund engages in the business of investing and reinvesting
its assets in securities; and
WHEREAS, the Investment Manager is registered under the Investment
Advisers Act of 1940 as an investment adviser and engages in the business of
providing investment management services; and
WHEREAS, the Trust, severally on behalf of each Fund, and the
Investment Manager desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Trust hereby employs the Investment Manager to manage the
investment and reinvestment of each Fund's assets and to administer the Trust's
affairs, subject to the direction of the Trust's Board of Trustees and officers
for the period and on the terms hereinafter set forth. The Investment Manager
hereby accepts such employment and agrees during such period to render the
services and assume the obligations herein set forth for the compensation herein
provided. The Investment Manager shall for all purposes herein be deemed to be
an independent contractor, and shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent the Trust in any way, or
in any way be deemed an agent of the Trust. The Investment Manager shall
regularly make decisions as to what securities and other instruments to purchase
and sell on behalf of each Fund and shall effect the purchase and sale of such
investments in furtherance of each Fund's objectives and policies and shall
furnish the Board of Trustees of the Trust with such information and reports
regarding each Fund's investments as the Investment Manager deems appropriate or
as the Trustees of the Trust may reasonably request.
2. The Trust shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto, including, but not
in limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of shares,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' and Trustees' meetings; miscellaneous office expenses; brokerage
commissions; custodian fees; legal and accounting fees; taxes; and federal and
state registration fees. Directors, trustees, officers and employees of the
Investment Manager may be directors, trustees, officers and employees of any of
the investment companies within the Delaware Investments family (including the
Trust). Directors, trustees, officers and employees of the Investment Manager
who are
<PAGE>
directors, trustees, officers and/or employees of these investment companies
shall not receive any compensation from such companies for acting in such dual
capacity.
In the conduct of the respective businesses of the parties hereto and
in the performance of this Agreement, the Trust and Investment Manager may share
facilities common to each, which may include legal and accounting personnel,
with appropriate proration of expenses between them.
3. (a) Subject to the primary objective of obtaining the best
execution, the Investment Manager will place orders for the purchase and sale of
portfolio securities and other instruments with such broker/dealers selected who
provide statistical, factual and financial information and services to the
Trust, to the Investment Manager, to any sub-adviser (as defined in Paragraph 5
hereof, a "Sub-Adviser") or to any other fund for which the Investment Manager
or any Sub-Adviser provides investment advisory services and/or with
broker/dealers who sell shares of the Trust or who sell shares of any other
investment company (or series thereof) for which the Investment Manager or any
Sub-Adviser provides investment advisory services. Broker/dealers who sell
shares of any investment companies or series thereof for which the Investment
Manager or Sub-Adviser provide investment advisory services shall only receive
orders for the purchase or sale of portfolio securities to the extent that the
placing of such orders is in compliance with the Rules of the Securities and
Exchange Commission and NASD Regulation, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above and
subject to such policies and procedures as may be adopted by the Board of
Trustees and officers of the Trust, the Investment Manager may cause a Fund to
pay a member of an exchange, broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of commission another
member of an exchange, broker or dealer would have charged for effecting that
transaction, in such instances where the Investment Manager has determined in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such member, broker or
dealer, viewed in terms of either that particular transaction or the Investment
Manager's overall responsibilities with respect to the Trust on behalf of the
Funds and to other investment companies (or series thereof) and other advisory
accounts for which the Investment Manager or any Sub-Adviser exercises
investment discretion.
4. As compensation for the services to be rendered to a particular Fund
by the Investment Manager under the provisions of this Agreement, that Fund
shall pay monthly to the Investment Manager exclusively from that Fund's assets,
a fee based on the average daily net assets of that Fund during the month. Such
fee shall be calculated in accordance with the fee schedule applicable to that
Fund as set forth in Exhibit A hereto, which Exhibit may be amended from time to
time as provided in Paragraphs 10(b) and (c) of this Agreement.
If this Agreement is terminated prior to the end of any calendar month
with respect to a particular Fund, the management fee for such Fund shall be
prorated for the portion of any month in which this Agreement is in effect with
respect to such Fund according to the proportion which the number of calendar
days during which the Agreement is in effect bears to the number of calendar
days in the month, and shall be payable within 10 calendar days after the date
of termination.
5. The Investment Manager may, at its expense, select and contract with
one or more investment advisers registered under the Investment Advisers Act of
1940 ("Sub-Advisers") to perform some or all of the services for a Fund for
which it is responsible under this Agreement. The Investment Manager will
compensate any Sub-Adviser for its services to the Fund. The Investment Manager
may terminate the services of any Sub-Adviser at any time in its sole
discretion, and shall at such time assume the responsibilities of such
Sub-Adviser unless and until a successor Sub-Adviser is selected and the
-2-
<PAGE>
requisite approval of the Fund's shareholders is obtained. The Investment
Manager will continue to have responsibility for all advisory services furnished
by any Sub-Adviser.
6. The services to be rendered by the Investment Manager to the Trust
on behalf of each Fund under the provisions of this Agreement are not to be
deemed to be exclusive, and the Investment Manager shall be free to render
similar or different services to others so long as its ability to render the
services provided for in this Agreement shall not be impaired thereby.
7. The Investment Manager, its directors, officers, employees, agents
and shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Trust or to any other investment company, corporation, association, firm or
individual.
8. It is understood and agreed that so long as the Investment Manager
and/or its advisory affiliates shall continue to serve as the investment adviser
to any of the Trust's Funds, other investment companies as may be sponsored or
advised by the Investment Manager or its affiliates shall have the right
permanently to adopt and to use the words "Delaware," "Delaware Investments" or
"Delaware Group" in their names and in the names of any series or class of
shares of such funds.
9. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of its duties as the Investment
Manager to the Trust on behalf of any Fund, the Investment Manager shall not be
subject to liability to the Trust or to any Fund or to any shareholder of the
Trust for any action or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security, or otherwise.
10. (a) This Agreement shall be executed and become effective as of the
date written below, and shall become effective with respect to a particular Fund
as of the effective date set forth in Exhibit A for that Fund, only if approved
by the vote of a majority of the outstanding voting securities of that Fund. It
shall continue in effect for an initial period of two years for each Fund and
may be renewed thereafter only so long as such renewal and continuance is
specifically approved at least annually by the Board of Trustees or by the vote
of a majority of the outstanding voting securities of that Fund and only if the
terms and the renewal hereof have been approved by the vote of a majority of the
Trustees of the Trust who are not parties hereto or interested persons of any
such party ("Independent Trustees"), cast in person at a meeting called for the
purpose of voting on such approval.
(b) Except as provided in Paragraph 10(c) below, no amendment to
this Agreement (or to Exhibit A hereto) shall be effective with respect to any
Fund unless approved by: (i) a majority of the Trustees of the Trust, including
a majority of Independent Trustees; and (ii) a majority of the outstanding
voting securities of the particular Fund. Any such amendment that pertains to a
Fund will not change, or otherwise affect the applicability of, this Agreement
with respect to other Funds.
(c) The Agreement (and Exhibit A hereto) may be amended with respect
to a Fund without the approval of a majority of the outstanding voting
securities of that Fund if the amendment relates solely to a management fee
reduction or other change that is permitted or not prohibited under federal law,
rule, regulation or SEC staff interpretation thereof to be made without
shareholder approval. This Agreement may be amended from time to time to add or
remove one or more Funds, or to reflect changes in management fees, by an
amendment to Exhibit A hereto executed by the Trust and the Investment Manager.
Any such amendment that pertains to a Fund will not change, or otherwise affect
the applicability of, this Agreement with respect to other Funds.
-3-
<PAGE>
(d) This Agreement may be terminated as to any Fund by the Trust at
any time, without the payment of a penalty, on sixty days' written notice to the
Investment Manager of the Trust's intention to do so, pursuant to action by the
Board of Trustees of the Trust or pursuant to the vote of a majority of the
outstanding voting securities of the affected Fund. The Investment Manager may
terminate this Agreement at any time, without the payment of a penalty, on sixty
days' written notice to the Fund of its intention to do so. Upon termination of
this Agreement, the obligations of all the parties hereunder shall cease and
terminate as of the date of such termination, except for any obligation to
respond for a breach of this Agreement committed prior to such termination, and
except for the obligation of the Trust on behalf of a Fund to pay to the
Investment Manager the fee provided in Paragraph 4 hereof, prorated to the date
of termination. This Agreement shall automatically terminate in the event of its
assignment.
11. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
12. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities"; "interested persons"; and "assignment"
shall have the meaning defined in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and duly attested as of the day of
April, 2000.
DELAWARE MANAGEMENT COMPANY, DELAWARE GROUP STATE
a series of Delaware Management Business Trust TAX-FREE INCOME TRUST
on behalf of the Funds listed on
Exhibit A
By:_____________________________ By:_____________________________
Name:___________________________ Name:___________________________
Title:__________________________ Title:__________________________
Attest:_________________________ Attest:_________________________
Name:___________________________ Name:___________________________
Title:__________________________ Title:__________________________
-4-
<PAGE>
EXHIBIT A
THIS EXHIBIT to the Investment Management Agreement between DELAWARE
GROUP STATE TAX-FREE INCOME TRUST and DELAWARE MANAGEMENT COMPANY, a series of
Delaware Management Business Trust entered into as of the 1st day of April, 1999
(the "Agreement") lists the Funds for which the Investment Manager provides
investment management services pursuant to this Agreement, along with the
management fee rate schedule for each Fund and the date on which the Agreement
became effective for each Fund.
<TABLE>
<CAPTION>
- ---------------------------------------- -------------------------------------- --------------------------------------
Fund Name Effective Date Management Fee Schedule
(as a percentage of
average daily net assets)
Annual Rate
<S> <C> <C>
- ---------------------------------------- -------------------------------------- --------------------------------------
Tax-Free New Jersey Fund April 1, 1999 0.55% on first $500 million
0.50% on next $500 million
0.45% on next $1,500 million
0.425% on assets in excess of
$2,500 million
- ---------------------------------------- -------------------------------------- --------------------------------------
Tax-Free Ohio Fund April 1, 1999 0.55% on first $500 million
0.50% on next $500 million
0.45% on next $1,500 million
0.425% on assets in excess of
$2,500 million
- ---------------------------------------- -------------------------------------- --------------------------------------
Tax-Free Pennsylvania Fund April 1, 1999 0.55% on first $500 million
0.50% on next $500 million
0.45% on next $1,500 million
0.425% on assets in excess of
$2,500 million
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
-5-
<PAGE>
Law Office
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8115
February 28, 2000
Delaware Group State Tax-Free Income Trust
1818 Market Street
Philadelphia, PA 19103
Re: Legal Opinion-Securities Act of 1933
------------------------------------
Ladies and Gentlemen:
We have examined the Agreement and Declaration of Trust (the
"Agreement") of Delaware Group State Tax-Free Income Trust (the "Fund"), a
series business trust organized under the Delaware Business Trust Act, the
By-Laws of the Fund, and its proposed form of share certificates (if any), all
as amended to date, and the various pertinent corporate proceedings we deem
material. We have also examined the Notification of Registration and the
Registration Statements filed on behalf of the Fund or its predecessor under the
Investment Company Act of 1940, as amended (the "Investment Company Act") and
the Securities Act of 1933, as amended (the "Securities Act"), all as amended to
date, as well as other items we deem material to this opinion.
The Fund is authorized by the Agreement to issue an unlimited
number of shares of beneficial interest with no par value and currently issues
shares of the Delaware Group Tax-Free Pennsylvania Fund, the Delaware Group
Tax-Free Ohio Fund and the Delaware Group Tax-Free New Jersey Fund. The
Agreement also empowers the Board to designate any additional series or classes
and allocate shares to such series or classes.
The Fund has filed with the U.S. Securities and Exchange
Commission, a registration statement under the Securities Act, which
registration statement is deemed to register an indefinite number of shares of
the Fund pursuant to the provisions of Section 24(f) of the Investment Company
Act. You have further advised us that the Fund, and/or its predecessor, has
filed, and each year hereafter will timely file, a Notice pursuant to Rule 24f-2
under the Investment Company Act perfecting the registration of the shares sold
by the Fund during each fiscal year during which such registration of an
indefinite number of shares remains in effect.
You have also informed us that the shares of the Fund, and/or
its predecessor, have been, and will continue to be, sold in accordance with the
Fund's usual method of
<PAGE>
Delaware Group State Tax-Free Income Trust
February 28, 2000
Page 2
distributing its registered shares, under which prospectuses are made available
for delivery to offerees and purchasers of such shares in accordance with
Section 5(b) of the Securities Act.
Based upon the foregoing information and examination, so long
as the Fund remains a valid and subsisting entity under the laws of its state of
organization, and the registration of an indefinite number of shares of the Fund
remains effective, the authorized shares of the Fund when issued for the
consideration set by the Board of Trustees pursuant to the Agreement, and
subject to compliance with Rule 24f-2, will be legally outstanding, fully-paid,
and non-assessable shares, and the holders of such shares will have all the
rights provided for with respect to such holding by the Agreement and the laws
of the State of Delaware.
We hereby consent to the use of this opinion, in lieu of any
other, as an exhibit to the Registration Statement of the Fund, along with any
amendments thereto, covering the registration of the shares of the Fund under
the Securities Act and the applications, registration statements or notice
filings, and amendments thereto, filed in accordance with the securities laws of
the several states in which shares of the Fund are offered, and we further
consent to reference in the registration statement of the Fund to the fact that
this opinion concerning the legality of the issue has been rendered by us.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
BY: /s/ Mark H. Plafker
---------------------------------
Mark H. Plafker
<PAGE>
POWER OF ATTORNEY
Each of the undersigned, a member of the Boards of Directors/Trustees
of the Delaware Investments Funds listed on Exhibit A to this Power of Attorney,
hereby constitutes and appoints on behalf of each of the Funds listed on Exhibit
A, David K. Downes, Wayne A. Stork and Walter P. Babich and any one of them
acting singly, his or her true and lawful attorneys-in-fact, in his or her name,
place, and stead, to execute and cause to be filed with the Securities and
Exchange Commission and other federal or state government agency or body, such
registration statements, and any and all amendments thereto as any of such
designees may deem to be appropriate under the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and all other
applicable federal and state securities laws.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
this 16th day of July, 1999.
/s/ Walter P. Babich /s/ Thomas F. Madison
- --------------------------- ----------------------------------
Walter P. Babich Thomas F. Madison
/s/ David K. Downes /s/ Charles E. Peck
- --------------------------- ----------------------------------
David K. Downes Charles E. Peck
/s/ Anthony D. Knerr /s/ Wayne A. Stork
- --------------------------- ----------------------------------
Anthony D. Knerr Wayne A. Stork
/s/ Ann R. Leven /s/ Jan L. Yeomans
- --------------------------- ----------------------------------
Ann R. Leven Jan L. Yeomans
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE INVESTMENTS FUNDS
DELAWARE GROUP EQUITY FUNDS I
DELAWARE GROUP EQUITY FUNDS II
DELAWARE GROUP EQUITY FUNDS III
DELAWARE GROUP EQUITY FUNDS IV
DELAWARE GROUP EQUITY FUNDS V
DELAWARE GROUP INCOME FUNDS
DELAWARE GROUP GOVERNMENT FUND
DELAWARE GROUP CASH RESERVE
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS
DELAWARE GROUP TAX-FREE FUND
DELAWARE GROUP TAX-FREE MONEY FUND
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS
DELAWARE GROUP ADVISER FUNDS
DELAWARE POOLED TRUST
DELAWARE GROUP PREMIUM FUND
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
VOYAGEUR FUNDS
VOYAGEUR INSURED FUNDS
VOYAGEUR INTERMEDIATE TAX FREE FUNDS
VOYAGEUR INVESTMENT TRUST
VOYAGEUR MUTUAL FUNDS
VOYAGEUR MUTUAL FUNDS II
VOYAGEUR MUTUAL FUNDS III
VOYAGEUR TAX FREE FUNDS
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.
<PAGE>
POWER OF ATTORNEY
The undersigned, a member of the Boards of Directors/Trustees of the
Delaware Investments Funds listed on Exhibit A to this Power of Attorney, hereby
constitutes and appoints on behalf of each of the Funds listed on Exhibit A,
David K. Downes, Wayne A. Stork and Walter P. Babich and any one of them acting
singly, his true and lawful attorneys-in-fact, in his name, place, and stead, to
execute and cause to be filed with the Securities and Exchange Commission and
other federal or state government agency or body, such registration statements,
and any and all amendments thereto as any of such designees may deem to be
appropriate under the Securities Act of 1933, as amended, the Investment Company
Act of 1940, as amended, and all other applicable federal and state securities
laws.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
this 16th day of July, 1999.
/s/ John H. Durham
- -----------------------
John H. Durham
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I
DELAWARE GROUP EQUITY FUNDS II
DELAWARE GROUP EQUITY FUNDS III
DELAWARE GROUP EQUITY FUNDS IV
DELAWARE GROUP EQUITY FUNDS V
DELAWARE GROUP INCOME FUNDS
DELAWARE GROUP GOVERNMENT FUND
DELAWARE GROUP CASH RESERVE
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS
DELAWARE GROUP TAX-FREE FUND
DELAWARE GROUP TAX-FREE MONEY FUND
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS
DELAWARE GROUP ADVISER FUNDS
DELAWARE POOLED TRUST
DELAWARE GROUP PREMIUM FUND
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
