<PAGE> 1
1995
Annual
Report
-----------
DELAWARE
GROUP
TAX-FREE USA
INTERMEDIATE
FUND
------------
[PHOTO OF VARIOUS PHILADELPHIA HISTORICAL SITES]
A Tradition of Sound Investing Since 1929
[DELAWARE GROUP LOGO]
<PAGE> 2
TAX-FREE USA
- -----------------
INTERMEDIATE FUND
- -----------------
INVESTMENT
- -----------------
OBJECTIVE
- -----------------
To seek as high a level of current interest income exempt from Federal income
tax as is available from municipal bonds and is consistent with prudent
investment management and preservation of capital.
[PHOTO OF VARIOUS PHILADELPHIA HISTORICAL SITES]
ABOUT OUR COVER
Headquartered in Philadelphia, Pennsylvania, Delaware Group shares in the
tradition of a city built on the vision of opportunity. Amidst the city's
historic sites, symbolic of our nation's freedom and prosperity, Delaware Group
provides both individual and institutional investors with a conservative,
disciplined approach to money management.
DELAWARE GROUP
- ---------------
A TRADITION OF
- ---------------
SOUND INVESTING
- ---------------
Delaware Management Company's investment experience dates back to 1929. Our
first mutual fund was established in 1938. Headquartered in Philadelphia with
an affiliate in London, Delaware provides a full range of mutual fund
investments, annuities and retirement plan services. Delaware International
Advisers Ltd., our London-based international affiliate, was established in
1990.
Delaware Group manages mutual funds with the same time-tested, disciplined
strategies demanded by the large public and private pension plans, foundations
and endowments that are among our clients. With over 60 years of investment
management experience we have demonstrated our commitment to quality investment
management and service.
Today, Delaware manages some $27 billion in mutual funds and institutional
investment advisory accounts. We measure our success by the financial success
and satisfaction of our nearly 500,000 shareholders.
<PAGE> 3
This annual report is for the information of Tax-Free USA Intermediate Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current Prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the Fund. Summary
investment results are documented in the current Statement of Additional
Information.
If used with prospective investors, this report must be accompanied by a
Tax-Free USA Intermediate Fund Performance Update for the most recently
completed calendar quarter. The figures in this report represent past results.
The return and principal value of an investment in the Fund will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
BOARD
- -------
MEMBERS
- -------
WAYNE A. STORK
Chairman, Delaware Group of Funds
Philadelphia, PA
WALTER P. BABICH
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
ANTHONY D. KNERR
Consultant, Anthony Knerr & Associates
New York, NY
ANN R. LEVEN
Treasurer, National Gallery of Art
Washington, DC
W. THACHER LONGSTRETH
Vice Chairman, Packquisition Corp.
Philadelphia, PA
CHARLES E. PECK
Secretary of Enterprise Homes, Inc.
Fredericksburg, VA
former Chairman and CEO
The Ryland Group, Inc.
Columbia, MD
AFFILIATED
- ----------
OFFICERS
- ----------
GEORGE M. CHAMBERLAIN, JR.
Senior Vice President and Secretary,
Delaware Group of Funds
Philadelphia, PA
KEITH E. MITCHELL
President and CEO,
Delaware Distributors, L.P.
Philadelphia, PA
DAVID K. DOWNES
Senior Vice President, Chief Financial Officer and
Chief Administrative Officer
Delaware Group of Funds
Philadelphia, PA
<PAGE> 4
September 18, 1995
DEAR
- ------------
SHAREHOLDER:
- ------------
Since the summer of 1994, bond investors have been on an interest rate roller
coaster brought about by changes in Federal Reserve Board policy, changing
economic perceptions and possible tax reform.
Still, the net effect of the past fiscal year's events has been positive.
Intermediate municipal bond interest rates were 0.30% to 0.40% lower as of
August 31, 1995, than they were 12 months earlier. In fact, the steepest
decline in rates - and most significant price appreciation - has been in the
three- to 10-year bond maturity range - the primary focus of the Tax-Free USA
Intermediate Fund.
Between August 1994 and February 1995, the Fed raised the Federal Funds
rate by 1.75 percentage points to fight anticipated inflation. Rising interest
rates pushed municipal prices lower. Then, this past spring, amid signs of
slower economic growth, the market correctly anticipated a reversal of Fed
policy, causing bond prices to rise.
This rally reversed again in May, when numerous tax proposals were
introduced in Congress, including one leading proposal for a "flat tax" that
would also end taxation of investment income. If enacted into law, some fear it
could reduce the value of municipal bonds relative to U.S. Treasuries and
corporate bonds. We do not believe the proposal is passable in its current
form.
For the 12 months ended August 31, 1995, Tax-Free USA Intermediate Fund A
Class had a total return (capital change plus reinvested
<TABLE>
<CAPTION>
====================================================================================
TOTAL RETURN
6 Months 12 Months
Ended Ended
---------------------- ------------
2/28/95 8/31/95 8/31/95
<S> <C> <C> <C>
Tax-Free USA
Intermediate Fund A +1.40% +4.96% +6.43%
Merrill Lynch
Three-to Seven-Year
Municipal Bond Index +1.26% +5.47% +6.79%
Lipper Intermediate
Municipal Debt Average +1.87% +5.05% +7.09%
</TABLE>
Tax-Free USA Intermediate Fund's performance is based on net asset value.
Performance information for all classes of the Fund can be found on page 6.
================================================================================
dividends) that nearly matched the intermediate-term municipal bond market. The
table above shows the Fund's results compared to the return of the Merrill
Lynch Three-to Seven-Year Municipal Bond Index and the Lipper Intermediate
Municipal Debt Fund Average.
Tax-Free USA Intermediate Fund has a strong focus on generating current
income, which helped protect principal during the first half of the Fund's
fiscal year. The Fund outperformed the Merrill Lynch Index amid a weak overall
bond market.
1
<PAGE> 5
During the second half of the year, interest rates fell. The Fund
participated in the bond market's rally, but the Fund's income-oriented focus
meant that price gains were somewhat less than those achieved by the Index.
Despite recent interest rate volatility, the long-term fundamentals of the
municipal bond market are positive. Credit quality as measured by rating
services is improving. Investor demand remains healthy and new issue supply
continues to decline. In our report, Patrick P. Coyne, Senior Portfolio
Manager, discusses these trends, reviews the Fund's performance and outlines
his approach for the coming months.
We are confident that the defensive, income-oriented approach and
experienced management of Tax-Free USA Intermediate Fund can help investors
benefit from the attractive features of the municipal bond market as Congress
grapples with tax reform.
/s/ WAYNE A. STORK
- -------------------
Wayne A. Stork
Chairman
PORTFOLIO
- ---------
MANAGER'S
- ---------
REVIEW
- ---------
In 1994, fixed-income markets were dramatically affected by the strength of the
U.S. economy and the fear of impending inflation. In response to these
influences the Federal Reserve Board tightened monetary policy by raising
short-term interest rates three percentage points between February 1994 and
February 1995.
In this rising interest rate environment, Tax-Free USA Intermediate Fund
maintained its focus of seeking a high level of current tax-free income
consistent with preservation of capital. We did this by buying higher coupon
bonds with superior credit characteristics. The coupon is the initial interest
rate set at the time a bond is issued.
As the first quarter of calendar 1995 progressed, it became clear to the
bond market that some parts of the economy were
MUNICIPAL BOND YIELDS IN THE WAKE OF TAX CHANGES
[GRAPH]
<TABLE>
<CAPTION>
Yield
-----
<S> <C>
Jan-81 9.68%
Feb-81 10.22
Mar-81 9.81
Apr-81 10.80
May-81 10.73
Jun-81 10.73
Jul-81 11.34
Aug-81 12.49
Sep-81 12.79
Oct-81 12.99
Nov-81 11.71
Dec-81 13.17
Jan-82 13.16
Feb-82 12.96
Mar-82 12.99
Apr-82 12.29
May-82 11.96
Jun-82 12.63
Jul-82 12.01
Aug-82 10.82
Sep-82 10.58
Oct-82 9.69
Nov-82 10.20
Dec-82 9.84
Jan-83 9.48
Feb-83 9.53
Mar-83 9.15
Apr-83 9.09
May-83 9.29
Jun-83 9.38
Jul-83 9.44
Aug-83 9.70
Sep-83 9.42
Oct-83 9.68
Nov-83 9.70
Dec-83 9.92
Jan-84 9.60
Feb-84 9.68
Mar-84 10.01
Apr-84 9.89
May-84 10.83
Jun-84 10.56
Jul-84 10.36
Aug-84 10.02
Sep-84 9.95
Oct-84 10.24
Nov-84 10.24
Dec-84 9.93
Jan-85 9.21
Feb-85 9.71
Mar-85 9.82
Apr-85 9.25
May-85 8.91
Jun-85 8.69
Jul-85 8.73
Aug-85 9.18
Sep-85 9.35
Oct-85 8.95
Nov-85 8.37
Dec-85 8.38
Jan-86 8.05
Feb-86 7.44
Mar-86 7.34
Apr-86 7.16
May-86 7.78
Jun-86 7.82
Jul-86 7.60
Aug-86 7.06
Sep-86 7.14
Oct-86 7.11
Nov-86 6.78
Dec-86 6.92
Jan-87 6.54
Feb-87 6.62
Mar-87 6.68
Apr-87 7.82
May-87 8.31
Jun-87 7.63
Jul-87 7.72
Aug-87 7.81
Sep-87 8.32
Oct-87 8.72
Nov-87 7.91
Dec-87 7.95
Jan-88 7.61
Feb-88 7.55
Mar-88 7.89
Apr-88 7.87
May-88 7.97
Jun-88 7.77
Jul-88 7.77
Aug-88 7.80
Sep-88 7.64
Oct-88 7.36
Nov-88 7.58
Dec-88 7.50
Jan-89 7.29
Feb-89 7.55
Mar-89 7.64
Apr-89 7.10
May-89 7.11
Jun-89 7.02
Jul-89 6.95
Aug-89 7.16
Sep-89 7.40
Oct-89 7.22
Nov-89 7.04
Dec-89 6.99
Jan-90 7.19
Feb-90 7.23
Mar-90 7.33
Apr-90 7.51
May-90 7.26
Jun-90 7.27
Jul-90 7.15
Aug-90 7.47
Sep-90 7.53
Oct-90 7.43
Nov-90 7.08
Dec-90 7.14
Jan-91 7.00
Feb-91 7.01
Mar-91 7.14
Apr-91 7.01
May-91 6.95
Jun-91 7.13
Jul-91 7.05
Aug-91 6.90
Sep-91 6.80
Oct-91 6.68
Nov-91 6.73
Dec-91 6.69
Jan-92 6.54
Feb-92 6.74
Mar-92 6.76
Apr-92 6.67
May-92 6.57
Jun-92 6.49
Jul-92 6.13
Aug-92 6.16
Sep-92 6.25
Oct-92 6.41
Nov-92 6.36
Dec-92 6.22
Jan-93 6.16
Feb-93 5.87
Mar-93 5.64
Apr-93 5.76
May-93 5.73
Jun-93 5.63
Jul-93 5.57
Aug-93 5.45
Sep-93 5.29
Oct-93 5.31
Nov-93 5.47
Dec-93 5.35
Jan-94 5.28
Feb-94 5.58
Mar-94 6.07
Apr-94 6.16
May-94 6.16
Jun-94 6.28
Jul-94 6.22
Aug-94 6.16
Sep-94 6.43
Oct-94 6.64
Nov-94 7.03
Dec-94 6.71
Jan-95 6.49
Feb-95 6.11
Mar-95 6.07
Apr-95 6.06
May-95 5.83
Jun-95 5.97
Jul-95 5.97
Aug-95 5.98
</TABLE>
Highlight points in chart:
Apr-81 - '81 Tax Cut
Apr-87 - Impact of '86 Tax Reform Act
Apr-93 - '93 Tax Increase
Sources: Bloomberg Business News, The Bond Buyer
Interest rates in the municipal bond market, although temporarily affected by
tax changes, have been declining since 1981. Yields have fallen steadily
despite a short-term increase in 1987 after passage of the 1986 Tax Reform Act.
Bond prices generally move in the opposite direction of yields.
2
<PAGE> 6
weakening. Interest rates fell in anticipation that the Fed would reverse
course.
For the municipal bond market, the fear of tax reform tempered the
benefits of falling interest rates.
As you can see from the chart on the previous page, interest rates on
municipal bonds rose three times since 1981 amid changes in tax policy.
However, the effect has generally been short-lived and has been more than
offset by the long-term decline in interest rates that has continued since the
early 1980s.
THE FUND'S INVESTMENT STRATEGY
Tax-Free USA Intermediate Fund employs a defensive strategy that generally
involves investing in a portfolio with higher than average bond coupons and
above-average quality ratings. Higher coupon bonds tend to be less impacted by
rising interest rates than current coupon bonds which pay interest in line with
current rates. Low coupon bonds, on the other hand, tend to be more affected by
rising interest rates, since bond prices have to fall more so that yields can
match investors' demands.
During fiscal 1995, we responded to changes in the interest rate
environment and the risks created by the tax debate by reducing the average
maturity and duration of bonds in the Fund's portfolio. Duration is the most
common measure of a bond's sensitivity to interest rates. It indicates the
approximate percentage of change in a bond's price given a 1% movement in
interest rates. Although a shorter duration helps investors when interest rates
rise, it reduces the degree to which an investment can appreciate in value when
interest rates fall.
In an effort to minimize the impact of gyrating interest rates and better
protect principal, Tax-Free USA Intermediate Fund's portfolio maintained a
shorter duration (4.9 years) than the Index cited in the chairman's letter
(6.85 years). This explains in part why the Fund's total return in fiscal 1995
was less than the unmanaged Merrill Lynch Index.
Below is a summary of how the characteristics of the Fund's portfolio
changed during the fiscal year.
<TABLE>
<CAPTION>
===============================================================================
PORTFOLIO CHARACTERISTICS
Aug. 31, Aug. 31,
1994 1995
<S> <C> <C>
TAX-FREE USA
INTERMEDIATE FUND
Average Effective
Maturity 7.2 yrs. 5.9 yrs.
Average Duration 5.7 yrs. 4.9 yrs.
Average Bond Rating AA3 AA2
===============================================================================
</TABLE>
As you can see, we reduced both the Fund's average effective maturity and
duration. This portfolio modification was driven by changes in the yield curve,
particularly in the one- to 10-year maturity range. In this range of
maturities, the yield difference between a one-year bond and a 10-year bond
"flattened."
As the slope of the intermediate yield curve flattened, short- and
intermediate-term securities offered a greater percentage of the income
available from the 10-year bond with less interest rate risk. By maintaining
approximately a six-year average effective maturity for Tax-Free USA
Intermediate Fund, we believe we give our shareholders the potential to receive
greater rewards with less price volatility than with longer term bonds.
The Fund's average AA2 bond rating is a slightly higher quality
designation than last year's AA3 rating. Both imply that issuers of bonds in
the portfolio have a strong ability to pay interest and repay principal.
3
<PAGE> 7
As you can see from the municipal bond yield chart below, yields on
one-year maturity municipal bonds as of August 31 were just slightly lower than
12 months earlier. The yield in the six-year maturity range for intermediate
municipal bonds dropped by a wider margin to about 4.4%.
Municipal bonds with the longest maturities - 20 to 30 years - provide the
highest level of income. But in order to take advantage of those opportunities,
your Fund would have to take interest rate risks that would be inconsistent
with the Fund's objective of preserving principal. So we look for other ways to
provide high income.
To increase income, we generally invest in bonds from states that have
little or no income taxes. Because municipal bonds are generally free of state
and local as well as federal taxes for residents of the state in which they are
issued, demand for bonds of states with high income taxes such as New York is
generally heavy.
Higher demand pushes bond prices up and yields down, so bonds from states
like New York typically yield less than bonds from states with lower income
taxes. Consequently, we are often able to get higher yields on bonds from
states such as Florida, which has a relatively modest "intangible" personal
property tax and a state constitutional mandate prohibiting an income tax.
[PHOTO OF PATRICK C. COYNE]
Patrick C. Coyne
Senior Portfolio Manager
As you may know, we maintain a national focus to provide a much greater
level of diversity for investors than can be found by investing in a
single-state fund, thereby reducing the potential effect of a recession,
political change or government management problems in any single state. No
single state's bonds accounted for more than 15% of the portfolio's net assets
as of August 31.
[GRAPH]
<TABLE>
<CAPTION>
MUNICIPAL BOND YIELD CURVE
AUGUST 1995 VS. AUGUST 1994
Maturity in Years August 1994 August 1995
<S> <C> <C>
1 Yr 3.72% 3.65%
2 Yr 4.12 3.85
3 Yr 4.34 4.01
4 Yr 4.54 4.16
5 Yr 4.71 4.31
7 Yr 4.96 4.56
10 Yr 5.27 4.86
15 Yr 5.76 5.46
20 Yr 5.96 5.73
25 Yr 5.98 5.85
30 Yr 6.01 5.87
</TABLE>
Despite wide swings in interest rates since the summer of 1994 and possible tax
policy changes, municipal bond yields are slightly lower than they were 12
months earlier. The biggest decline in yield was in the intermediate part of
the market as highlighted in the chart.
4
<PAGE> 8
[GRAPH]
<TABLE>
<CAPTION>
THE SUPPLY OF MUNICIPAL BONDS
Billions
--------
<S> <C>
1984 $ 101.90
1985 207.00
1986 151.30
1987 105.40
1988 117.80
1989 125.00
1990 125.10
1991 174.20
1992 235.00
1993 290.90
1994 162.98
1995* 138.00
</TABLE>
* 1995 Estimate
Source: Bond Buyer, issues maturing in 13 months or longer
As interest rates have risen since early 1994, the supply of new municipal
bonds has waned while investor demand has remained steady. Generally, when
supply decreases and demand stays the same or increases, prices tend to
increase.
OUTLOOK
We are optimistic about the future of the intermediate sector of the municipal
bond market. As the most conservative investors shifted to very short-term
bonds in the midst of the tax debate, investor demand for intermediate- and
long-term bonds has been temporarily reduced. In our opinion, the intermediate
sector offers good value and without exposing investors to as much interest
rate risk as long-term bonds.
As you can see in the chart above, one factor benefiting the market is
that the supply of new municipal bond issues continues to decline. This year it
is estimated that only $138 billion in new bonds will be issued, the lowest
level since 1990, according to The Bond Buyer, an independent trade journal.
For municipal bonds, tax policy changes in Washington have been a
perennial concern since the 1970s. With the change in leadership in Congress,
legislators are proposing the most fundamental changes since the 1986 tax
reform act. But whether they can reach a consensus - and whether that consensus
will have any lasting impact on bond values - remains to be seen.
/s/ PATRICK P. COYNE
- -----------------------
Patrick P. Coyne
Senior Portfolio Manager
A LOOK AT
- -----------
LIFETIME
- -----------
PERFORMANCE
- -----------
While past performance doesn't guarantee future results, we believe
Tax-Free Intermediate Fund's two-and-a-half-year record illustrates the
strengths of our relatively conservative approach to municipal bond investing.
As you can see from the chart on page 6, a $10,000 investment at the Fund's
inception on January 6, 1993 would have grown to $11,565 as of August 31, 1995
if dividends were reinvested.
Tax-Free Intermediate Fund has slightly outperformed the unmanaged Merrill
Lynch Three- To Seven-Year Municipal Bond Index during this period. The
performance of the unmanaged Index, a hypothetical portfolio of bonds, does not
include the "real world" expenses associated with a mutual fund such as the
cost of buying and selling bonds. We believe Tax-Free USA Intermediate Fund
will continue to be well positioned if major changes in tax policy and interest
rates ensue.
5
<PAGE> 9
This chart shows what a $10,000 investment in Tax-Free USA Intermediate Fund
would have grown to since its inception, assuming the reinvestment of
dividends. The Fund's performance is compared to that of the Merrill Lynch
Three-to-Seven-Year Municipal Bond Index.
TAX-FREE USA INTERMEDIATE FUND A CLASS LIFETIME PERFORMANCE
[GRAPH]
<TABLE>
<CAPTION>
Growth of a $10,000 investment, January 1993 through August 1995
MERRILL LYNCH THREE- TO
TAX-FREE USA INTERMEDIATE FUND SEVEN-YEAR MUNICIPAL INDEX
<S> <C> <C>
Jan. '93 $ 9,699.30 $10,079
10,079 10,086.42 10,288
Mar. '93 10,039.50 10,272
Apr. '93 10,131.53 10,328
May '93 10,205.96 10,404
June '93 10,337.65 10,486
July '93 10,421.68 10,465
Aug. '93 10,644.67 10,572
Sept. '93 10,760.24 10,673
Oct. '93 10,816.03 10,732
Nov. '93 10,717.77 10,646
Dec. '93 10,905.89 10,798
Jan. '94 11,032.13 10,906
Feb. '94 10,828.10 10,723
Mar. '94 10,555.08 10,423
Apr. '94 10,588.05 10,491
May '94 10,685.44 10,563
June '94 10,689.13 10,568
July '94 10,819.69 10,762
Aug. '94 10,866.65 10,771
Sept. '94 10,775.72 10,684
Oct. '94 10,675.41 10,617
Nov. '94 10,498.89 10,516
Dec. '94 10,622.53 10,612
Jan. '95 10,833.01 10,682
Feb. '95 11,018.96 10,906
Mar. '95 11,069.80 10,973
Apr. '95 11,098.01 11,047
May '95 11,334.40 11,296
June '95 11,329.19 11,308
July '95 11,453.63 11,400
Aug. '95 11,564.99 11,503
</TABLE>
Chart assumes $10,000 invested on January 7, 1993 and includes the impact of
the 3% sales charge and the reinvestment of all dividends. The illustration
does not show the impact of state and local taxes or the Federal alternative
minimum tax.
TAX-FREE USA INTERMEDIATE FUND PERFORMANCE
Total Return through August 31, 1995
<TABLE>
<CAPTION>
CLASS A (EST. 1993)
Average Annual Total Returns
<S> <C>
Lifetime +5.64%
One Year +3.23%
</TABLE>
Including Sales Charge
<TABLE>
<CAPTION>
CLASS B (EST. 1994)
Average Annual Total Returns
<S> <C>
Lifetime
+5.92% Excluding Sales Charge
+4.44% Including Sales Charge
One Year
+5.53% Excluding Sales Charge
+3.58% Including Sales Charge
</TABLE>
TAX-FREE USA INTERMEDIATE FUND'S RETURN AND SHARE VALUE FLUCTUATE WITH RISING
AND FALLING INTEREST RATES SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE
RESULTS. UP TO 20% OF THE ASSETS OF THE FUND MAY BE INVESTED IN MUNICIPAL
SECURITIES THAT GENERATE INCOME SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX.
AN EXPENSE LIMITATION WAS IN EFFECT DURING THE PERIOD. THE FUND'S PERFORMANCE
WOULD HAVE BEEN MATERIALLY LOWER HAD THE LIMITATION NOT BEEN IN EFFECT.
Class A returns reflect the impact of the 3% maximum sales charge, reinvestment
of all distributions, and a 12b-1 fee of up to 0.15%.
Class B performance reflects the reinvestment of all distributions. Class B
shares do not carry a front-end sales charge, but are subject to a 1% annual
distribution and service fee. They are subject to a deferred sales charge of up
to 2%. Lifetime performance "excluding sales charge" assumes the investment was
not redeemed. Class B was initially offered on 5/2/94.
6
<PAGE> 10
FINANCIAL
- ----------
STATEMENTS
- ----------
DELAWARE GROUP
TAX-FREE USA INTERMEDIATE FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
MUNICIPAL BONDS - 98.00%
CITY AND STATE AGENCY BONDS - 22.73%
Indiana Bond Bank
(State Revolving Fund Program)
6.00% 2/1/01 . . . . . . . . . . . . . . . $ 500,000 $ 524,375
Michigan Municipal Bond Authority
(Local Government Loan Program)
5.85% 5/1/01 (AMBAC) . . . . . . . . . . . 2,195,000 2,340,419
Pennsylvania State Industrial Development
Authority Economic Dev. Revenue
6.00% 7/1/99 (AMBAC) . . . . . . . . . . . 1,400,000 1,482,250
Vermont Municipal Bond Bank - Series 2
(AMBAC) 5.50% 12/1/03 . . . . . . . . . . . 500,000 526,875
----------
4,873,919
----------
GENERAL OBLIGATION BONDS - 12.04%
Kansas City, Missouri Municipal
Assistance Corp.
5.50% 3/1/00 (CGIC) . . . . . . . . . . . . 1,250,000 1,300,000
Philadelphia, Pennsylvania Municipal
Authority 5.25% 7/15/98 . . . . . . . . . . 200,000 200,750
Philadelphia, Pennsylvania School District
6.25% 5/15/01 (AMBAC) . . . . . . . . . . . 1,000,000 1,080,000
----------
2,580,750
----------
HIGHER EDUCATION REVENUE BONDS -
12.33%
* Student Loan Finance Corp. (South Dakota
Student Loan Revenue AMT)
5.30% 8/1/97 . . . . . . . . . . . . . . . 1,000,000 1,013,750
Virginia College Building Authority
(University of Richmond Project)
Mandatory Put 11/1/01
6.40% 11/1/22 . . . . . . . . . . . . . . . 1,000,000 1,073,750
Virginia State University
(Commonwealth of Virginia)
5.20% 5/1/06 . . . . . . . . . . . . . . . 555,000 556,388
----------
2,643,888
----------
HOSPITAL REVENUE BONDS - 4.10%
Michigan State Hospital Finance Auth.
(Genesys Health System)
Series 95A, 6.10% 10/1/96 . . . . . . . . . 515,000 520,794
Series 95A, 6.40% 10/1/97 . . . . . . . . . 350,000 357,438
----------
878,232
----------
HOUSING REVENUE BONDS - 13.82%
Maryland State Community Development
Administration (Single Family Program)
6th Series, 5.90% 4/1/01 . . . . . . . . . $1,000,000 $ 1,032,500
Montgomery County, Pennsylvania
Redevelopment Authority
Multifamily Housing Revenue
(KBF Associates) 6.00% 7/1/04 . . . . . . . 2,000,000 1,930,000
-----------
2,962,500
-----------
INDUSTRIAL DEVELOPMENT REVENUE BONDS -
3.20%
Philadelphia Industrial Development
Authority (Gallery II Parking Garage
Project) 6.125% 2/15/03 . . . . . . . . . . 685,000 685,856
-----------
685,856
-----------
POWER AUTHORITY REVENUE BONDS - 4.95%
New Madrid, Missouri Power Plant
5.65% 6/1/03 (AMBAC) . . . . . . . . . . . 1,000,000 1,061,250
-----------
1,061,250
-----------
TRANSPORTATION REVENUE BONDS - 13.84%
Foothill/Eastern Transportation Corridor
Agency California Toll Road Revenue
Series 95A 0.00% 1/1/05 . . . . . . . . . . 1,500,000 810,000
* Rhode Island Port Authority and Economic
Development Corp.
Airport Revenue (AMT)
5.80% 7/1/02 (FSA) . . . . . . . . . . . . 565,000 592,544
5.90% 7/1/03 (FSA) . . . . . . . . . . . . 490,000 518,175
Southeastern Pennsylvania Transportation
Authority (Letter of Credit - Canadian
Imperial) 6.00% 6/1/99 . . . . . . . . . . 1,000,000 1,047,500
-----------
2,968,219
-----------
WATER AND SEWER REVENUE BONDS - 1.95%
Easton, Pennsylvania Joint Sewer Authority
5.60% 4/1/03 (ASSET GTY) . . . . . . . . . 200,000 210,000
Marysville, Washington Water and Sewer
Revenue 5.50% 12/1/02 (MBIA) . . . . . . . 200,000 208,250
-----------
418,250
-----------
OTHER REVENUE BONDS - 9.04%
Charleston County, South Carolina
(Charleston Public Facilities Corp.)
5.20% 12/1/99 (MBIA) . . . . . . . . . . . 860,000 885,800
West Virginia School Building Authority Capital
Improvement
5.625% 7/1/02 (MBIA) . . . . . . . . . . . 1,000,000 1,053,750
-----------
1,939,550
-----------
TOTAL MUNICIPAL BONDS
(cost $20,290,468) . . . . . . . . . . . . 21,012,414
-----------
</TABLE>
7
<PAGE> 11
STATEMENT OF NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
VARIABLE RATE DEMAND NOTES - 1.40%
Montgomery, Alabama BMC Special Care
Facilities Financing Authority Series E
3.55% 12/1/30 (AMBAC) . . . . . . . . . . . $200,000 $ 200,000
Lynchburg, Virginia Industrial Development
Authority Hospital Facilities
3.55% 12/1/25 . . . . . . . . . . . . . . . 100,000 100,000
-----------
TOTAL VARIABLE RATE DEMAND NOTES
(COST $300,000) . . . . . . . . . . . . . . 300,000
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED - 99.40%
(COST $20,590,468) . . . . . . . . . . . . 21,312,414
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES -
0.60% . . . . . . . . . . . . . . . . . . . 128,355
-----------
NET ASSETS APPLICABLE TO 1,969,203 TAX-FREE USA
INTERMEDIATE FUND A CLASS SHARES AND 91,148
Tax-free USA Intermediate FUND B CLASS SHARES
($.01 PAR VALUE) OUTSTANDING; EQUIVALENT TO
$10.41 PER SHARE - 100.00% . . . . . . . . $21,440,769
===========
</TABLE>
-----------------
* This security is subject to the federal alternative minimum tax.
AMBAC - Insured by AMBAC Indemnity Corporation.
ASSET GTY - Insured by the Asset Guaranty Insurance Company.
CGIC - Insured by the Capital Guaranty Insurance Company.
FSA - Insured by Financial Security Assurance.
MBIA - Insured by the Municipal Bond Insurance Association.
<TABLE>
<S> <C>
COMPONENTS OF NET ASSETS AT AUGUST 31, 1995:
Common stock, $.01 par value, 500,000,000 shares
authorized to the Tax-Free USA Intermediate Fund $21,785,764
Accumulated undistributed :
Net realized loss on investments . . . . . (1,066,941)
Net unrealized appreciation of investments 721,946
-----------
Total net assets . . . . . . . . . . . . . . . $21,440,769
===========
</TABLE>
See accompanying notes
DELAWARE GROUP
TAX-FREE USA INTERMEDIATE FUND
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . $1,264,519
EXPENSES:
Management fees ($104,724) and
directors' fees ($7,825) . . . . . . . . . $112,549
Distribution expenses . . . . . . . . . . . . 39,514
Registration fees . . . . . . . . . . . . . . 31,564
Dividend disbursing and transfer agent
fees and expenses . . . . . . . . . . . . . 20,637
Professional fees . . . . . . . . . . . . . . 14,155
Salaries . . . . . . . . . . . . . . . . . . . 5,789
Reports and statements to shareholders . . . . 6,248
Amortization of organization expense . . . . . 3,303
Custodian fees . . . . . . . . . . . . . . . . 3,075
Taxes (other than taxes on income) . . . . . . 740
Other . . . . . . . . . . . . . . . . . . . . 9,069
--------
Total expenses . . . . . . . . . . . . . . . . 246,643
Less expenses absorbed by Delaware
Management Company, Inc. . . . . . . . . . (184,542) 62,101
-------- ----------
NET INVESTMENT INCOME . . . . . . . . . . . . 1,202,418
----------
NET REALIZED LOSS AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized loss from
security transactions . . . . . . . . . . . (623,654)
Net unrealized appreciation of
investments during the period . . . . . . . 560,494
----------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS . . . . . . . . . . . . (63,160)
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS . . . . . . . . . $1,139,258
==========
COMPUTATION OF NET ASSET VALUE AND OFFERING
PRICE FOR THE TAX-FREE USA INTERMEDIATE FUND
A CLASS - AUGUST 31, 1995
Net asset value per share (A) . . . . . . . . $10.41
Sales charges (3.00% of offering price, or 3.08%
of amount invested per share) (B) . . . . . .32
------
Offering price . . . . . . . . . . . . . . . . $10.73
======
</TABLE>
-----------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See Purchasing Shares in the current Prospectus for purchases of $100,000
or more.
See accompanying notes
8
<PAGE> 12
DELAWARE GROUP
TAX-FREE USA INTERMEDIATE FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
8/31/95 8/31/94
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . $ 1,202,418 $ 1,110,760
Net realized loss from
security transactions . . . . . . . . . . (623,654) (443,287)
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . 560,494 (221,229)
------------ ------------
Net increase in net assets resulting
from operations . . . . . . . . . . . . . 1,139,258 446,244
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME:
Tax-Free USA Intermediate Fund A Class . . . (1,171,911) (1,111,341)
Tax-Free USA Intermediate Fund B Class . . . (30,507) (3,182)
------------ ------------
(1,202,418) (1,114,523)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Tax-Free USA Intermediate Fund A Class . . 5,342,070 21,139,526
Tax-Free USA Intermediate Fund B Class . . 557,360 591,990
Net asset value of shares issued upon
reinvestment of dividends from net
investment income:
Tax-Free USA Intermediate Fund A Class . . 822,660 867,862
Tax-Free USA Intermediate Fund B Class . . 23,597 2,550
------------ ------------
6,745,687 22,601,928
------------ ------------
Cost of shares repurchased:
Tax-Free USA Intermediate Fund A Class . . (13,794,758) (7,827,573)
Tax-Free USA Intermediate Fund B Class . . (237,151) --
------------ ------------
(14,031,909) (7,827,573)
------------ ------------
Increase (decrease) in net assets derived
from capital share transactions . . . . . (7,286,222) 14,774,355
------------ ------------
NET INCREASE (DECREASE) IN
NET ASSETS . . . . . . . . . . . . . . . (7,349,382) 14,106,076
NET ASSETS:
Beginning of period . . . . . . . . . . . . 28,790,151 14,684,075
------------ ------------
End of period . . . . . . . . . . . . . . . $ 21,440,769 $28,790,151
============ ============
</TABLE>
See accompanying notes
DELAWARE GROUP
TAX-FREE USA INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1995
Delaware Group Tax-Free Fund, Inc. ("The Company") is registered as a
non-diversified open-end investment company under the Investment Company Act of
1940. The Company is organized as a Maryland Corporation and offers three
portfolios, the Tax-Free USA Intermediate Fund (the "Fund"), the Tax-Free USA
Fund and the Tax-Free Insured Fund. Each portfolio offers two classes of
shares.
1. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund for financial
statement preparation:
SECURITY VALUATION - Long term debt securities are valued by an independent
pricing service and are believed to reflect the fair value of such securities.
Money market instruments having less than 60 days to maturity are valued at
amortized cost.
FEDERAL INCOME TAXES - The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes is required in the financial
statements.
CLASS ACCOUNTING - Expenses directly attributable to a class are charged to
that class. Other common expenses are prorated between all classes of the Fund.
OTHER - Expenses common to all Funds within the Delaware Group of Funds are
allocated amongst the funds on the basis of average net assets. Security
transactions are recorded on the date the securities are purchased or sold
(trade date). Costs used in calculating realized gains and losses on the sale
of investment securities are those of the specific securities sold. Dividend
income is recorded on the ex-dividend date and interest income is recorded on
an accrual basis. Original issue discounts are accreted and premiums are
amortized to interest income over the lives of the respective securities. The
Fund declares dividends daily from net investment income and pays such
dividends monthly.
9
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT MANAGEMENT AND DISTRIBUTION AGREEMENTS
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc., (DMC)the Investment Manager of the
Fund, an annual fee which is calculated daily at the rate of 0.50% of the net
assets of the Fund less fees paid to the independent directors. DMC has elected
voluntarily to waive its fee and to absorb those expenses of the Fund to the
extent that the Fund's annual operating expenses exceed 0.25% of average daily
net assets exclusive of 12b-1 expenses through May 1, 1996. Total expenses
absorbed or waived by DMC for the year ended August 31, 1995 were $184,542. At
August 31, 1995 the Fund had a liability for Investment Management fees and
other expenses payable to DMC of $74,582.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee of 0.15% of
the average daily net assets of Class A and 1.00% of the average daily net
assets of Class B. For the year ended August 31, 1995, the Fund paid DDLP
$8,629 for commissions earned on sales of Tax-Free USA Intermediate Fund A
Class shares. At August 31, 1995, the Fund had a liability for distribution
fees and other expenses payable to DDLP of $3,763.
Certain officers of the Investment Manager are officers, directors and/or
employees of the Fund. These officers, directors and employees are paid no
compensation by the Fund. The Fund has engaged Delaware Service Company, Inc.
(DSC), an affiliate of DMC, to serve as Dividend Disbursing and Transfer Agent
for the Fund. For the year ended August 31, 1995, the amount expensed for these
services was $20,637. At August 31, 1995, the Fund had a liability for such
fees and other expenses payable to DSC of $4,591.
On April 3, 1995, Delaware Management Holdings, Inc., the indirect parent of
DMC, DDLP and DSC, through a merger transaction (the "Merger") became a
wholly-owned subsidiary of Lincoln National Corporation. Other than the
resulting change in ownership, the Merger will not materially change the manner
in which DMC, DDLP, or DSC have heretofore conducted their relationship with
the Fund.
3. INVESTMENTS
During the year ended August 31, 1995, the Fund had purchases of $14,058,853
and sales of $21,367,495 of investment securities other than U.S. government
securities and temporary cash investments.
At August 31, 1995 unrealized appreciation for financial reporting and federal
income tax purposes aggregated $721,946 of which $791,946 related to unrealized
appreciation of securities and $70,000 related to unrealized depreciation of
securities.
Net loss based on cost of specific certificate or bond for federal income tax
purposes was $623,654 for the year ended August 31, 1995. For federal income
tax purposes, the Fund had accumulated capital losses at August 31, 1995, of
$1,066,941 which may be carried forward and applied against future capital
gains. The capital loss carryforward expires as follows: 2002 - $443,287 and
2003 - $623,654.
4. CAPITAL STOCK
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
8/31/95 8/31/94
<S> <C> <C>
Shares Sold:
Tax-Free USA Intermediate Fund A Class . . . . 526,910 2,020,577
Tax-Free USA Intermediate Fund B Class . . . . 54,596 57,606
Shares issued upon reinvestment of dividends
from net investment income:
Tax-Free USA Intermediate Fund A Class . . . . 80,984 83,219
Tax-Free USA Intermediate Fund B Class . . . . 2,320 248
---------- ----------
664,810 2,161,650
---------- ----------
Shares repurchased:
Tax-Free USA Intermediate Fund A Class . . . . (1,371,578) (752,231)
Tax-Free USA Intermediate Fund B Class . . . . (23,622) --
---------- ----------
(1,395,200) (752,231)
---------- ----------
Net (decrease) increase . . . . . . . . . . . (730,390) 1,409,419
========== ==========
</TABLE>
5. LINES OF CREDIT
The Fund has a committed line of credit for $1,000,000. No amount was
outstanding at August 31, 1995 or at any time during the last fiscal year.
6. CONCENTRATION OF CREDIT RISK
The Fund concentrates its investments in securities issued by municipalities.
The value of these investments may be adversely affected by new legislation
within the states, regional or local economic conditions, and differing levels
of supply and demand for municipal bonds. Many municipalities insure repayment
for their obligations. Although bond insurance reduces the risk of loss due to
default by an issuer, such bonds remain subject to the risk that market value
may fluctuate for other reasons and there is no assurance that the insurance
company will meet its obligations. These securities have been identified in the
statement of net assets.
10
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
TAX-FREE USA TAX-FREE USA
INTERMEDIATE INTERMEDIATE
FUND A CLASS FUND B CLASS
--------------------------- --------------------
YEAR YEAR 1/7/93(1) YEAR PERIOD
ENDED ENDED TO ENDED 5/2/94(1) TO
8/31/95 8/31/94 8/31/93 8/31/95 8/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . $10.32 $10.63 $10.00 $10.32 $10.23
Income from investment operations:
Net investment income . . . . . . . . . . . . 0.55 0.53 0.33 0.46 0.15
Net realized and unrealized gain (loss) from
security transactions . . . . . . . . . . . 0.09 (0.31) 0.63 0.09 0.09
------ ------ ------ ------ ------
Total from investment operations . . . . . . . 0.64 0.22 0.96 0.55 0.24
Less distributions:
Dividends from net investment income . . . . . (0.55) (0.53) (0.33) (0.46) (0.15)
Distributions from net realized gain on security
transactions . . . . . . . . . . . . . . . . none none none none none
------ ------ ------ ------ ------
Total distributions . . . . . . . . . . . . . (0.55) (0.53) (0.33) (0.46) (0.15)
------ ------ ------ ------ ------
Net asset value, end of period . . . . . . . . . $10.41 $10.32 $10.63 $10.41 $10.32
====== ====== ====== ====== ======
Total return(2) . . . . . . . . . . . . . . . . . 6.43% 2.09% 9.75% 5.53% 2.31%
Ratios/supplemental data:
Net assets, end of period (000 omitted) . . . $20,492 $28,193 $14,684 $949 $597
Ratio of expenses to average net assets . . . 0.25%(3) 0.25%(3) 0.25%(3) 1.10%(5) 1.10%(5)
Ratio of net investment income to average net
assets . . . . . . . . . . . . . . . . . . . 5.37%(4) 5.00%(4) 4.84%(4) 4.52%(6) 4.15%(6)
Portfolio turnover rate . . . . . . . . . . . 63% 81% 53% 63% 81%
</TABLE>
- -----------------
(1) Date of initial public offering; ratios have been annualized and total
returns have not been annualized.
(2) Does not reflect the maximum front-end sales charge of 3.00% nor the 1.00%
limited contingent deferred sales charge that would apply in the event of
certain redemptions within 12 months of purchase for the Tax-Free USA
Intermediate Fund A Class and the contingent deferred sales charge for the
Tax-Free USA Intermediate Fund B Class.
(3) Ratio of expenses to average net assets prior to expense limitation was
1.07% for the year ended August 31, 1995, 1.19% for 1994 and 1.94% for
1993.
(4) Ratio of net investment income to average net assets prior to expense
limitation was 4.55% for the year ended August 31, 1995, 4.06% for 1994
and 3.15% for 1993.
(5) Ratio of expenses to average net assets prior to expense limitation was
1.92% for the year ended August 31, 1995 and 2.04% for the period ended
August 31, 1994.
(6) Ratio of net investment income to average net assets prior to expense
limitation was 3.70% for the year ended August 31, 1995 and 3.21% for the
period ended August 31, 1994.
11
<PAGE> 15
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
DELAWARE GROUP TAX-FREE FUND, INC. -
TAX-FREE USA INTERMEDIATE FUND
We have audited the accompanying statement of net assets of Delaware Group
Tax-Free Fund, Inc. - Tax-Free USA Intermediate Fund as of August 31, 1995, and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the two years in the period then ended and
for the period from January 7, 1993 (date of initial public offering) to August
31, 1993. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Tax-Free Fund, Inc. - Tax-Free USA Intermediate Fund at August
31, 1995, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the two years in the period then ended and for
the period from January 7, 1993 (date of initial public offering) to August 31,
1993, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
October 12, 1995
A REPORT ON THE TAX-FREE FUND, INC. ANNUAL MEETING
At an annual meeting of shareholders held on March 29, 1995, the following
matters were submitted for shareholder vote: the election of directors, the
ratification of the selection of Ernst & Young LLP as independent auditors of
the Fund and the approval of a new investment management agreement. The new
investment management agreement was proposed in connection with the April 3,
1995, merger of Delaware Management Holdings, Inc. (the parent company of
Delaware Management Company, Inc.) and a subsidiary of Lincoln National
Corporation. Whenever there is a change in control of an investment manager,
the Investment Company Act of 1940 requires shareholders to vote on a new
investment management agreement.
Below are the names of each director elected at the meeting as well as the
results of the other matters voted on by shareholders. The results of the
election of directors and selection of Ernst & Young LLP as independent
auditors shown are for all series of Delaware Group Tax-Free Fund. Inc. The
results shown for the approval of the new investment management agreement are
for the Tax-Free USA Intermediate Fund only.
<TABLE>
<CAPTION>
Number of Votes*
----------------------------------------------------
For Against/Withheld Abstentions
<S> <C> <C> <C>
Election of Directors:
Wayne A. Stork . . . . . . . . . . 49,978,063 1,243,534 --
Walter P. Babich . . . . . . . . . 49,972,880 1,248,717 --
Anthony D. Knerr . . . . . . . . . 49,979,565 1,242,032 --
Ann R. Leven . . . . . . . . . . . 49,980,841 1,240,757 --
W. Thacher Longstreth . . . . . . . 49,955,428 1,266,169 --
Charles E. Peck . . . . . . . . . . 49,979,893 1,241,704 --
Selection of Ernst & Young LLP as
Independent Auditors . . . . . . . 49,078,243 323,693 1,819,660
Approval of the New
Investment Management
Agreement . . . . . . . . . . . . 1,366,296 16,261 73,837
</TABLE>
* Please note that the results of this meeting were not audited by Ernst &
Young LLP.
12
<PAGE> 16
DELAWARE GROUP
- --------------
OF FUNDS
- --------------
FOR GROWTH OF CAPITAL
Trend Fund
DelCap Fund
Value Fund
FOR TOTAL RETURN
Devon Fund
Decatur Total Return Fund
Decatur Income Fund
Delaware Fund
FOR GLOBAL DIVERSIFICATION
International Equity Fund
Global Assets Fund
Global Bond Fund
FOR CURRENT INCOME
Delchester Fund
U.S. Government Fund
Limited-Term Government Fund
FOR TAX-FREE CURRENT INCOME
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Tax-Free Pennsylvania Fund
MONEY MARKET FUNDS
Delaware Cash Reserve
U.S. Government Money Fund
Tax-Free Money Fund
CLOSED-END EQUITY/INCOME*
Dividend and Income Fund
Global Dividend and Income Fund
This report must be preceded or accompanied by a current Tax-Free USA
Intermediate Fund prospectus. For a prospectus of any other Delaware Group
fund, contact your financial adviser or Delaware Group.
* Delaware Group Dividend and Income Fund and Delaware Group Global Dividend
and Income Fund purchases can be made through any registered broker.
[DELAWARE GROUP LOGO]
Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan; however, shares of the Fund are
not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union,
are not obligations of or deposits of any bank or any credit union, and involve
investment risk, including the possible loss of principal. Shares of the Fund
are not bank or credit union deposits.
INVESTMENT MANAGER
Delaware Management Company, Inc.
Philadelphia
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia
1818 Market Street
Philadelphia, PA 19103-3682
Nationwide (800) 523-4640;
In Philadelphia (215) 988-1333
SECURITIES DEALERS ONLY
Nationwide (800) 362-7500;
In Philadelphia (215) 988-1050
(C) Delaware Distributors, L.P.
[LOGO] Printed in U.S.A. on recycled paper.
AR=037[8/95]TKO10/95
13
