<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 2-86606
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. / /
--------
Post-Effective Amendment No. 21 / X /
--------
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 21
-------
DELAWARE GROUP TAX-FREE FUND, INC.
- -----------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
- -----------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 751-2923
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
- -----------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: November 29, 1995
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
---------
X on November 29, 1995 pursuant to paragraph (b)
---------
60 days after filing pursuant to paragraph (a)(1)
---------
on (date) pursuant to paragraph (a)(1)
---------
75 days after filing pursuant to paragraph (a)(2)
---------
on (date) pursuant to paragraph (a)(2) of Rule 485
---------
Registrant has registered an indefinite amount of securities
under the Securities Act of 1933 pursuant to Section 24(f)
of the Investment Company Act of 1940. Registrant's 24f-2 Notice
for its most recent fiscal year was filed on October 25, 1995.
<PAGE> 2
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
--- C O N T E N T S ---
This Post-Effective Amendment No. 21 to Registration File No. 2-86606
includes the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectuses
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE> 3
<TABLE>
<CAPTION>
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
CROSS-REFERENCE SHEET*
PART A
------
Item No. Description Location in Prospectuses
-------- ----------- ------------------------
<S> <C> <C>
Tax-Free USA Fund
Tax-Free Insured Fund
A Classes/B Classes/C Classes
1 Cover Page . . . . . . . . . . . . . . . . . . . . . . . . Cover
2 Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . Synopsis, Summary of Expenses
3 Condensed Financial Information . . . . . . . . . . . . . . Financial Highlights
4 General Description of Registrant . . . . . . . . . . . . . Investment Objective and
Policies, Shares
5 Management of the Fund . . . . . . . . . . . . . . . . . . Management of the Fund
6 Capital Stock and Other Securities . . . . . . . . . . . . Delaware Difference,
Dividends and
Distributions, Taxes,
Shares
7 Purchase of Securities Being Offered . . . . . . . . . . . Cover, Buying Shares,
Calculation of Offering
Price and Net Asset
Value Per Share,
Management of the Fund
8 Redemption or Repurchase . . . . . . . . . . . . . . . . . Buying Shares,
Redemption and Exchange
9 Pending Legal Proceedings . . . . . . . . . . . . . . . . . None
</TABLE>
* Delaware Group Tax-Free Fund, Inc. offers three (3) series of
shares. Each series offers three (3) classes of shares. The
Tax-Free USA Fund offers the Tax-Free USA Fund A Class, the
Tax-Free USA Fund B Class and the Tax-Free USA Fund C Class; the
Tax-Free Insured Fund offers the Tax-Free Insured Fund A Class, the
Tax-Free Insured Fund B Class and the Tax-Free Insured Fund C
Class; and the Tax-Free USA Intermediate Fund offers the Tax-Free
USA Intermediate Fund A Class, the Tax-Free USA Intermediate Fund B
Class and the Tax-Free USA Intermediate Fund C Class. The Class A,
B and C Shares of each of the Tax-Free USA Fund and the Tax-Free
Insured Fund are combined in one (1) prospectus. The Class A, B
and C Shares of the Tax-Free USA Intermediate Fund are also
combined in a separate prospectus. The three (3) series, along
with their respective classes, have a common Part B and Part C.
<PAGE> 4
<TABLE>
<CAPTION>
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
CROSS-REFERENCE SHEET
PART A
------
(Continued)
Item No. Description Location in Prospectuses
-------- ----------- ------------------------
Tax-Free USA
Intermediate Fund
A Class/B Class/C Class
<S> <C> <C>
1 Cover Page . . . . . . . . . . . . . . . . . . . . . . . . Cover
2 Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . Synopsis, Summary of Expenses
3 Condensed Financial Information . . . . . . . . . . . . . . Financial Highlights
4 General Description of Registrant . . . . . . . . . . . . . Investment Objective and
Policies, Shares
5 Management of the Fund . . . . . . . . . . . . . . . . . . Management of the Fund
6 Capital Stock and Other Securities . . . . . . . . . . . . Delaware Difference,
Dividends and
Distributions, Taxes,
Shares
7 Purchase of Securities Being Offered . . . . . . . . . . . Cover, Buying Shares,
Calculation of Offering
Price and Net Asset
Value Per Share,
Management of the Fund
8 Redemption or Repurchase . . . . . . . . . . . . . . . . . Buying Shares,
Redemption and Exchange
9 Pending Legal Proceedings . . . . . . . . . . . . . . . . . None
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
CROSS-REFERENCE SHEET
PART B
------
Location in Statement
Item No. Description of Additional Information
-------- ----------- -------------------------
<S> <C> <C>
10 Cover Page . . . . . . . . . . . . . . . . . . . . . . . . Cover
11 Table of Contents . . . . . . . . . . . . . . . . . . . . . Table of Contents
12 General Information and History . . . . . . . . . . . . . . General Information
13 Investment Objectives and Policies . . . . . . . . . . . . Investment Objectives
and Policies
14 Management of the Registrant . . . . . . . . . . . . . . . Officers and Directors
15 Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . . . . . . . . . . Officers and Directors
16 Investment Advisory and Other Services . . . . . . . . . . Plans Under Rule 12b-1
(under Purchasing Shares),
Investment Management Agreement,
Officers and Directors,
General Information,
Financial Statements
17 Brokerage Allocation . . . . . . . . . . . . . . . . . . . Trading Practices and Brokerage
18 Capital Stock and Other Securities . . . . . . . . . . . . Capitalization and
Noncumulative Voting
(under General Information)
19 Purchase, Redemption and Pricing of Securities
Being Offered . . . . . . . . . . . . . . . . . . . . . . . Purchasing Shares,
Determining Offering Price
and Net Asset Value,
Redemption and Exchange,
Exchange Privilege
20 Tax Status . . . . . . . . . . . . . . . . . . . . . . . . Taxes
21 Underwriters . . . . . . . . . . . . . . . . . . . . . . . Purchasing Shares
22 Calculation of Performance Data . . . . . . . . . . . . . . Performance Information
23 Financial Statements . . . . . . . . . . . . . . . . . . . Financial Statements
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
CROSS-REFERENCE SHEET
PART C
------
Item No. Description Location in Part C
-------- ----------- -------------------
<S> <C> <C>
24 Financial Statements and Exhibits . . . . . . . . . . . . . . . . . . . . . . . Item 24
25 Persons Controlled by or under Common
Control with Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 25
26 Number of Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . Item 26
27 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 27
28 Business and Other Connections of Investment Adviser . . . . . . . . . . . . . . . Item 28
29 Principal Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 29
30 Location of Accounts and Records . . . . . . . . . . . . . . . . . . . . . . . . . Item 30
31 Management Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 31
32 Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 32
</TABLE>
<PAGE> 7
============
TAX-FREE USA
INTERMEDIATE
FUND
A CLASS
B CLASS
C CLASS
============
PROSPECTUS
NOVEMBER 29, 1995
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, tax-free funds, money market funds,
global and international funds and closed-end equity funds give investors the
ability to create a portfolio that fits their personal financial goals. For more
information, contact your financial adviser or call Delaware Group at
800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, NY 10260
[ARTWORK]
DELAWARE
GROUP
=========
PHILADELPHIA - LONDON
[LOGO - PRINTED IN THE U.S.A. ON RECYCLED PAPER.]
P-037[--]BP11/95
<PAGE> 8
TAX-FREE USA INTERMEDIATE FUND PROSPECTUS
NOVEMBER 29, 1995
A CLASS SHARES
B CLASS SHARES
C CLASS SHARES
- --------------------------------------------------------------------------------
1818 MARKET STREET, PHILADELPHIA, PA 19103
FOR PROSPECTUS AND PERFORMANCE: NATIONWIDE 800-523-4640, PHILADELPHIA
215-988-1333
INFORMATION ON EXISTING ACCOUNTS: (SHAREHOLDERS ONLY) NATIONWIDE 800-523-1918,
PHILADELPHIA 215-988-1241
DEALER SERVICES: (BROKER/DEALERS ONLY) NATIONWIDE 800-362-7500, PHILADELPHIA
215-988-1050
Delaware Group Tax-Free Fund, Inc. (the "Fund"), established as a Maryland
corporation in 1983, is a professionally-managed, open-end management investment
company of the series type. This Prospectus describes the Tax-Free USA
Intermediate Fund A Class ("Class A Shares"), the Tax-Free USA Intermediate Fund
B Class ("Class B Shares") and the Tax-Free USA Intermediate Fund C Class
("Class C Shares") (such classes, collectively the "Classes") of the Fund's
Tax-Free USA Intermediate Fund series (the "Series"). The objective of the
Series is to seek a high level of current interest income exempt from federal
income tax as is available from municipal bonds and is consistent with prudent
investment management and the preservation of capital. The Series' portfolio of
investments is nondiversified, as defined by the Investment Company Act of 1940,
as amended (the "1940 Act").
Class A Shares may be purchased at the public offering price, which is equal to
the next determined net asset value per share, plus a front-end sales charge.
Class B Shares and Class C Shares may be purchased at a price equal to the next
determined net asset value per share. Class A Shares are subject to a maximum
front-end sales charge of 3.00% and annual 12b-1 Plan expenses of up to .30%.
Class B Shares are subject to a contingent deferred sales charge ("CDSC") which
may be imposed on redemptions made within three years of purchase and annual
12b-1 Plan expenses of 1%, which, except in the case of certain purchases of
shares acquired by exchange, are assessed against the Class B Shares for
approximately five years after purchase. See Automatic Conversion of Class B
Shares under Buying Shares. Class C Shares are subject to a CDSC which may be
imposed on redemptions made within twelve months of purchase and annual 12b-1
Plan expenses of 1%, which are assessed against the Class C Shares for the life
of the investment. See Summary of Expenses. These alternatives permit an
investor to choose the method of purchasing shares that is most suitable for his
or her needs. In choosing the most suitable class, an investor should consider
the differences among the Classes, including the effect of sales charges and
12b-1 Plan expenses, given the amount of the purchase, the length of time the
investor expects to hold the shares and other circumstances. See Buying Shares.
This Prospectus relates only to the Classes listed above and sets forth
information that you should read and consider before you invest. Please retain
it for future reference. Part B of the Fund's registration statement, dated
November 29, 1995, as it may be amended from time to time, contains additional
information about the Series and has been filed with the Securities and Exchange
Commission. Part B is incorporated by reference into this Prospectus and is
available, without charge, by writing to Delaware Distributors, L.P. at the
above address or by calling the above numbers. The Series' financial statements
appear in its Annual Report, which will accompany any response to requests for
Part B.
The Fund also offers the Tax-Free USA Fund and the Tax-Free Insured Fund, each
of which offers three classes of shares. The three classes of shares of the Tax-
Free USA Fund are the Tax-Free USA Fund A Class, the Tax-Free USA Fund B Class
and the Tax-Free USA Fund C Class. The three classes of shares of the Tax-Free
Insured Fund are the Tax-Free Insured Fund A Class, the Tax-Free Insured Fund B
Class and the Tax-Free Insured Fund C Class. A prospectus for the Tax-Free USA
Fund and The Tax-Free Insured Fund can be obtained by writing to Delaware
Distributors, L.P. at the above address or by calling the above number.
<TABLE>
<S> <C>
TABLE OF CONTENTS
COVER PAGE.......................................... 1
SYNOPSIS............................................ 2
SUMMARY OF EXPENSES................................. 4
FINANCIAL HIGHLIGHTS................................ 6
INVESTMENT OBJECTIVE AND POLICIES
SUITABILITY....................................... 8
INVESTMENT STRATEGY............................... 8
THE DELAWARE DIFFERENCE
PLANS AND SERVICES................................ 15
BUYING SHARES....................................... 17
REDEMPTION AND EXCHANGE............................. 25
DIVIDENDS AND DISTRIBUTIONS......................... 30
TAXES............................................... 31
CALCULATION OF OFFERING PRICE AND
NET ASSET VALUE PER SHARE......................... 32
MANAGEMENT OF THE FUND.............................. 33
APPENDIX A--INVESTMENT ILLUSTRATIONS................ 36
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT
BANK OR CREDIT UNION DEPOSITS.
- -------------------------------------------------------------------------------
- - 1
<PAGE> 9
SYNOPSIS
CAPITALIZATION
The Series offers three classes of shares: Class A Shares, Class B Shares and
Class C Shares. The Fund has a present authorized capitalization of five hundred
million shares of capital stock with a $.01 par value per share, with one
hundred million shares allocated to the Series. Fifty million shares have been
allocated to the Class A Shares, twenty-five million shares to the Class B
Shares and twenty-five million shares to the Class C Shares. See Shares under
Management of the Fund.
INVESTMENT MANAGER, DISTRIBUTOR AND SERVICE AGENT
Delaware Management Company, Inc. (the "Manager") is the investment manager
for the Fund. The Manager or its affiliate, Delaware International Advisers
Ltd., also manages the other funds in the Delaware Group. Delaware Distributors,
L.P. (the "Distributor") is the national distributor for the Fund and for all of
the other mutual funds in the Delaware Group. Delaware Service Company, Inc.
(the "Transfer Agent") is the shareholder servicing, dividend disbursing and
transfer agent for the Fund and for all of the other mutual funds in the
Delaware Group. See Management of the Fund.
SALES CHARGES
The price of the Class A Shares includes a maximum front-end sales charge of
3.00% of the offering price, which, based on the net asset value of the Class A
Shares as of the end of the Fund's most recent fiscal year, is equivalent to
3.08% of the amount invested. The sales charge is reduced on certain
transactions of at least $100,000 but under $1,000,000. For purchases of
$1,000,000 or more, the front-end sales charge is eliminated. Class A Shares are
subject to annual 12b-1 Plan expenses.
The price of the Class B Shares is equal to the net asset value per share.
Class B Shares are subject to a CDSC of: (i) 2% if shares are redeemed within
two years of purchase; and (ii) 1% if shares are redeemed during the third year
following purchase. Class B Shares are subject to annual 12b-1 Plan expenses for
approximately five years after purchase. See Automatic Conversion of Class B
Shares under Buying Shares.
The price of the Class C Shares is equal to the net asset value per share.
Class C Shares are subject to a CDSC of 1% if shares are redeemed within twelve
months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses for
the life of the investment.
See Buying Shares and Distribution (12b-1) and Service under Management of the
Fund.
PURCHASE AMOUNTS
Generally, the minimum initial investment is $1,000 for Class A Shares, Class
B Shares and Class C Shares. Subsequent investments generally must be at least
$100. Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. An investor may exceed the maximum purchase
limitations for Class B Shares and Class C Shares by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more of Class A
Shares, which are subject to lower annual 12b-1 Plan expenses than Class B
Shares and Class C Shares and generally are not subject to a CDSC. See Buying
Shares.
INVESTMENT OBJECTIVE
The objective of the Series is to seek a high 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. The
Series seeks to achieve its objective by investing primarily in municipal bonds.
The portfolio will have a dollar weighted average maturity of between three and
ten years. Although exempt from regular federal income tax, interest paid on
certain types of municipal obligations is deemed to be a preference item under
federal tax law and is subject to the federal alternative minimum tax. Up to 20%
of the net assets of the Series may be invested in bonds the income from which
is subject to the federal alternative minimum tax. In addition, gain on the
disposition of a tax-exempt bond that was acquired after April 30, 1993 for a
price less than the principal amount of the bond is treated as ordinary income
to the extent of the accrued market discount. For further details, see
Investment Objective and Policies.
- - 2
<PAGE> 10
RISK FACTORS AND SPECIAL CONSIDERATIONS
Prospective investors should consider a number of factors:
1. The Series may invest in repurchase agreements (which involve risks of loss
if a seller defaults on its obligation under the agreement). See Repurchase
Agreements under Investment Strategy.
2. The Series may lend portfolio securities to creditworthy institutions; the
principal risk to the Series is the risk that the borrower will fail to return
the borrowed security. The Series will require borrowers to deliver collateral
to the Series before lending securities. See Portfolio Loan Transactions under
Investment Strategy.
3. The Series has the right to engage in options and futures transactions for
hedging purposes, to counterbalance portfolio volatility and, in connection with
futures transactions, will maintain certain collateral in special accounts
established by futures commission merchants in the care of the Morgan Guaranty
Trust Company of New York (the "Custodian Bank"). While the Series does not
engage in options and futures for speculative purposes, there are risks that
result from the use of these instruments by the Series, and an investor should
carefully review the descriptions of such in this Prospectus. The Fund is not
registered as a commodity pool operator nor is the Manager registered as a
commodities trading adviser, in reliance upon various exemptive rules. See
Options and Futures under Investment Strategy.
4. The Series may invest up to 10% of its assets in high-yield securities
(junk bonds) and, consequently, greater risks may be involved with an investment
in the Series. See Quality Restrictions under Investment Strategy.
5. While the Series intends to seek to qualify as a "diversified" investment
company under provisions of Subchapter M of the Internal Revenue Code, the
Series will not be diversified as defined by the 1940 Act. Thus, while at least
50% of the Series' total assets will be represented by cash, cash items, and
other securities limited in respect of any one issuer to an amount not greater
than 5% of the Series' total assets, it will not satisfy the 1940 Act definition
of "diversified," which applies the test set forth in this sentence to 75% of
the Series' assets. A nondiversified portfolio is believed to be subject to
greater risk because adverse effects on the portfolio's security holdings may
affect a larger portion of the overall assets.
OPEN-END INVESTMENT COMPANY
The Fund, which was organized as a Maryland corporation in 1983, is an
open-end management investment company. See Shares under Management of the Fund.
INVESTMENT MANAGEMENT FEES
The Manager furnishes investment management services to the Fund, subject to
the supervision and direction of the Board of Directors. Under the Investment
Management Agreement, the annual compensation paid to the Manager is equal to
.50% of the average daily net assets of the Series, less a proportionate share
of all directors' fees paid to the unaffiliated directors by the Fund. See
Management of the Fund.
REDEMPTION AND EXCHANGE
Class A Shares of the Series may be redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request. Neither
the Series nor the Distributor assesses a charge for redemptions or exchanges of
Class A Shares, except for certain redemptions of such shares purchased at net
asset value, which may be subject to a contingent deferred sales charge if such
purchase triggered the payment of a dealer's commission. See Front-End Sales
Charge Alternative--Class A Shares under Buying Shares. Class B Shares and Class
C Shares may be redeemed or exchanged at the net asset value calculated after
receipt of the redemption or exchange request subject, in the case of
redemptions, to any applicable CDSC. Neither the Fund nor the Distributor
assesses any charges other than the CDSC for redemptions or exchanges of Class B
or Class C Shares. There are certain limitations on an investor's ability to
exchange shares between the various classes of shares that are offered. See
Redemption and Exchange.
- - 3
<PAGE> 11
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses applicable
to Class A, Class B and Class C Shares follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHAREHOLDER TRANSACTION EXPENSES SHARES SHARES SHARES
---------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................. 3.00% None None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of offering price)..... None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, whichever
is lower)......................... None* 2.00%* 1.00%*
Redemption Fees.................... None** None** None**
</TABLE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE CLASS A CLASS B CLASS C
DAILY NET ASSETS) SHARES SHARES SHARES
--------------------------------------------------------------
<S> <C> <C> <C>
Management Fees (after voluntary
waiver)........................ 0.00% + 0.00% ++ 0.00% ++
12b-1 Plan Expenses (including
service fees)................... 0.15% *** 1.00% *** 1.00% ***
Other Operating Expenses......... 0.10% + 0.10% ++ 0.10% ++
----- ----- -----
Total Operating Expenses...... 0.25% + 1.10% ++ 1.10% ++
===== ==== =====
</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in any of the Classes will bear
directly or indirectly.
*With respect to Class A Shares, purchases of $1 million or more may be made
at net asset value; however, if in connection with any such purchase, certain
dealer commissions are paid to the financial adviser through whom such
purchase is effected, a contingent deferred sales charge of 1% will be
imposed on certain redemptions within 12 months of purchase ("Limited CDSC").
Class B Shares are subject to a CDSC of 2% if shares are redeemed within the
first two years of purchase, 1% if shares are redeemed during the third year
following purchase and 0% thereafter. Class C Shares are subject to a CDSC of
1% if the shares are redeemed within twelve months of purchase. See
Contingent Deferred Sales Charge for Certain Purchases of Class A Shares Made
at Net Asset Value under Redemption and Exchange; Deferred Sales Charge
Alternative-- Class B Shares and Level Sales Charge Alternative--Class C
Shares under Buying Shares.
**CoreStates Bank, N.A. currently charges $7.50 per redemption for redemptions
payable by wire.
***Class A Shares, Class B Shares and Class C Shares are subject to separate
12b-1 Plans. Long-term shareholders of the Classes may pay more than the
economic equivalent of the maximum front-end sales charges permitted by the
rules of the National Association of Securities Dealers, Inc. ("NASD").
+The Manager elected voluntarily to waive that portion, if any, of the annual
management fees payable by the Class A Shares and to reimburse such Class to
the extent necessary to ensure that the Total Operating Expenses of the Class
A Shares, including the 12b-1 expenses, did not exceed .25% during the period
from the commencement of the public offering of the Class through June 30,
1993. This waiver was extended to June 30, 1994, but modified, effective May
2, 1994 through June 30, 1996 to provide that annual operating expenses would
not exceed .10% (excluding 12b-1 fees). Because 12b-1 Plan fees have been set
at .15% by the Fund's Board for the Class A Shares, the amount of the
voluntary waiver, as modified, will be equivalent to the waiver operative
through May 1, 1994. If the voluntary expense waivers were not in effect, the
Total Operating Expenses, as a percentage of average daily net assets, would
have been 1.07%, reflecting Management Fees of 0.47%, for the Class A Shares.
++The Manager has elected voluntarily to waive that portion of the annual
management fees payable by the Class B Shares and the Class C Shares and to
reimburse each such Class to the extent necessary to ensure that annual
operating expenses of the Class B Shares and the Class C Shares, excluding
12b-1 expenses, do not exceed .10% through June 30, 1996. If the voluntary
expense waivers were not in effect, Total Operating Expenses of the Class B
Shares, as a percentage of average daily net assets would have been 1.92%,
reflecting Management Fees of 0.47%. "Other Operating Expenses" for Class C
Shares are based upon the actual expenses incurred by Class A Shares and
Class B Shares for the fiscal year ended August 31, 1995 and the voluntary
waiver of fees by the Manager. If the voluntary expense waivers were not in
effect, it is estimated that Total Operating Expenses of the Class C Shares
would be 1.92%.
- - 4
<PAGE> 12
SUMMARY OF EXPENSES
(Continued)
The following example illustrates the expenses that an investor would pay on a
$1,000 investment over various time periods, assuming (1) a 5% annual rate of
return, (2) redemption at the end of each time period and (3) with respect to
Class B Shares and Class C Shares, payment of a CDSC at the time of redemption,
if applicable.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
CLASS A SHARES $ 32(1) $38 $44 $ 61
CLASS B SHARES $ 31 $45 $61(2) $ 78(2)
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
CLASS C SHARES $21 $35 $61 $134
</TABLE>
An investor would pay the following expenses on the same $1,000 investment,
assuming no redemption at the end of the period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
CLASS A SHARES $32 $38 $44 $ 61
CLASS B SHARES $11 $35 $61(2) $ 78(2)
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
CLASS C SHARES $11 $35 $61 $134
</TABLE>
(1)Generally, the Fund does not assess a redemption charge upon redemption of
Class A Shares. Under certain circumstances, however, a Limited CDSC, which
has not been reflected in this calculation, may be imposed on certain
redemptions within 12 months of purchase. See Contingent Deferred Sales
Charge for Certain Purchases of Class A Shares Made at Net Asset Value under
Redemption and Exchange.
(2)At the end of approximately five years after purchase, Class B Shares will be
automatically converted into Class A Shares. The example above assumes
conversion of Class B Shares at the end of the fifth year. However, the
conversion may occur as late as three months after the fifth anniversary of
purchase, during which time the higher 12b-1 Plan fees payable by Class B
Shares will continue to be assessed. Information for the sixth through tenth
years reflects expenses of the Class A Shares. See Automatic Conversion of
Class B Shares under Buying Shares for a description of the automatic
conversion feature.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
- - 5
<PAGE> 13
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Tax-Free Fund, Inc.-- Tax-Free USA Intermediate Fund and have
been audited by Ernst & Young LLP, independent auditors. The data should be read
in conjunction with the financial statements, related notes, and the report of
Ernst & Young LLP covering such financial information and highlights, all of
which are incorporated by reference into Part B. Further information about the
Series' performance is contained in its Annual Report to shareholders. A copy of
the Series' Annual Report (including the report of Ernst & Young LLP) may be
obtained from the Fund upon request at no charge. Information regarding the
Class C Shares has not been included in these tables because such shares were
not offered to the public prior to the date of this Prospectus.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX-FREE USA INTERMEDIATE FUND
A CLASS
---------------------------------
PERIOD
1/7/93(1)
YEAR ENDED THROUGH
8/31/95 8/31/94 8/31/93
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................ $10.320 $10.630 $10.000
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............................... 0.550 0.530 0.330
Net Gains (Losses) on Securities (both realized and
unrealized)........................................ 0.090 (0.310) 0.630
------ ------ ------
Total From Investment Operations................... 0.640 0.220 0.960
------ ------ ------
LESS DISTRIBUTIONS
Dividends from Net Investment Income................ (0.550) (0.530) (0.330)
Distributions from Capital Gains.................... none none none
Returns of Capital.................................. none none none
------ ------ ------
Total Distributions................................ (0.550) (0.530) (0.330)
------ ------ ------
Net Asset Value, End of Period...................... $10.410 $10.320 $10.630
====== ====== ======
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(2)..................................... 6.43% 2.09% 9.75%
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)........... $20,492 $28,193 $14,684
Ratio of Expenses to Average Daily Net Assets(3).... 0.25% 0.25% 0.25%
Ratio of Net Investment Income to Average Daily Net
Assets(4).......................................... 5.37% 5.00% 4.84%
Portfolio Turnover Rate............................. 63% 81% 53%
</TABLE>
- ------------------
(1)Date of initial public offering; ratios have been annualized but total return
has not been annualized.
(2)Does not reflect maximum sales charge of 3.00% nor the 1% Limited CDSC that
would apply in the event of certain redemptions within 12 months of purchase.
Total return reflects the waiver of fees in Notes 3 and 4.
(3)Ratio of expenses to average daily net assets prior to expense limitation was
1.07% for 1995, 1.19% for 1994 and 1.94% for 1993.
(4)Ratio of net investment income to average daily net assets prior to expense
limitation was 4.55% for 1995, 4.06% for 1994 and 3.15% for 1993.
- - 6
<PAGE> 14
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX-FREE USA
INTERMEDIATE FUND
B CLASS
--------------------
PERIOD
YEAR 5/2/94(1)
ENDED THROUGH
8/31/95 8/31/94
<S> <C> <C>
Net Asset Value, Beginning of Period.................. $10.320 $10.230
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................. 0.460 0.150
Net Gains (Losses) on Securities (both realized and
unrealized).......................................... 0.090 0.090
------ ------
Total From Investment Operations..................... 0.550 0.240
------ ------
LESS DISTRIBUTIONS
Dividends from Net Investment Income.................. (0.460) (0.150)
Distributions from Capital Gains...................... none none
Returns of Capital.................................... none none
------ ------
Total Distributions.................................. (0.460) (0.150)
------ ------
Net Asset Value, End of Period........................ $10.410 $10.320
====== ======
- ------------------------------------------------------------------------------------
TOTAL RETURN(2)....................................... 5.53% 2.31%
- ------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)............. $ 949 $ 597
Ratio of Expenses to Average Daily Net Assets(3)...... 1.10% 1.10%
Ratio of Net Investment Income to Average Daily Net
Assets(4)............................................ 4.52% 4.15%
Portfolio Turnover Rate............................... 63% 81%
</TABLE>
- ------------------
(1)Date of initial public offering; ratios have been annualized but total return
has not been annualized.
(2)Total return reflects the waiver of fees in Notes 3 and 4. Total return does
not reflect any applicable CDSC.
(3)Ratio of expenses to average daily net assets prior to expense limitation was
1.92% for 1995 and 2.04% for 1994.
(4)Ratio of net investment income to average daily net assets prior to expense
limitation was 3.70% for 1995 and 3.21% for 1994.
- - 7
<PAGE> 15
INVESTMENT OBJECTIVE
AND POLICIES
The objective of the Series is to seek as high a level of current interest
income exempt from federal income tax as is available from municipal bonds and
as is consistent with prudent investment management and preservation of capital.
The Series pursues its investment objective by investing in a municipal bond
portfolio having a dollar weighted average maturity of between three and ten
years and utilizing various investment strategies and quality restrictions, as
described below.
The objective of the Series cannot be changed without approval by the
shareholders of the Series. There is no assurance that the objective of the
Series can be achieved.
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.
SUITABILITY
The Series may be suitable for longer-term investors. The Series is designed
for investors seeking a high level of tax-exempt income and more price stability
than investments in long-term municipal bonds or bond funds. Investors should be
willing to accept the risk of investments in municipal bonds. An investment in
the Series permits an investor to participate in these types of instruments
while affording the advantages of diversification and a high degree of
liquidity. Ownership of Series shares also reduces the bookkeeping and
administrative inconveniences connected with the direct purchase of such
obligations.
The net asset value of the Series' shares can generally be expected to
fluctuate inversely to changes in interest rates.
INVESTMENT STRATEGY
TAX-EXEMPT INVESTMENTS
The Series invests primarily in municipal securities paying interest income
which, in the opinion of the bond issuer's counsel, is exempt from federal
income tax. These securities include debt obligations issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies, authorities and
instrumentalities.
The Series intends to invest at least 80% of its net assets under normal
market conditions in the types of securities described above as a fundamental
policy. The Series may invest up to 20% of its net assets in bonds the income
from which is subject to the federal alternative minimum tax. Although exempt
from regular federal income tax, interest paid on certain types of municipal
obligations (commonly referred to as "private activity" or "private purpose"
bonds) is deemed to be a preference item under federal tax law and is subject to
the federal alternative minimum tax.
The following table shows what the impact of tax-free investing can be for
shareholders.
<TABLE>
<CAPTION>
1995 RATES 4.0%* 5.0%* 6.0%* 7.0%*
FEDERAL FEDERAL FEDERAL FEDERAL FEDERAL
TAXABLE INCOME TAX TAXABLE TAXABLE TAXABLE TAXABLE
JOINT RETURN SINGLE RETURN RATE EQUIVALENT EQUIVALENT EQUIVALENT EQUIVALENT
<S> <C> <C> <C> <C> <C> <C>
$0-38,000 $0-22,750 15% 4.7% 5.9% 7.1% 8.2%
$38,001-91,850 $22,751-55,100 28% 5.6% 6.9% 8.3% 9.7%
$91,851-140,000 $55,101-115,000 31% 5.8% 7.2% 8.7% 10.1%
$140,001-250,000 $115,001-250,000 36%+ 6.3% 7.8% 9.4% 10.9%
Over $250,000 Over $250,000 39.6%+ 6.6% 8.3% 9.9% 11.6%
</TABLE>
The equivalent yields are calculated on 4, 5, 6 and 7 percent tax-free yields.
While it is expected that the Series will invest principally in obligations
generating interest exempt from federal income tax, other income received by the
Series may be taxable and certain income received by the Series may be subject
to the federal alternative minimum tax.
*This should not be considered representative of the Series' yield at any
specific time.
+For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate. In
addition, a 10% surtax (not applicable to capital gains) applies to certain
high-income taxpayers. It is computed by applying a 39.6% rate to taxable
income in excess of $250,000. The above table does not reflect the personal
exemption phaseout nor the limitations of itemized deductions that may apply.
QUALITY RESTRICTIONS
The Series intends to invest at least 90% of its portfolio in debt obligations
that are either rated in the top four grades by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Rating Group ("S&P") at the time of purchase or
unrated, but in the Manager's opinion equivalent in credit quality to
obligations so rated. The fourth grade is considered medium grade and may have
speculative characteristics. The Series may invest up to 10% of its assets in
securities either with a rating lower than the top four grades or unrated, but
in the Manager's opinion equivalent in credit quality to obligations so rated.
These securities are speculative and may involve greater risks and have higher
yields.
- - 8
<PAGE> 16
The market values of such lower-rated securities tend to reflect individual
developments affecting the issuer to a greater extent than do higher-rated
securities, which react primarily to fluctuations in the general level of
interest rates. Such lower-rated securities also tend to be more sensitive to
economic conditions and generally involve more credit risk than higher-rated
securities. The issuer's ability to service its debt obligations may also be
adversely affected by specific developments, or the issuer's inability to meet
specific projected revenue forecasts, or by the unavailability of additional
financing.
The market for lower-rated fixed-income securities generally tends to be
concentrated among a smaller number of dealers than is the case for securities
which trade in a broader secondary retail market and, therefore, it is generally
not as liquid as the secondary market for higher-rated securities.
Factors adversely impacting the market value of high yielding securities may
adversely impact the Series' net asset value. In addition, the Series may incur
additional expenses to the extent it is required to seek recovery upon a default
in the payment of principal or interest on its portfolio holding. The Series
will rely on the investment manager's judgment, analysis and experience in
evaluating the creditworthiness of an issuer. In this evaluation, the investment
manager will take into consideration, among other things, the issuer's financial
resources, its sensitivity to economic conditions and trends, its operating
history, the quality of the issuer's management and regulatory matters.
Some municipal bonds are backed by the issuer's full faith and credit while
others are secured by a specific revenue source and are not backed by any
general taxing power. The Series will invest in both types.
DIVERSIFICATION
The Series' portfolio of assets is nondiversified as defined by the 1940 Act.
This means that the Manager has the flexibility to invest as much as 50% of the
Series' assets in as few as two issuers provided no single issuer accounts for
more than 25% of the portfolio. The remaining 50% of the portfolio must be
diversified so that no more than 5% of it is invested in the securities of a
single issuer. Those limitations notwithstanding, and except as otherwise
provided herein, the Series may invest up to 20% of its assets in U.S.
Government securities and government agency securities that are backed by the
U.S. Government, its agencies or instrumentalities. Because the Series may
invest its assets in fewer issuers, the value of Series shares may increase or
decrease more rapidly than if the Series were fully diversified. In the event
the Series invests more than 5% of its assets in a single issuer, it would be
affected more than a fully diversified fund if that issuer were to encounter
difficulties in satisfying its financial obligations.
The Series 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 Series 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. The Series
will not, 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.
OTHER CONSIDERATIONS
The Series may invest without limit in short-term, tax-free instruments such
as tax-exempt commercial paper and general obligation, revenue and project
notes, as well as variable and floating rate demand obligations. Short-term
securities will be rated in the top two grades by a nationally-recognized rating
agency.
Under abnormal conditions, the Series may invest in taxable instruments for
temporary defensive purposes. These would include instruments such as
obligations of the U.S. Government, its agencies and instrumentalities,
commercial paper, certificates of deposit of domestic banks and other debt
instruments. The above investments will be rated at least A-2, P-2 or MIG-2.
The Series may invest in "when-issued securities." When-issued securities
involve commitments to buy a new issue with settlement up to 45 days later.
During the time between the commitment and settlement the Series does not accrue
interest, but the market value may fluctuate. This can result in the Series'
share value increasing or decreasing. If the Series invests in securities of
this type, it will maintain a segregated account to pay for them and mark them
to market daily.
The Tax Reform Act of 1986 limits the amount of new "private purpose" bonds
that each state can issue and subjects interest income from these bonds to the
federal alternative minimum tax. "Private purpose" bonds are issues whose
proceeds are used to finance certain nongovernment activities, and could include
some types of industrial revenue bonds such as privately-owned sports and
convention facilities. The Act also makes the tax-exempt status of certain bonds
depend on the issuer's compliance with specific requirements after the bonds are
issued.
- - 9
<PAGE> 17
The Series intends to seek to achieve a high level of tax-exempt income.
However, if the Series invests in newly-issued private purpose bonds, a portion
of the Series' distributions would be subject to the federal alternative minimum
tax. The Series may invest up to 20% of its assets in bonds the income from
which is subject to the federal alternative minimum tax.
The Series is permitted to borrow money. The Series will not purchase
investment securities while it has an outstanding borrowing. The Series may
invest in restricted securities, including securities eligible for resale
without registration pursuant to Rule 144A ("Rule 144A Securities") under the
Securities Act of 1933, as discussed more fully below. The Series may invest no
more than 10% of the value of its net assets in illiquid securities.
Part B sets forth other more specific investment restrictions and descriptions
of Moody's and S&P ratings.
RULE 144A SECURITIES
Rule 144A permits many privately placed and legally restricted securities to
be freely traded among certain institutional buyers such as the Series. While
maintaining oversight, the Board of Directors has delegated to the Manager the
day-to-day function of determining whether or not individual Rule 144A
Securities are liquid for purposes of the Series' 10% limitation on investments
in illiquid assets. The Board has instructed the Manager to consider the
following factors in determining the liquidity of a Rule 144A Security: (i) the
frequency of trades and trading volume for the security; (ii) whether at least
three dealers are willing to purchase or sell the security and the number of
potential purchasers; (iii) whether at least two dealers are making a market in
the security; (iv) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was previously
determined to be liquid is no longer liquid and, as a result, the Series'
holdings of illiquid securities exceed the Series' 10% limit on investments in
such securities, the Manager will determine what action to take to ensure that
the Series continues to adhere to such limitation.
REPURCHASE AGREEMENTS
In order to invest its cash reserves or when in a temporary defensive posture,
the Series may enter into repurchase agreements with banks or broker/dealers
deemed to be creditworthy by the Manager, under guidelines approved by the
Fund's Board of Directors. A repurchase agreement is a short-term investment in
which the purchaser (i.e., the Series) 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. Generally,
repurchase agreements are of short duration, often less than one week but on
occasion for longer periods. Not more than 10% of the Series' assets may be
invested in repurchase agreements of over seven-days' maturity or other illiquid
assets. Should an issuer of a repurchase agreement fail to repurchase the
underlying security, the loss to the Series, if any, would be the difference
between the repurchase price and the market value of the security. The Series
will limit its investments in repurchase agreements to those which the Manager,
under the guidelines of the Board of Directors, determines to present minimal
credit risks and which are of high quality. In addition, the Series must have
collateral of at least 100% of the repurchase price, including the portion
representing the Series' yield under such agreements which is monitored on a
daily basis. Such collateral is held by the Custodian in book entry form. Such
agreements may be considered loans under the 1940 Act, but the Series considers
repurchase agreements contracts for the purchase and sale of securities, and it
seeks to perfect a security interest in the collateral securities so that it has
the right to keep and dispose of the underlying collateral in the event of
default.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow the
Delaware Group funds jointly to invest cash balances. The Series may invest cash
balances in a joint repurchase agreement in accordance with the terms of the
exemptive order and subject generally to the conditions described above.
ZERO COUPON BONDS
The Series may also invest in zero coupon bonds. Zero coupon bonds are debt
obligations which do not entitle the holder to any periodic payments of interest
prior to maturity or a specified date when the securities begin paying current
interest, and therefore are issued and traded at a discount from their face
amounts or par value.
- - 10
<PAGE> 18
The market prices of zero coupon securities are generally more volatile than
the market prices of securities that pay interest periodically and are likely to
respond to changes in interest rates to a greater degree than do non-zero coupon
securities having similar maturities and credit quality. Current federal income
tax law requires that a holder of a taxable zero coupon security report as
income each year the portion of the original issue discount of such security
that accrues that year, even though the holder receives no cash payments of
interest during the year. The Series has qualified as a regulated investment
company under the Internal Revenue Code. Accordingly, during periods when the
Series receives no interest payments on its zero coupon securities, it will be
required, in order to maintain its desired tax treatment, to distribute cash
approximating the income attributable to such securities. Such distribution may
require the sale of portfolio securities to meet the distribution requirements
and such sales may be subject to the risk factor discussed above.
VARIABLE RATE OBLIGATIONS
The Series may purchase "floating-rate" and "variable-rate" obligations. These
obligations bear interest at rates that are not fixed, but that vary with
changes in specified market rates or indices on predesigned dates.
INVERSE FLOATERS
The Series may invest in inverse floaters. 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.
MUNICIPAL LEASES
The Series may also invest in municipal lease obligations primarily through
certificates of participation ("COPs"). As with its other investments, the
Series expects that its investments in municipal lease obligations will consist
of such obligations which are exempt from regular federal income taxes. COPs,
which are widely used by state and local governments to finance the purchase of
property, function much like installment purchase agreements. For example, a COP
may be created when long-term lease revenue bonds are issued by a governmental
corporation to pay for the acquisition of property or facilities which are then
leased to a municipality. The payments made by the municipality under the lease
are used to repay interest and principal on the bonds issued to purchase the
property. Once these lease payments are completed, the municipality gains
ownership of the property for a nominal sum. The lessor is, in effect, a lender
secured by the property being leased. This lease format is generally not subject
to constitutional limitations on the issuance of state debt and COPs enable a
governmental issuer to increase government liabilities beyond constitutional
debt limits.
A feature which distinguishes COPs from municipal debt is that the lease which
is the subject of the transaction typically contains a "nonappropriation" or
"abatement" clause. A nonappropriation clause provides that, while the
municipality will use its best efforts to make lease payments, the municipality
may terminate the lease without penalty if the municipality's appropriating body
does not allocate the necessary funds. Substantially all of the COPs purchased
by the Series are expected to contain a "nonappropriation" or "abatement"
clause. Local administrations, being faced with increasingly tight budgets,
therefore, have more discretion to curtail payments on traditionally funded debt
obligations. If the government lessee does not appropriate sufficient monies to
make lease payments, the lessor, or its agent, is typically entitled to
repossess the property. In most cases, however, the private sector value of the
property will be less than the amount the government lessee was paying.
While the risk of nonappropriation is inherent to COP financing, the Series
believes that this risk is mitigated by its policy of investing only in COPs
rated within the four highest rating categories of Moody's, S&P or Fitch
Investors Service, Inc., or in unrated COPs believed to be of comparable
quality. Criteria considered by the rating agencies and the Manager in assessing
such risk include the issuing municipality's credit rating, the importance of
the leased property to the municipality and the term of the lease compared to
the useful life of the leased property. The Board of Directors has established
guidelines to determine whether the COPs held in the Series' portfolio
constitute liquid investments. These guidelines set forth various factors to be
reviewed by the Manager and 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 Series both in general
and with respect to COPs; and (c) the extent to which the type of COPs held by
the Series trade on the same basis and with the same degree of dealer
participation as other municipal bonds of comparable credit rating or quality.
- - 11
<PAGE> 19
ADVANCE REFUNDED BONDS
Escrow secured bonds or defeased bonds are created when an issuer refunds in
advance of maturity (or pre-refunds) an outstanding bond issue which is not
immediately callable, and it becomes necessary or desirable to set aside funds
for redemption of the bonds at a future date. In an advance refunding, the
issuer will use the proceeds of a new bond issue to purchase high grade interest
bearing debt securities which are then deposited in an irrevocable escrow
account held by a trustee bank to secure all future payments of principal and
interest of the advance refunded bond. Escrow secured bonds will often receive a
triple A rating from S&P and Moody's.
OPTIONS
The Series may write put and call options on a covered basis only, and will
not engage in option writing strategies for speculative purposes. The Series 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 the Series' investment objective. The Series
may also purchase (i) call options to the extent that premiums paid for such
options do not exceed 2% of the Series' total assets and (ii) put options to the
extent that premiums paid for such options do not exceed 2% of the Series' 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 Series, 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 the Series of writing covered calls is that the Series
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 the Series to
write another call option on the underlying security with either a different
exercise price or expiration date or both. The Series 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, the Series 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,
the Series 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.
Call options will be written only on a covered basis, which means that the
Series will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected, the
Series would be required to continue to hold a security which it might otherwise
wish to sell. Options written by the Series 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.
- - 12
<PAGE> 20
B. PURCHASING CALL OPTIONS--The Series may purchase call options to the extent
that premiums paid by the Series do not aggregate more than 2% of the Series'
total assets. When the Series purchases a call option, in return for a premium
paid by the Series to the writer of the option, the Series 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 the Series 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 the Series upon exercise of the option.
The Series 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. The
Series 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 Series 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 the Series 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 the
Series 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 Series may expire without
any value to the Series.
C. SECURED PUT WRITING--A put option gives the purchaser of the option the
right to sell, and the writer, in this case the Series, 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 the Series may not exceed 2% of its total assets.
The advantage to the Series of writing such options is that it receives
premium income. The disadvantage is that the Series 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 the
Series will maintain in a segregated account with its Custodian, the Morgan
Guaranty Trust Company of New York, 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 the Series.
Secured put options will generally be written in circumstances where the Manager
wishes to purchase the underlying security for the Series' portfolio at a price
lower than the current market price of the security. In such event, the Series
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.
D. PURCHASING PUT OPTIONS--The Series may purchase put options to the extent
that premiums paid for such options do not exceed 2% of the Series' total
assets. The Series will, at all times during which it holds a put option, own
the security covered by such option.
The Series 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 the Series to protect unrealized gain in an
appreciated security in its portfolio without actually selling the security. In
addition, the Series will continue to receive interest income on the security.
If the security does not drop in value, the Series will lose the value of the
premium paid. The Series 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.
- - 13
<PAGE> 21
FUTURES
The Series may invest in futures contracts and options on such futures
contracts subject to certain limitations. Futures contracts are agreements for
the purchase or sale for future delivery of securities. When a futures contract
is sold, the Series incurs a contractual obligation to deliver the securities
underlying the contract at a specified price on a specified date during a
specified future month. A purchase of a futures contract means the acquisition
of a contractual right to obtain delivery to the Series of the securities called
for by the contract at a specified price during a specified future month.
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 the Series enters into a futures transaction, it
must deliver to the futures commission merchant selected by the Series an amount
referred to as "initial margin." This amount is maintained by the futures
commission merchant in an account at the Series' custodian bank. Thereafter, a
"variation margin" may be paid by the Series to, or drawn by the Series from,
such account in accordance with controls set for such account, depending upon
changes in the price of the underlying securities subject to the futures
contract.
The Series 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 the Series, which
consists of a substantial number of municipal securities, is to protect the
Series 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 the Series 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, the
Series 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, the Series will retain the full amount
of the option premium which provides a partial hedge against any increase in the
price of municipal securities which the Series intends to purchase.
If a put or call option the Series has written is exercised, the Series will
incur a loss which will be reduced by the amount of the premium it receives.
Depending on the degree of correlation between the value of its portfolio
securities and changes in the value of its futures positions, the Series' losses
from existing options on futures may, to some extent, be reduced or increased by
changes in the value of portfolio securities. The Series will purchase a put
option on a futures contract to hedge the Series' portfolio against the risk of
rising interest rates.
To the extent that interest rates move in an unexpected direction, the Series
may not achieve the anticipated benefits of futures contracts or options on
futures contracts or may realize a loss. For example, if the Series is hedged
against the possibility of an increase in interest rates which would adversely
affect the price of municipal securities held in its portfolio and interest
rates decrease instead, the Series will lose part or all of the benefit of the
increased value of its municipal securities which it has because it will have
offsetting losses in its futures position. In addition, in such situations, if
the Series had insufficient cash, it may be required to sell municipal
securities from its portfolio to meet daily variation margin requirements. Such
sales of municipal securities may, but will not necessarily, be at increased
prices which reflect the rising market. The Series may be required to sell
securities at a time when it may be disadvantageous to do so.
- - 14
<PAGE> 22
To the extent that the Series 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, the
Series 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.
The Series will not enter into futures contracts to the extent that more than
5% of the Series' assets are required as futures contract margin deposits and
will not invest in futures contracts or options thereon to the extent that
obligations relating to such transactions exceed 20% of the Series' assets.
PORTFOLIO LOAN TRANSACTIONS
The Series may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
The major risk to which the Series would be exposed on a loan transaction is
the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Series will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager. See Part B.
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.
SHAREHOLDER PHONE DIRECTORY
INVESTOR INFORMATION CENTER
800-523-4640
(PHILADELPHIA 215-988-1333)
FUND INFORMATION; LITERATURE;
PRICE, YIELD AND PERFORMANCE FIGURES
SHAREHOLDER SERVICE CENTER
800-523-1918
(PHILADELPHIA 215-988-1241)
INFORMATION ON EXISTING REGULAR INVESTMENT ACCOUNTS AND RETIREMENT PLAN
ACCOUNTS;
WIRE INVESTMENTS; WIRE LIQUIDATIONS;
TELEPHONE LIQUIDATIONS; TELEPHONE EXCHANGES
DELAPHONE
800-362-FUND
(800-362-3863)
SHAREHOLDER SERVICES
During business hours, you can call the Fund's Shareholder Service Center. Our
representatives can answer any questions about your account, the Series, various
service features and other funds in the Delaware Group.
PERFORMANCE INFORMATION
During business hours, you can call the Investor Information Center to get
current yield information. Current yield and total return information may also
be included in advertisements and information given to shareholders. Yields are
computed on an annual basis over a 30-day period.
DELAPHONE SERVICE
Delaphone is an account inquiry service for investors with Touch-Tone(R) phone
service. It enables you to get information on your account faster than the
mailed statements and confirmations. Delaphone is available seven days a week,
24 hours a day.
STATEMENTS AND CONFIRMATIONS
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of distributions. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.
- - 15
<PAGE> 23
DUPLICATE CONFIRMATIONS
If your investment dealer is noted on your investment application, we will
send your dealer a duplicate confirmation. This makes it easier for your
investment dealer to help you manage your investments.
DIVIDEND REINVESTMENT PLAN
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your account. Also, you may invest
your distributions in certain other funds in the Delaware Group, subject to the
exceptions noted below as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of the Series or of other
Delaware Group funds are made without a front-end sales charge. Reinvestments of
distributions into Class B Shares of the Series or of other Delaware Group funds
or into Class C Shares of the Series or of other Delaware Group funds are also
made without any sales charge and will not be subject to a CDSC if later
redeemed. See Automatic Conversion of Class B Shares under Buying Shares for
information concerning the automatic conversion of Class B Shares acquired by
reinvesting dividends.
Holders of Class A Shares of the Series may not invest their distributions
into Class B Shares or Class C Shares of any fund in the Delaware Group,
including the Series. Holders of Class B Shares of the Series may reinvest their
distributions only into Class B Shares of the funds in the Delaware Group which
offer that class of shares (the "Class B Funds"). Similarly, holders of Class C
Shares of the Series may reinvest their distributions only into Class C Shares
of the funds in the Delaware Group which offer that class of shares (the "Class
C Funds"). See Class B Funds and Class C Funds under Buying Shares for a list of
the funds offering those classes of shares. For more information about
reinvestments, please call the Shareholder Service Center.
EXCHANGE PRIVILEGE
The Exchange Privilege permits shareholders to exchange all or part of their
shares into shares of the other funds in the Delaware Group, subject to certain
exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption and Exchange.
WEALTH BUILDER OPTION
You may elect to have amounts in your account automatically invested in shares
of other funds in the Delaware Group. Investments under this feature are
exchanges and are therefore subject to the same conditions and limitations as
other exchanges of Class A, Class B and Class C Shares. See Redemption and
Exchange.
RIGHT OF ACCUMULATION
With respect to Class A Shares, the Right of Accumulation feature allows you
to combine the value of your current holdings of Class A Shares, Class B Shares
and Class C Shares of the Series with the dollar amount of new purchases of
Class A Shares to qualify for a reduced front-end sales charge. Under the
COMBINED PURCHASES PRIVILEGE, you may also include certain shares that you own
in other funds in the Delaware Group. See Buying Shares.
LETTER OF INTENTION
The Letter of Intention feature permits you to obtain a reduced front-end
sales charge on purchases of Class A Shares by aggregating certain of your
purchases of Delaware Group fund shares over a 13-month period. See Buying
Shares and Part B.
12-MONTH REINVESTMENT PRIVILEGE
The 12-Month Reinvestment Privilege permits you to reinvest proceeds of Class
A Shares within one year of the date of redemption, without a front-end sales
charge. See Part B.
DELAWARE GROUP ASSET PLANNER
Delaware Group Asset Planner is an asset allocation service that gives
investors, working with a professional financial adviser, the ability to more
easily design and maintain investments in a diversified selection of Delaware
Group mutual funds. The Asset Planner service offers a choice of four
pre-designed allocation Strategies (each with a different risk/reward profile)
made up of separate investments in predetermined percentages of Delaware Group
funds. With the guidance of a financial adviser, investors may also tailor a
Strategy that meets their personal needs and goals. See How to Buy Shares under
Buying Shares.
FINANCIAL INFORMATION ABOUT THE FUND
Each fiscal year, you will receive an audited annual report and an unaudited
semi-annual report. These reports provide detailed information about the Series'
investments and performance. The Fund's fiscal year ends on August 31.
- - 16
<PAGE> 24
BUYING SHARES
PURCHASE AMOUNTS
Generally, the minimum initial purchase is $1,000 for Class A Shares, Class B
Shares and Class C Shares. Subsequent purchases generally must be $100 or more.
In addition, there is a maximum purchase limitation of $250,000 on each purchase
of Class B Shares; for Class C Shares, each purchase must be in an amount that
is less than $1,000,000. An investor may exceed these maximum purchase
limitations by making cumulative purchases over a period of time. In doing so,
an investor should keep in mind that reduced front-end sales charges are
available on investments of $100,000 or more in Class A Shares, and that Class A
Shares (i) are subject to lower annual 12b-1 Plan expenses than Class B Shares
and Class C Shares and (ii) generally are not subject to a CDSC.
ALTERNATIVE PURCHASE ARRANGEMENTS
Shares may be purchased at a price equal to the next determined net asset
value per share, subject to a sales charge which may be imposed, at the election
of the purchaser, at the time of the purchase with respect to Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis with
respect to Class B Shares ("deferred sales charge alternative") or Class C
Shares ("level sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge alternative
acquires Class A Shares. Class A Shares incur a sales charge when they are
purchased but generally are not subject to any sales charge when they are
redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of .30% (currently, no more than .15% pursuant to Board action) of
average daily net assets of such shares. See Contingent Deferred Charges for
Certain Purchases of Class A Shares Made at Net Asset Value and Distribution
(12b-1) and Service. Certain purchases of Class A Shares qualify for reduced
front-end sales charges. See Front-End Sales Charge Alternative--Class A Shares,
below.
Class B Shares. An investor who elects the deferred sales charge alternative
acquires Class B Shares. Class B Shares do not incur a front-end sales charge
when they are purchased, but are subject to a sales charge if they are redeemed
within three years of purchase and are subject to annual 12b-1 Plan expenses of
up to a maximum of 1% (.25% of which are service fees to be paid to the
Distributor, dealers and others for providing personal service and/or
maintaining shareholder accounts) of average daily net assets of such shares for
approximately five years after purchase. Class B Shares permit all of the
investor's dollars to work from the time the investment is made. The higher
12b-1 Plan expenses paid by Class B Shares will cause such shares to have a
higher expense ratio and to pay lower dividends than those related to the Class
A Shares. At the end of approximately five years after purchase, the Class B
Shares will automatically be converted into Class A Shares. See Automatic
Conversion of Class B Shares, below.
Class C Shares. An investor who elects the level sales charge alternative
acquires Class C Shares. Class C Shares do not incur a front-end sales charge
when they are purchased, but are subject to a sales charge if they are redeemed
within twelve months of purchase and are subject to annual 12b-1 Plan expenses
of up to a maximum of 1% (.25% of which are service fees to be paid to the
Distributor, dealers or others for providing personal service and/or maintaining
shareholder accounts) of average daily net assets of such shares for the life of
the investment. The higher 12b-1 Plan expenses paid by Class C Shares will cause
such shares to have a higher expense ratio and to pay lower dividends than those
related to the Class A Shares. Unlike Class B Shares, Class C Shares do not
convert to another class.
The alternative purchase arrangements described above permit investors in the
Series to choose the method of purchasing shares that is most suitable given the
amount of their purchase, the length of time they expect to hold their shares
and other relevant circumstances. Investors should determine whether, given
their particular circumstances, it is more advantageous to purchase Class A
Shares and incur a front-end sales charge, purchase Class B Shares and have the
entire initial purchase amount invested in the Series with their investment
being subject to a CDSC if they redeem shares within three years of purchase, or
purchase Class C Shares and have the entire initial purchase amount invested in
the Series with their investment being subject to a CDSC if they redeem shares
within twelve months of purchase. In addition, investors should consider the
level of annual 12b-1 Plan expenses to which each of the Classes is subject and,
in comparing Class B Shares to Class C Shares, the desirability of an automatic
conversion feature, which is available only for Class B Shares.
- - 17
<PAGE> 25
As an illustration, investors who qualify for significantly reduced front-end
sales charges on purchases of Class A Shares, as described below, might elect
the front-end sales charge alternative because similar sales charge reductions
are not available under either the deferred sales charge alternative or the
level sales charge alternative. Moreover, shares acquired under the front-end
sales charge alternative are subject to annual 12b-1 Plan expenses of up to .30%
(currently, no more than .15%), whereas Class B Shares acquired under the
deferred sales charge alternative are subject to annual 12b-1 Plan expenses of
up to 1% for approximately five years after purchase (see Automatic Conversion
of Class B Shares) and Class C Shares acquired under the level sales charge
alternative are subject to annual 12b-1 Plan expenses of up to 1% for the life
of the investment. However, because front-end sales charges are deducted from
the purchase amount at the time of purchase, investors who buy Class A Shares
will not have their full purchase amount invested in the Series.
Certain other investors might determine it to be more advantageous to purchase
Class B Shares and have all their funds invested initially, although they would
be subject to a CDSC for up to three years after purchase, as well as annual
12b-1 Plan expenses of up to 1% until the shares are automatically converted
into Class A Shares. Still other investors might determine it to be more
advantageous to purchase Class C Shares and have all of their funds invested
initially, recognizing that they would be subject to a CDSC for just twelve
months after purchase but that Class C Shares do not offer a conversion feature,
so their shares would be subject to annual 12b-1 Plan expenses of up to 1% for
the life of the investment. The higher 12b-1 Plan expenses on Class B Shares and
Class C Shares will be offset to the extent a return is realized on the
additional money initially invested under the deferred sales charge alternative
or the level sales charge alternative. However, there can be no assurance as to
the return, if any, that will be realized on such additional money.
Prospective investors should refer to Appendix A to this Prospectus for an
illustration of the potential impact on a long-term shareholder's investment in
the Series under each of the purchase options.
For the distribution and related services provided to, and the expenses borne
on behalf of, the Series, the Distributor and others will be paid, in the case
of the Class A Shares, from the proceeds of the front-end sales charge and 12b-1
Plan fees and, in the case of the Class B Shares and the Class C Shares, from
the proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Sales personnel may receive different compensation for selling Class
A, Class B and Class C Shares. Investors should understand that the purpose and
function of the respective 12b-1 Plans and the CDSCs applicable to Class B
Shares and Class C Shares are the same as those of the 12b-1 Plan and the
front-end sales charge applicable to Class A Shares in that such fees and
charges provide for the financing of the distribution of the respective Classes.
See 12b-1 Distribution Plans--Class A, Class B and Class C Shares.
Dividends paid by the Series with respect to the Class A, Class B and Class C
Shares, to the extent any dividends are paid, will be calculated in the same
manner, at the same time, on the same day and will be in the same amount, except
that the additional amount of 12b-1 Plan expenses relating to the Class B Shares
and the Class C Shares will be borne exclusively by such shares. See Calculation
of Offering Price and Net Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. The Fund and the Distributor intend to operate in compliance with these
rules.
FRONT-END SALES CHARGE ALTERNATIVE--CLASS A SHARES
The Class A Shares may be purchased at the offering price, which reflects a
maximum front-end sales charge of 3.00%. See Calculation of Offering Price and
Net Asset Value Per Share.
Purchases of $100,000 or more carry a reduced front-end sales charge as shown
in the following table.
- - 18
<PAGE> 26
Tax-Free USA Intermediate Fund A Class
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Front-End Sales
Charge as % of Dealer's
Concession***
Offering Amount as % of
Amount of Purchase Price Invested** Offering Price
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 3.00% 3.08% 2.50%
$100,000 but under $250,000 2.50 2.59 2.00
$250,000 but under $500,000 2.00 2.02 1.60
$500,000 but under
$1,000,000* 1.50 1.54 1.20
</TABLE>
*There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% Limited CDSC
may apply upon redemption of such shares.
**Based on the net asset value per share of the Class A Shares as of the end of
the Fund's most recent fiscal year.
***Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- ----------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify for the
reduced front-end sales charge on the basis of previous or current purchases.
The reduced front-end sales charge will be granted upon confirmation of the
shareholder's holdings by the Fund. Such reduced front-end sales charges are not
retroactive.
From time to time, upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the Distributor
may reallow to dealers up to the full amount of the front-end sales charge shown
above. In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Group products and services and who
increase sales of Delaware Group funds may receive an additional concession of
up to .15% of the offering price. Dealers who receive 90% or more of the sales
charge may be deemed to be underwriters under the Securities Act of 1933.
- ----------------------------------------------------------
For initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through whom
such purchases are effected in accordance with the following schedule:
<TABLE>
<CAPTION>
DEALER'S COMMISSION
------------------
AMOUNT OF PURCHASE (as a percentage of amount purchased)
- ---------------------------------
<S> <C>
Up to $3 million .60%
Next $2 million up to $5 million .40
Amount over $5 million .20
</TABLE>
In determining a financial adviser's eligibility for the dealer's commission,
purchases of Class A Shares of other Delaware Group funds as to which a Limited
CDSC applies may be aggregated with the Class A Shares of the Series. Financial
advisers also may be eligible for a dealer's commission in connection with
certain purchases made under a Letter of Intention or pursuant to an investor's
Right of Accumulation. Financial advisers should contact the Distributor
concerning the applicability and calculation of the dealer's commission in the
case of combined purchases.
An exchange from other Delaware Group funds will not qualify for payment of
the dealer's commission, unless such exchange is from a Delaware Group fund with
assets as to which a dealer's commission or similar payment has not been
previously paid. The schedule and program for payment of the dealer's commission
are subject to change or termination at any time by the Distributor in its
discretion.
Redemptions of Class A Shares purchased at net asset value may result in the
imposition of a Limited CDSC if the dealer's commission described above was paid
in connection with the purchase of those shares. See Contingent Deferred Sales
Charge for Certain Purchases of Class A Shares Made at Net Asset Value under
Redemption and Exchange.
COMBINED PURCHASES PRIVILEGE
By combining your holdings of Class A Shares with your holdings of Class B
Shares and/or Class C Shares of the Series and shares of the other funds in the
Delaware Group, except those noted below, you can reduce the front-end sales
charges on any additional purchases of Class A Shares. Shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with ownership of variable
insurance products may be combined with other Delaware Group fund holdings.
Shares of other funds that do not carry a front-end sales charge or CDSC may not
be included, unless they were acquired through an exchange from a Delaware Group
fund that does carry a front-end sales charge or CDSC.
This privilege permits you to combine your purchases and holdings with those
of your spouse, your children under 21 and any trust, fiduciary or retirement
account for the benefit of such family members.
It also permits you to use these combinations under a Letter of Intention. A
Letter of Intention allows you to make purchases over a 13-month period and
qualify the entire purchase for a reduction in front-end sales charges on Class
A Shares.
- - 19
<PAGE> 27
Combined purchases of $1,000,000 or more, including certain purchases made at
net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may trigger the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative-- Class A Shares under Buying
Shares.
BUYING AT NET ASSET VALUE
Class A Shares of the Series may be purchased at net asset value under the
Delaware Group Dividend Reinvestment Plan and, under certain circumstances, the
12-Month Reinvestment Privilege and the Exchange Privilege. (See The Delaware
Difference and Redemption and Exchange for additional information.)
Purchases of Class A Shares may be made at net asset value by current and
former officers, directors and employees (and members of their immediate
families) of the Manager, any affiliate, any of the funds in the Delaware Group,
certain of their agents and registered representatives and employees of
authorized investment dealers and by employee benefit plans for such entities.
Individual purchases include retirement accounts and must be for accounts in the
name of the individual or a qualifying family member. Purchases of Class A
Shares may be made by clients of registered representatives of an authorized
investment dealer at net asset value within six months of a change of the
registered representative's employment, if the purchase is funded by proceeds
from an investment where a front-end sales charge has been assessed and the
redemption of the investment did not result in the imposition of a contingent
deferred sales charge or other redemption charge. Purchases of Class A Shares
also may be made at net asset value by bank employees who provide services in
connection with agreements between the bank and unaffiliated brokers or dealers
concerning sales of Class A Shares. Officers, directors and key employees of
institutional clients of the Manager, or any of its affiliates, may purchase
Class A Shares at net asset value. Moreover, purchases may be effected at net
asset value for the benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such broker, dealer
or investment adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in connection with
special investment products, such as wrap accounts or similar fee based
programs.
Beginning December 1, 1994, Class A Shares of the Series may be purchased at
net asset value by any investor within 90 days after a redemption of shares from
a fund outside the Delaware Group of funds provided that: 1) the redeemed shares
were purchased no more than five years before the proposed purchase of Class A
Shares of the Series; and 2) a front-end sales charge was paid in connection
with the purchase of the redeemed shares or a contingent deferred sales charge
was paid upon their redemption.
The Series must be notified in advance that an investment qualifies for
purchase at net asset value.
DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B Shares may be purchased at net asset value without the imposition of a
front-end sales charge and, as a result, the Series will invest the full amount
of the investor's purchase payment. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 2% of the dollar
amount purchased. As discussed below, however, Class B Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within three years of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees facilitates the ability of the Series to
sell the Class B Shares without deducting a front-end sales charge at the time
of purchase.
- - 20
<PAGE> 28
AUTOMATIC CONVERSION OF CLASS B SHARES
Except for shares acquired through a reinvestment of dividends, Class B Shares
held for five years after purchase are eligible for automatic conversion into
Class A Shares. The Fund will effect conversions of Class B Shares into Class A
Shares only four times in any calendar year, on the last business day of the
second full week of March, June, September and December (each, a "Conversion
Date"). If the fifth 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 fifth 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 fifth 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 fifth anniversary after purchase before the
shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through reinvestment of dividends will
convert to the corresponding Class A Shares of that fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Cash Reserve Consultant Class) pro-rata
with Class B Shares of that fund not acquired through dividend reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.
LEVEL SALES CHARGE ALTERNATIVE--CLASS C SHARES
Class C Shares may be purchased at net asset value without the imposition of a
front-end sales charge and, as a result, the Series will invest the full amount
of the investor's purchase payment. The Distributor currently anticipates
compensating dealers or brokers for selling Class C Shares at the time of
purchase from its own assets in an amount equal to no more than 1% of the dollar
amount purchased. As discussed below, however, Class C Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within twelve months of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Shareholders of the Series' Class C Shares who exercise the exchange privilege
described below will continue to be subject to the CDSC schedule for the Series'
C Class shares described in this Prospectus. See Redemption and Exchange.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES AND CLASS C SHARES
Class B Shares redeemed within three years of purchase may be subject to a
CDSC at the rates set forth below, and Class C Shares redeemed within twelve
months of purchase may be subject to a CDSC of 1%. CDSCs are charged as a
percentage of the dollar amount subject to the CDSC. The charge will be assessed
on an amount equal to the lesser of the net asset value at the time of purchase
of the shares being redeemed or the net asset value of those shares at the time
of redemption. No CDSC will be imposed on increases in net asset value above the
initial purchase price. In addition, no CDSC will be assessed on redemptions of
shares received through reinvestments of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of either the Class B Shares
or the Class C Shares of the Series, even if those shares are later exchanged
for shares of another Delaware Group fund. In the event of an exchange of the
shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares that were acquired in the exchange.
The following table sets forth the rates of the CDSC for the Class B Shares of
the Series:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
(AS A PERCENTAGE OF
YEAR AFTER DOLLAR AMOUNT
PURCHASE MADE SUBJECT TO CHARGE)
- -------------- -------------------
<S> <C>
0-2 2%
3 1%
4 and thereafter None
</TABLE>
During the fourth year after purchase and, thereafter, until converted
automatically into Class A Shares of the Series, the Class B Shares will still
be subject to the annual 12b-1 Plan expenses of up to 1% of average daily net
assets of those shares. See Automatic Conversion of Class B Shares above.
Investors are reminded that the Class A Shares into which the Class B Shares
will convert are subject to ongoing annual 12b-1 Plan expenses of up to a
maximum of .30% (currently, no more than .15%) of average daily net assets
representing such shares.
- - 21
<PAGE> 29
In determining whether a CDSC is applicable to a redemption of Class B Shares,
it will be assumed that shares held for more than three years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the three-year period.
With respect to the Class C Shares, it will be assumed that shares held for more
than twelve months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for
twelve months or less. All investments made during a calendar month, regardless
of what day of the month the investment occurred, will age one month on the last
day of that month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of CDSC under Redemption and Exchange.
12B-1 DISTRIBUTION PLANS--CLASS A, CLASS B AND CLASS C SHARES
Under the distribution plans adopted by the Fund in accordance with Rule 12b-1
under the 1940 Act, the Series is permitted to pay the Distributor annual
distribution fees of up to .30% (currently, no more than .15%) of the average
daily net assets of the Class A Shares, 1% of the average daily net assets of
the Class B Shares and 1% of the average daily net assets of the Class C Shares.
These fees, which are payable monthly, compensate the Distributor for providing
distribution and related services and bearing certain expenses of each Class.
The 12b-1 Plans applicable to the Class B Shares and the Class C Shares are
designed to permit an investor to purchase Class B Shares or Class C Shares
through dealers or brokers without the assessment of a front-end sales charge
while enabling the Distributor to compensate dealers and brokers for the sale of
such shares. For more detailed discussion of the 12b-1 Plans relating to the
Class A, Class B and Class C Shares, see Distribution (12b-1) and Service under
Management of the Fund.
OTHER PAYMENTS TO DEALERS--CLASS A, CLASS B AND CLASS C SHARES
In addition, from time to time at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of the Classes exceed certain
limits as set by the Distributor, may receive from the Distributor an additional
payment of up to .25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Subject to pending amendments to the NASD's Rules of Fair Practice, in
connection with the promotion of Delaware Group fund shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Rules of Fair Practice will be amended such that
the ability of the Distributor to pay non-cash compensation as described above
will be restricted in some fashion. The Distributor intends to comply with the
NASD's Rules of Fair Practice as they may be amended. In addition, as noted
above, the Distributor may pay dealers a commission in connection with net asset
value purchases.
CLASS B FUNDS AND CLASS C FUNDS
The following funds currently offer Class B Shares and Class C Shares:
Delaware Group Delchester High-Yield Bond Fund, Inc., Delaware Group Government
Fund, Inc., Limited-Term Government Fund of Delaware Group Limited-Term
Government Funds, Inc., Delaware Group Cash Reserve, Inc., Tax-Free USA Fund and
Tax-Free Insured Fund of the Fund, Delaware Group DelCap Fund, Inc., Delaware
Fund and Devon Fund of Delaware Group Delaware Fund, Inc., Delaware Group Trend
Fund, Inc., Delaware Group Value Fund, Inc., Decatur Income Fund and Decatur
Total Return Fund of Delaware Group Decatur Fund, Inc., Global Assets Series,
Global Bond Series and International Equity Series of Delaware Group Global &
International Funds, Inc., DMC Tax-Free Income Trust-Pennsylvania and the
Series.
- - 22
<PAGE> 30
DIVIDEND ORDERS
YOU MAY HAVE THE DIVIDENDS EARNED IN ONE FUND AUTOMATICALLY INVESTED IN
ANOTHER DELAWARE GROUP FUND WITH A DIFFERENT INVESTMENT OBJECTIVE. For more
information, see Dividend Reinvestment Plan under The Delaware Difference or
call the Shareholder Service Center.
HOW TO BUY SHARES
The Series makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer.
INVESTING THROUGH YOUR INVESTMENT DEALER
You can make a purchase of shares of the Classes through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one, we
can refer you to one.
INVESTING BY MAIL
1. Initial Purchases--An Investment Application must be completed, signed and
sent with a check payable to Tax-Free USA Intermediate Fund A Class, Tax-Free
USA Intermediate Fund B Class or Tax-Free USA Intermediate Fund C Class at 1818
Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to Tax-Free USA Intermediate Fund A Class, Tax-Free USA
Intermediate Fund B Class or Tax-Free USA Intermediate Fund C Class. Your check
should be identified with your name(s) and account number. An investment slip
(similar to a deposit slip) is provided at the bottom of transaction
confirmations and dividend statements that you will receive from the Fund. Use
of this investment slip can help expedite processing of your check when making
additional purchases. Your investment may be delayed if you send additional
purchases by certified mail.
INVESTING BY WIRE
You may purchase shares by requesting your bank to transmit funds by wire to
CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include your
name(s) and your account number for the Class in which you are investing).
1. Initial Purchases--Before you invest, telephone the Fund's Shareholder
Service Center to get an account number. If you do not call first, processing of
your investment may be delayed. In addition, you must promptly send your
Investment Application to Tax-Free USA Intermediate Fund A Class, Tax-Free
USA Intermediate Fund B Class or Tax-Free USA
Intermediate Fund C Class at 1818 Market Street,
Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the Fund's
Shareholder Service Center by telephone of each wire you send.
DELAWARE GROUP ASSET PLANNER
To invest in Delaware Group funds using the Asset Planner service, you should
complete a Delaware Group Asset Planner Account Registration Form, which is
available only from a financial adviser. The sales charge on the investment is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. The minimum initial investment
per Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available for use inside the Asset
Planner service; however, only "like" class shares may be used within the same
Strategy.
An annual maintenance fee, currently $35 per Strategy, is due at the time of
initial investment and by September 30th of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of your Fund accounts if not paid by September 30th. See the Statement of
Additional Information.
Investors will receive a customized quarterly Strategy Report summarizing all
Delaware Group Asset Planner investment performance and account activity during
the prior period. Confirmation statements will be sent following all
transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the Asset
Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
- - 23
<PAGE> 31
INVESTING BY EXCHANGE
If you have an investment in another mutual fund in the Delaware Group, you
may write and authorize an exchange of part or all of your investment into
shares of the Series. If you wish to open an account by exchange, call the
Shareholder Service Center for more information. All exchanges are subject to
the eligibility and minimum purchase requirements set forth in each fund's
prospectus.
Shareholders of Class A Shares may exchange all or part of their shares for
certain of the shares of other funds in the Delaware Group, including other
Class A Shares, but may not exchange their shares for Class B Shares or Class C
Shares of the Series or for Class B Shares or Class C Shares of any other fund
in the Delaware Group. Shareholders of Class B Shares of the Series are
permitted to exchange all or part of their Class B Shares only into the
corresponding class of shares of the Class B Funds. Similarly, shareholders of
Class C Shares of the Series are permitted to exchange all or part of their
Class C Shares only into the corresponding class of shares of the Class C Funds.
Class B Shares of the Series and Class C Shares of the Series acquired by
exchange will continue to carry the contingent deferred sales charge and, in the
case of Class B Shares, the automatic conversion schedule of the fund from which
the exchange is made. Consequently, investors that purchase Class B Shares of
the Series by exchange may be subject to the higher 12b-1 Plan fees applicable
to Class B Shares longer than investors that purchase Class B Shares of the
Series directly if the shares exchanged for Series shares are of a Class B Fund
having a longer conversion feature than that of the Series. The holding period
of the Class B Shares of the Series acquired by exchange will be added to that
of the shares that were exchanged for purposes of determining the time of the
automatic conversion into Class A Shares of the Series.
Permissible exchanges into Class A Shares of the Series will be made without a
front-end sales charge imposed by the Series, except for exchanges from funds
not subject to a front-end sales charge (unless such shares were acquired in an
exchange from a fund subject to such a charge or such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of the Series will be made without the imposition of a
contingent deferred sales charge by the fund from which the exchange is being
made at the time of the exchange.
ADDITIONAL METHODS OF ADDING TO YOUR INVESTMENT
Call the Shareholder Service Center for more information if you wish to use
the following services:
1. Direct Deposit
YOU MAY HAVE YOUR EMPLOYER OR BANK MAKE REGULAR INVESTMENTS DIRECTLY TO YOUR
ACCOUNT FOR YOU (for example: payroll deduction, pay by phone, annuity
payments). The Series also accepts preauthorized recurring government and
private payments by Electronic Fund Transfer, which avoids mail time and check
clearing holds on payments such as social security, federal salaries, Railroad
Retirement benefits, etc.
2. Automatic Investing Plan
THE AUTOMATIC INVESTING PLAN ENABLES YOU TO MAKE REGULAR MONTHLY INVESTMENTS
WITHOUT WRITING OR MAILING CHECKS. You may authorize the Fund to transfer a
designated amount monthly from your checking account to your Series account.
Shareholders should allow a reasonable amount of time for initial purchases and
changes to these plans to become effective.
* * *
Should investments by these two methods be reclaimed or returned for some
reason, the Fund has the right to liquidate your shares to reimburse the
government or transmitting bank. If there are insufficient funds in your
account, you are obligated to reimburse the Series.
PURCHASE PRICE AND EFFECTIVE DATE
The offering price and net asset value of the Class A, Class B and Class C
Shares are determined as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The effective date of a purchase made through an investment dealer is the date
the order is received by the Series. The effective date of a direct purchase is
the day your wire, electronic transfer or check is received, unless it is
received after the time the offering price or net asset value of shares is
determined, as noted above. Purchase orders received after such time will be
effective the next business day.
- - 24
<PAGE> 32
THE CONDITIONS OF YOUR PURCHASE
The Fund reserves the right to reject any purchase order. If a purchase is
canceled because your check is returned unpaid, you are responsible for any loss
incurred. The 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 Group. The 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.
The Fund also reserves the right, following shareholder notification, to
charge a service fee on accounts that have remained below the minimum stated
account balance for a period of three or more consecutive months. Holders of
such accounts may be notified of their below minimum status 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 contingent deferred sales charge will apply to such
assessments.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under a class' minimum initial
purchase amount as a result of redemptions. An investor making the minimum
initial investment may be subject to involuntary redemption without the
imposition of a CDSC or Limited CDSC if he or she redeems any portion of his or
her account.
REDEMPTION AND EXCHANGE
YOU CAN REDEEM OR EXCHANGE YOUR SHARES IN A NUMBER OF DIFFERENT WAYS. The
exchange service is useful if your investment requirements change and you want
an easy way to invest in other tax-advantaged funds, equity funds, bond funds or
money market funds. This service is also useful if you are anticipating a major
expenditure and want to move a portion of your investment into a fund that has
the checkwriting feature. Exchanges are subject to the requirements of each fund
and all exchanges of shares from one fund or class to another constitute taxable
events. See Taxes. Further, in order for an exchange to be processed, shares of
the fund being acquired must be registered in the state where the acquiring
shareholder resides. You may want to consult your financial adviser or
investment dealer to discuss which funds in the Delaware Group will best meet
your changing objectives and the consequence of any exchange transaction. You
may also call the Delaware Group directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net asset
value next determined after we receive your request in good order subject, in
the case of redemption, to any applicable CDSC or Limited CDSC. Redemption or
exchange requests received in good order after the time the offering price and
net asset value of shares are determined, as noted above, will be processed on
the next business day. See Purchase Price and Effective Date under Buying
Shares. A shareholder submitting a redemption may indicate that he or she wishes
to receive redemption proceeds of a specific dollar amount. In the case of such
a request, and in the case of certain redemptions from retirement plan accounts,
the Fund will redeem the number of shares necessary to deduct the applicable
CDSC, in the case of Class B or Class C Shares or, if applicable, the Limited
CDSC in the case of Class A Shares, and tender to the shareholder the requested
amount, assuming the shareholder holds enough shares in his or her account for
the redemption to be processed in this manner. Otherwise, the amount tendered to
the shareholder upon redemption will be reduced by the amount of the applicable
CDSC or Limited CDSC.
- - 25
<PAGE> 33
Except as noted below, for a redemption request to be in "good order," you
must provide your account number, account registration, and the total number of
shares or dollar amount of the transaction. For exchange requests, you must also
provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Fund at 800-523-1918 (in Philadelphia, 215-988-1241).
The Fund may suspend, terminate, or amend the terms of the exchange privilege
upon 60 days' written notice to shareholders.
The Fund will honor written redemption requests of shareholders who recently
purchased shares by check, but will not mail the proceeds until it is reasonably
satisfied the purchase check has cleared, which may take up to 15 days from the
purchase date. The Fund will not honor telephone redemptions for shares recently
purchased by check unless it is reasonably satisfied that the purchase check has
cleared. You can avoid this potential delay if you purchase shares by wiring
Federal Funds. The 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.
There is no front-end sales charge or fee for exchanges made between shares of
funds which both carry a front-end sales charge. Any applicable front-end sales
charge will apply to exchanges from shares of funds not subject to a front-end
sales charge, except for transfers involving assets that were previously
invested in a fund with a front-end sales charge and/or transfers involving the
reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for Class B Shares of other Class B Funds or Class C Shares
of other Class C Funds, as applicable (in each case, "New Shares"), will not be
subject to a CDSC that might otherwise be due upon redemption of the Original
Shares. However, such shareholders will continue to be subject to the CDSC and,
in the case of Class B Shares, the automatic conversion schedule of the Original
Shares as described in this Prospectus and any CDSC assessed upon redemption
will be charged by the Series. 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.
Various redemption and exchange methods are outlined below. Except for the
CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the Fund or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares redeemed
or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of the
features described below, shall continue in effect until such time as a written
revocation or modification has been received by the Fund or its agent.
All exchanges involve a purchase of shares of the fund into which the exchange
is made. As with any purchase, an investor should obtain and carefully read that
fund's prospectus before buying shares in an exchange. The prospectus contains
more complete information about the fund, including charges and expenses.
WRITTEN REDEMPTION
You can write to the 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 Fund requires a signature by all owners of the account and a
signature guarantee for each owner. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day, but no later than seven
days, after receipt of your redemption request. If your Class A Shares are in
certificate form, the certificate must accompany your request and also be in
good order. The Fund issues certificates for Class A Shares only if a
shareholder submits a specific request. The Fund does not issue certificates for
Class B Shares or Class C Shares.
- - 26
<PAGE> 34
WRITTEN EXCHANGE
You may also write to the Fund (at 1818 Market Street, Philadelphia, PA 19103)
to request an exchange of any or all of your shares into another mutual fund in
the Delaware Group, subject to the same conditions and limitations as other
exchanges noted above.
TELEPHONE REDEMPTION AND EXCHANGE
To get the added convenience of the telephone redemption and exchange methods,
you must have the Transfer Agent hold your shares (without charge) for you. If
you choose to have your Class A Shares in certificate form, you may only redeem
or exchange by written request and you must return your certificates.
The Telephone Redemption--Check to Your Address of Record service and the
Telephone Exchange service, both of which are described below, are automatically
provided unless you notify the Fund in writing that you do not wish to have such
service available with respect to your account. The 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 Fund by telephone during periods
when market or economic conditions lead to an unusually large volume of
telephone requests.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Series shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the 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, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
TELEPHONE REDEMPTION--CHECK TO YOUR ADDRESS OF RECORD
THE TELEPHONE REDEMPTION FEATURE IS A QUICK AND EASY METHOD TO REDEEM SHARES.
You or your investment dealer of record can have redemption proceeds of $50,000
or less mailed to you at your address of record. Checks will be payable to the
shareholder(s) of record. Payment is normally mailed the next business day, but
no later than seven days, after receipt of the request. This service is only
available to individual, joint and individual fiduciary-type accounts.
TELEPHONE REDEMPTION--PROCEEDS TO YOUR BANK
Redemption proceeds of $1,000 or more can be transferred to your predesignated
bank account by wire or by check. You should authorize this service when you
open your account. If you change your predesignated bank account, the Fund
requires an Authorization Form with your signature guaranteed. For your
protection, your authorization must be on file. If you request a wire, your
funds will normally be sent the next business day. CoreStates Bank, N.A.'s fee
(currently $7.50) will be deducted from your redemption. If you ask for a check,
it will normally be mailed the next business day, but no later than seven days,
after receipt of your request to your predesignated bank account. Except for any
CDSC which may be applicable to Class B and Class C Shares and Limited CDSC
which may be applicable to certain Class A Shares, there are no fees for this
redemption method, but the mail time may delay getting funds into your bank
account. Simply call the Fund's Shareholder Service Center prior to the time the
offering price and net asset value are determined, as noted above.
If expedited payment could adversely affect the Series, the Fund may take up
to seven days to pay.
TELEPHONE EXCHANGE
The Telephone Exchange feature is a convenient and efficient way to adjust
your investment holdings as your liquidity requirements and investment
objectives change.
You or your investment dealer of record can authorize an exchange of shares
into a money market fund in the Delaware Group with just a phone call. Any such
exchange is subject to the same limitations and conditions as other exchanges
noted above.
This service is useful if you are anticipating a major expenditure and want to
move a portion of your investment into a fund where stability of principal is
paramount. The Delaware Group money market fund investment minimums apply.
- - 27
<PAGE> 35
Your shares can also be exchanged into other funds in the Delaware Group under
the same registration subject to the same limitations and conditions as other
exchanges noted above. As with the written exchange service, telephone exchanges
are subject to the requirements of each fund, as described above. Telephone
exchanges may be subject to limitations as to amounts or frequency.
SYSTEMATIC WITHDRAWAL PLANS
This plan provides shareholders with a consistent monthly (or quarterly)
payment. THIS IS PARTICULARLY USEFUL TO SHAREHOLDERS LIVING ON FIXED INCOMES,
SINCE IT CAN PROVIDE THEM WITH A STABLE SUPPLEMENTAL AMOUNT. With accounts of at
least $5,000, you may elect monthly withdrawals of $25 (quarterly $75) or more.
The Fund does not recommend any particular monthly amount, as each shareholder's
situation and needs vary. Payments are normally made by check. You may elect to
have your payments transferred from your Series account to your predesignated
bank account through the Delaware Group's MoneyLine service. Your funds will
normally be credited to your bank account two business days after the payment
date. Except for the Limited CDSC which may be applicable to Class A Shares and
the CDSC which may be applicable to Class B and Class C Shares as noted below,
there are no fees for this redemption method. You can initiate the MoneyLine
service by completing an Authorization Agreement. If the name and address on
your bank account are not identical to the name and address on your Series
account, you must have your signature guaranteed. Please call the Shareholder
Service Center for additional information.
* * *
Shareholders should not purchase Class A Shares while participating in a
Systematic Withdrawal Plan. Also, redemptions of Class A Shares via a Systematic
Withdrawal Plan may be subject to a Limited CDSC if the original purchase was
made at net asset value within the 12 months prior to the withdrawal and a
dealer's commission has been paid on that purchase. See Contingent Deferred
Sales Charge for Certain Purchases of Class A Shares Made at Net Asset Value,
below. With respect to Class B Shares and Class C Shares redeemed via a
Systematic Withdrawal Plan, any applicable CDSC will be waived if, on the date
that the Plan is established, the annual amount selected to be withdrawn is less
than 12% of the account balance. If the annual amount selected to be withdrawn
exceeds 12% of the account balance on the date that the Systematic Withdrawal
Plan is established, all redemptions under the Plan will be subject to the
applicable CDSC. Whether a waiver of the CDSC is available or not, the first
shares to be redeemed for each Systematic Withdrawal Plan payment will be those
not subject to a CDSC because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions. The 12%
annual limit will be reset on the date that any Systematic Withdrawal Plan is
modified (for example, a change in the amount selected to be withdrawn or the
frequency or date of withdrawals), based on the balance in the account on that
date. See Waiver of CDSC--Class B and Class C Shares below.
For more information on Systematic Withdrawal Plans, call the Shareholder
Service Center.
WEALTH BUILDER OPTION
Shareholders may elect to invest in other mutual funds in the Delaware Group
through our Wealth Builder Option. Under this automatic exchange program,
shareholders can authorize regular monthly amounts (minimum of $100 per fund) to
be liquidated from their Series account and invested automatically into an
account in one or more funds in the Delaware Group. If, in connection with the
Wealth Builder Option, a shareholder wishes to open a new account in such other
fund or funds to receive the automatic investment, such new account in any fund
must meet such other fund's minimum initial purchase requirements. Investments
under this option are exchanges and are therefore subject to the same conditions
and limitations as other exchanges noted above.
Shareholders can use the Wealth Builder Option to invest in the Series through
regular liquidations of shares in their accounts in other funds in the Delaware
Group subject to the same conditions and limitations as other exchanges noted
above. Shareholders can terminate their participation at any time by written
notice to the Fund. See Redemption and Exchange.
- - 28
<PAGE> 36
CONTINGENT DEFERRED SALES CHARGE FOR
CERTAIN PURCHASES OF CLASS A SHARES MADE AT
NET ASSET VALUE
A Limited CDSC will be imposed by the Series upon certain redemptions of Class
A Shares (or shares into which such Class A Shares are exchanged) made within 12
months of purchase, if such purchases were made at net asset value and triggered
the payment by the Distributor of the dealer's commission described above. See
Buying Shares.
The Limited CDSC will be paid to the Distributor and will be equal to the
lesser of 1% of: (1) the net asset value at the time of purchase of the Class A
Shares being redeemed; or (2) the net asset value of such Class A Shares at the
time of redemption. For purposes of this formula, the "net asset value at the
time of purchase" will be the net asset value at purchase of the Class A Shares
even if those shares are later exchanged for shares of another Delaware Group
fund and, in the event of an exchange of Class A Shares, the "net asset value of
such shares at the time of redemption" will be the net asset value of the shares
acquired in the exchange.
Redemptions of such Class A Shares held for more than 12 months will not be
subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited CDSC
at the time of such exchange. The period a shareholder owns shares into which
Class A Shares are exchanged will count towards satisfying the 12-month holding
period. The Series assesses the Limited CDSC if such 12-month period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of the Series or the Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed that
shares not subject to the Limited CDSC are the first redeemed followed by other
shares held for the longest period of time. The Limited CDSC will not be imposed
upon shares representing reinvested dividends or capital gains distributions, or
upon amounts representing share appreciation. All investments made during a
calendar month, regardless of what day of the month the investment occurred,
will age one month on the last day of that month and each subsequent month.
WAIVER OF LIMITED CDSC--CLASS A SHARES
The Limited CDSC for Class A Shares on which a dealer's commission has been
paid will be waived in the following instances: (i) redemptions that result from
the 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) redemptions by the classes of shareholders who are
permitted to purchase shares at net asset value, regardless of the size of the
purchase (see Buying at Net Asset Value under Buying Shares).
WAIVER OF CDSC--CLASS B AND C SHARES
The CDSC is waived on redemptions of Class B Shares if the redemption results
from the 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.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the 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 of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts,
the waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Internal Revenue Code) of
all registered owners occurring after the purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B 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.
- - 29
<PAGE> 37
DIVIDENDS AND DISTRIBUTIONS
The Fund declares a dividend to all shareholders of record at the time the
offering price of shares is determined. See Purchase Price and Effective Date
under Buying Shares. Thus, when redeeming shares, dividends continue to be
credited up to and including the date of redemption.
Purchases of shares by wire begin earning dividends when converted into
Federal Funds and available for investment, normally the next business day after
receipt. However, if the Fund is given prior notice of Federal Funds wire and an
acceptable written guarantee of timely receipt from an investor satisfying the
Fund's credit policies, the purchase will start earning dividends on the date
the wire is received. Purchases by check earn dividends upon conversion to
Federal Funds, normally one business day after receipt.
Each Class of the Series will share proportionately in the investment income
and expenses of the Series, except that the per share dividends from net
investment income on the Class A Shares, the Class B Shares and the Class C
Shares will vary due to the expenses under the 12b-1 Plan applicable to each
Class. Generally, the dividends per share on Class B Shares and Class C Shares
can be expected to be lower than the dividends per share on Class A Shares
because the expenses under the 12b-1 Plans relating to Class B and Class C
Shares will be higher than the expenses under the 12b-1 Plan relating to Class A
Shares. See Distribution (12b-1) and Service under Management of the Fund.
Dividends are declared daily and paid monthly on the first business day
following the end of each month. Payment by check of cash dividends will
ordinarily be mailed within three business days after the payable date. Any
distributions from net realized securities profits will be distributed annually
in the quarter following the close of the fiscal year.
Both dividends and distributions, if any, are automatically reinvested in your
account at net asset value unless you elect otherwise. Any check in payment of
dividends or other distributions which cannot be delivered by the United States
Post Office or which remains uncashed for a period of more than one year may be
reinvested in the shareholder's account at the then-current net asset value and
the dividend option may be changed from cash to reinvest. If you elect to take
your dividends and distributions in cash and such dividends and distributions
are in an amount of $25 or more, you may choose the Delaware Group's MoneyLine
service and have such payments transferred from your Series account to your
predesignated bank account. Your funds will normally be credited to your bank
account two business days after the payment date. There are no fees for the
MoneyLine service. See Systematic Withdrawal Plans under Redemption and Exchange
for information regarding authorization of this service. (See The Delaware
Difference for more information on reinvestment options.)
The Series anticipates that substantially all of its dividends from net
investment income paid to shareholders will be exempt from federal income tax.
During the fiscal year ended August 31, 1995, dividends totaling $0.550 and
$0.460 per share of the Class A Shares and the Class B Shares, respectively,
were paid from net investment income, all of which were exempt from federal
income tax. Class C Shares were not offered prior to the date of this
Prospectus.
- - 30
<PAGE> 38
TAXES
The Series has qualified, and intends to continue to qualify, as a regulated
investment company under Subchapter M of the Internal Revenue Code (the "Code").
As such, the Series will not be subject to federal income tax, or to any excise
tax, to the extent its earnings are distributed as provided in the Code. The
Series intends to distribute substantially all of its net investment income and
net capital gains, if any.
The Series intends to invest a sufficient portion of its assets in municipal
bonds and notes so that it will qualify to pay "exempt-interest dividends" to
shareholders. Such exempt-interest dividends distributed to shareholders are
excluded from a shareholder's gross income for federal tax purposes.
A portion of the Series' dividends may be derived from income on "private
activity" municipal bonds and therefore may be a preference item under federal
tax law and subject to the federal alternative minimum tax. No portion of the
Series' distributions will be eligible for the dividends-received deduction for
corporations.
To the extent dividends are derived from taxable income on temporary
investments or short-term capital gains, they are treated as ordinary income,
whether received in cash or in additional shares. In addition, gain from the
disposition of a tax-exempt bond that was acquired after April 30, 1993 for a
price less than the principal amount of the bond is taxable to shareholders as
ordinary income to the extent of the accrued market discount.
Distributions paid by the Series from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in the Series. The Series does not seek to
realize any particular amount of capital gains during a year; rather, realized
gains are a byproduct of Series management activities. Consequently, capital
gains distributions may be expected to vary considerably from year to year.
Also, for those investors subject to tax, if purchases of shares in the Series
are made shortly before the record date for a capital gains distribution, a
portion of the investment will be returned as a taxable distribution.
Dividends which are declared in October, November or December to shareholders
of record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Series and received by the
shareholder on December 31 of the calendar year in which they are declared.
The sale of shares of the Series is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
two mutual funds (or two series or portfolios of a mutual fund). Any loss
incurred on sale or exchange of the Series' shares which had been held for six
months or less, will be treated as a long-term capital loss to the extent of
capital gain dividends received with respect to such shares and will be
disallowed to the extent of exempt-interest dividends paid with respect to such
shares. All or a portion of the sales charge incurred in acquiring Series shares
will be excluded from the federal tax basis of any of such shares sold or
exchanged within ninety days of their purchase (for purposes of determining gain
or loss upon sale of such shares) if the sale proceeds are reinvested in the
Series or in another fund in the Delaware Group of funds and a sales charge that
would otherwise apply to the reinvestment is reduced or eliminated. Any portion
of such sales charge excluded from the tax basis of the shares sold will be
added to the tax basis of the shares acquired in the reinvestment.
Exempt-interest dividends paid by the Fund, although exempt from regular
federal income tax in the hands of a shareholder, are includable in the tax base
for determining the extent to which a shareholder's Social Security benefits
would be subject to federal income tax. Shareholders are required to disclose
their receipt of tax-exempt interest on their federal income tax returns.
The automatic conversion of Class B Shares into Class A Shares at the end of
approximately five years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Buying Shares.
The exemption of dividends for regular federal income tax purposes may not
result in similar exemptions under the laws of a particular state or local
taxing authority. It is recommended that shareholders consult their tax advisers
in this regard.
- - 31
<PAGE> 39
Shares of the Series will be exempt from Pennsylvania county personal property
taxes. The Fund will report annually the percentage of interest income earned on
the municipal obligations on a state-by-state basis during the proceeding
calendar year.
Each year, the Fund will mail you information on the tax status of the Series'
dividends and distributions.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Account Registration Form your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
The tax discussion set forth above is included for general information only.
Investors should consult their own tax advisers concerning the federal, state,
local or foreign tax consequences of an investment in the Series.
See Taxes in Part B for additional information on tax matters relating to the
Series and its shareholders.
CALCULATION OF OFFERING
PRICE AND NET ASSET VALUE
PER SHARE
Class A Shares are purchased at the offering price per share, while Class B
Shares and Class C Shares are purchased at the net asset value ("NAV"). The
offering price per share of Class A Shares consists of the NAV per share next
computed after the order is received, plus any applicable front-end sales
charges. The offering price and NAV are computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on
days when the Exchange is open.
The NAV per share is computed by adding the value of all securities and other
assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of the shares outstanding. Debt
securities are priced at fair value by an independent pricing service using
methods approved by the Board of Directors. Short-term investments having a
maturity of less than 60 days are valued at amortized cost, which approximates
market value. All other securities are valued at their fair value as determined
in good faith and in a method approved by the Fund's Board of Directors.
Each of the Series' three classes will bear, pro-rata, all of the common
expenses of the Series. The net asset values of all outstanding shares of each
class of the Series will be computed on a pro-rata basis for each outstanding
share based on the proportionate participation in the Series represented by the
value of shares of that class. All income earned and expenses incurred by the
Series will be borne on a pro-rata basis by each outstanding share of a class,
based on each class' percentage in the Series 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 the Series may
vary. However, the NAV per share of each class is expected to be equivalent.
- - 32
<PAGE> 40
MANAGEMENT OF THE FUND
DIRECTORS
The business and affairs of the Fund are managed under the direction of its
Board of Directors. Part B contains additional information regarding the
directors and officers.
INVESTMENT MANAGER
The Manager furnishes investment management services to the Series.
The Manager and its predecessors have been managing the funds in the Delaware
Group since 1938. On August 31, 1995, the Manager and its affiliate, Delaware
International Advisers Ltd., were supervising in the aggregate more than $27
billion in assets in the various institutional (approximately $17,506,688,000)
and investment company (approximately $10,068,867,000) accounts.
The Manager is an indirect, wholly-owned subsidiary of Delaware Management
Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly-owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now wholly-owned subsidiaries, and subject to
the ultimate control, of Lincoln National. Lincoln National, with headquarters
in Fort Wayne, Indiana, is a diversified organization with operations in many
aspects of the financial services industry, including insurance and investment
management. In connection with the merger, a new Investment Management Agreement
between the Fund on behalf of the Series and the Manager was executed following
shareholder approval.
The Manager manages the Series' portfolio and makes and implements investment
decisions. The Manager also administers the Fund's affairs and pays the Fund's
rent and the salaries of all the directors, officers and employees of the Fund
who are affiliated with the Manager. For these services, the annual compensation
paid to the Manager is equal to .50% of the average daily net assets of the
Series, less a proportionate share of all directors' fees paid to the
unaffiliated directors of the Fund. After considering the waiver of fees by the
Manager described under Summary of Expenses, the Manager received no
compensation from the Series for this period. Had the waiver not been in effect,
investment management fees payable by the Series would have been 0.47% of
average daily net assets.
Patrick P. Coyne has primary responsibility for making day-to-day investment
decisions for the Series. He has been the Series' Senior Portfolio Manager since
its inception in 1993. A graduate of Harvard University with an MBA from the
University of Pennsylvania's Wharton School, Mr. Coyne joined the Delaware
Group's fixed income department in 1990. Prior to that, 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.
In making investment decisions for the Series, Mr. Coyne regularly consults
with Paul E. Suckow, J. Michael Pokorny and other members of the Delaware
Group's fixed income department. Mr. Suckow is the Manager's Chief Investment
Officer for fixed income. A Chartered Financial Analyst, he is a graduate of
Bradley University with an MBA from Western Illinois University. Mr. Suckow was
a fixed income portfolio manager at the Delaware Group from 1981 to 1985. He
returned to the Delaware Group in 1993 after eight years with Oppenheimer
Management Corporation. Mr. Pokorny is a graduate of William and Mary College
with over 29 years of fixed income experience. He joined the Delaware Group in
1978.
PORTFOLIO TRADING PRACTICES
The Series may sell securities without regard to the length of time they have
been held. Trading will be undertaken principally to achieve the Series'
objectives in light of expected changes in interest rates. The degree of trading
activity will affect brokerage costs of the Series and may affect taxes payable
by the Series' shareholders. Given the Series' investment objective, its annual
portfolio turnover rate is not expected to exceed 100%. During the past two
fiscal years, the portfolio turnover rates of the Series were 81% for 1994 and
63% for 1995.
The Manager uses its best efforts to obtain the best available price and most
favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, the Manager may consider a
broker/dealer's sales of Series shares in placing portfolio orders, and may
place orders with broker/dealers that have agreed to defray certain Series
expenses such as custodian fees.
- - 33
<PAGE> 41
PERFORMANCE INFORMATION
From time to time, the Series may quote yield or total return performance of
the Classes in advertising and other types of literature.
The current yield for a Class will be calculated by dividing the annualized
net investment income earned by that Class during a recent 30-day period by the
maximum offering price per share on the last day of the period. The yield
formula provides for semi-annual compounding, which assumes that net investment
income is earned and reinvested at a constant rate and annualized at the end of
a six-month period. The Series may also publish a tax-equivalent yield
concerning a Class based on federal and, if applicable, state tax rates, which
demonstrates the taxable yield necessary to produce an after-tax yield
equivalent to such Class' yield.
Total return will be based on a hypothetical $1,000 investment, reflecting the
reinvestment of all distributions at net asset value and: (i) in the case of
Class A Shares, the impact of the maximum front-end sales charge at the
beginning of each specified period; and (ii) in the case of Class B Shares and
Class C Shares, the deduction of any applicable CDSC at the end of the relevant
period. Each presentation will include the average annual total return for one-,
five- and ten-year periods, as relevant. The Series may, in addition, advertise
aggregate and average total return information over additional periods of time.
In addition, the Series may present total return information that does not
reflect the deduction of the maximum front-end sales charge or any applicable
CDSC. In this case, such total return information would be more favorable than
total return information that includes deductions of the maximum front-end sales
charge or any applicable CDSC.
Yield and net asset value fluctuate and are not guaranteed. Past performance
is not an indication of future results.
DISTRIBUTION (12B-1) AND SERVICE
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor for
the Series under a Distribution Agreement dated April 3, 1995, as amended on
November 29, 1995.
The Fund has adopted a separate distribution plan under Rule 12b-1 for each of
the Class A Shares, the Class B Shares and the Class C Shares (the "Plans"). The
Plans permit the Series to pay the Distributor from the assets of the respective
Classes a monthly fee for its services and expenses in distributing and
promoting sales of shares. These expenses include, among other things, preparing
and distributing advertisements, sales literature, and prospectuses and reports
used for sales purposes, compensating sales and marketing personnel, holding
special promotions for specified periods of time, and paying distribution and
maintenance fees to brokers, dealers and others. In connection with the
promotion of Class A, Class B and Class C Shares, the Distributor may, from time
to time, pay to participate in dealer-sponsored seminars and conferences, and
reimburse dealers for expenses incurred in connection with preapproved seminars,
conferences and advertising. The Distributor may pay or allow additional
promotional incentives to dealers as part of preapproved sales contests and/or
to dealers who provide extra training and information concerning each Class and
increase sales of each Class. In addition, the Series may make payments from the
assets of the respective Class directly to others, such as banks, who aid in the
distribution of its shares or provide services in respect of the shares,
pursuant to service agreements with the Series.
The 12b-1 Plan expenses relating to each of the Class B Shares and the Class C
Shares are also used to pay the Distributor for advancing the commission costs
to dealers with respect to the initial sale of such shares.
The aggregate fees paid by the Series from the assets of the respective
Classes to the Distributor and others under the Plans may not exceed .30% of the
Class A Shares' average daily net assets in any year, and 1% (.25% of which are
service fees to be paid to the Distributor, dealers or others for providing
personal service and/or maintaining shareholder accounts) of each of the Class B
Shares' and the Class C Shares' average daily net assets in any year. The Class
A, Class B and Class C Shares will not incur any distribution expenses beyond
these limits, which may not be increased without shareholder approval. The
Distributor may, however, incur additional expenses and make additional payments
to dealers from its own resources to promote the distribution of shares of the
Classes.
- - 34
<PAGE> 42
On September 17, 1992, the Board of Directors set the fee for the Class A
Shares, pursuant to its Plan, at .15% of average daily net assets.
While payments pursuant to the Plans may not exceed .30% annually with respect
to the Class A Shares, and 1% annually with respect to each of the Class B
Shares and the Class C Shares, the Plans do not limit fees to amounts actually
expended by the Distributor. It is therefore possible that the Distributor may
realize a profit in any particular year. However, the Distributor currently
expects that its distribution expenses will likely equal or exceed payments to
it under the Plans. The monthly fees paid to the Distributor are subject to the
review and approval of the Fund's unaffiliated directors who may reduce the fees
or terminate the Plans at any time.
The Transfer Agent, Delaware Service Company, Inc., serves as the shareholder
servicing, dividend disbursing and transfer agent for the Series under an
Agreement dated November 10, 1992. The directors annually review service fees
paid to the Transfer Agent.
The Distributor and the Transfer Agent are also indirect, wholly-owned
subsidiaries of DMH.
EXPENSES
The Series is responsible for all of its own expenses other than those borne
by the Manager under the Investment Management Agreement and those borne by the
Distributor under the Distribution Agreement. The ratios of expenses to average
daily net assets of the Class A Shares and the Class B Shares for the fiscal
year ended August 31, 1995 were 0.25% and 1.10%, respectively, reflecting the
voluntary waiver of fees by the Manager and the impact of 12b-1 Plan fees. The
Fund anticipates that the expense ratio for Class C Shares will be identical to
the expense ratio for Class B Shares.
SHARES
The Fund is an open-end management investment company and the Series'
portfolio of assets is nondiversified as defined by the 1940 Act. Commonly known
as a mutual fund, the Fund was organized as a Maryland corporation on August 17,
1983. The Fund currently offers three classes of shares for each of its series--
Tax-Free USA Intermediate Fund, Tax-Free USA Fund and Tax-Free Insured Fund;
shares of the Tax-Free USA Fund and Tax-Free Insured Fund are offered through a
separate prospectus.
The shares of each series have a par value of $.01, equal voting rights,
except as noted below, and are equal in all other respects. All Fund shares have
noncumulative voting rights which means that the holders of more than 50% of the
Fund's shares voting for the election of directors can elect 100% of the
directors if they choose to do so. Shares of each series have a priority over
shares of any other series of the Fund in the assets and income of that series,
and each series will vote separately on any matter which affects only that
series. Under Maryland law, the Fund is not required, and does not intend, to
hold annual meetings of shareholders unless, under certain circumstances, it is
required to do so under the 1940 Act. Shareholders of 10% or more of the Fund's
shares may request that a special meeting be called to consider the removal of a
director.
Shares of each class within a series represent proportionate interests in the
assets of that series and have the same voting and other rights and preferences
as the other classes of shares of the series, except that, 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, the Class B Shares may vote on any proposal to increase
materially the fees to be paid by the Series under the Rule 12b-1 Plan relating
to the Class A Shares.
Prior to May 2, 1994, the Tax-Free USA Intermediate Fund A Class was known as
the Tax-Free USA Intermediate Fund.
- - 35
<PAGE> 43
APPENDIX A
TAX-FREE USA INTERMEDIATE FUND
ILLUSTRATIONS OF THE POTENTIAL IMPACT ON INVESTMENT BASED ON PURCHASE OPTION
$10,000 PURCHASE
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3
NO REDEMPTION REDEEM 1ST YEAR REDEEM 3RD YEAR
------------------------------- ------------------------------- -------------------------------
YEAR CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- ---- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 9,700 10,000 10,000 9,700 10,000 10,000 9,700 10,000 10,000
1 10,185 10,415 10,415 10,185 10,215 10,315+ 10,185 10,415 10,415
2 10,694 10,847 10,847 10,694 10,847 10,847
3 11,229 11,297 11,297 11,229 11,197 11,297+
4 11,790+ 11,766 11,766
5 12,380 12,255 12,255
6 12,999 12,867* 12,763
7 13,649 13,511* 13,293
8 14,331 14,186* 13,844
9 15,048 14,895* 14,419
10 15,800 15,640* 15,017
<CAPTION>
SCENARIO 4
REDEEM 5TH YEAR
--------------------------------
YEAR CLASS A CLASS B CLASS C
- ---- ------- ------- -------
<S> <C> <C> <C>
0 9,700 10,000 10,000
1 10,185 10,415 10,415
2 10,694 10,847 10,847
3 11,229 11,297 11,297
4 11,790+ 11,766 11,766
5 12,380 12,255 12,255
6
7
8
9
10
</TABLE>
- ------------------
*This assumes that Class B Shares were converted to Class A Shares at the end of
the fifth year.
$250,000 PURCHASE
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3
NO REDEMPTION REDEEM 1ST YEAR REDEEM 3RD YEAR
------------------------------- ------------------------------- -------------------------------
YEAR CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- ---- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 245,000 250,000 250,000 245,000 250,000 250,000 245,000 250,000 250,000
1 257,250 260,375 260,375 257,250 255,375 257,875+ 257,250 260,375 260,375
2 270,113 271,181 271,181 270,113 271,181 271,181
3 283,618+ 282,435 282,435 283,618+ 279,935 282,435
4 297,799 294,156 294,156
5 312,689 306,363 306,363
6 328,323 321,681* 319,077
7 344,740 337,765* 332,319
8 361,977 354,654* 346,110
9 380,075 372,386* 360,474
10 399,079 391,006* 375,433
<CAPTION>
SCENARIO 4
REDEEM 5TH YEAR
---------------------------------
YEAR CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
0 245,000 250,000 250,000
1 257,250 260,375 260,375
2 270,113 271,181 271,181
3 283,618+ 282,435 282,435
4 297,799 294,156 294,156
5 312,689 306,363 306,363
6
7
8
9
10
</TABLE>
- ------------------
*This assumes that Class B Shares were converted to Class A Shares at the end of
the fifth year.
Assumes a hypothetical return for Class A of 5% per year, a hypothetical return
for Class B of 4.15% for years 1-5 and 5% for years 6-10, and a hypothetical
return for Class C of 4.15% per year. Hypothetical returns vary due to the
different expense structures for each class and do not represent actual
performance.
Class A purchase subject to appropriate sales charge breakpoint (3.00% @
$10,000; 2.00% @ $250,000).
Class B purchase assessed appropriate CDSC upon redemption (2%-2%-1% in years
1-2-3).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which class offers the greater return potential
based on investment amount and holding period.
- - 36
<PAGE> 44
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 45
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 46
=================
TAX-FREE
USA FUND
A CLASS
B CLASS
C CLASS
-----------------
TAX-FREE
INSURED FUND
A CLASS
B CLASS
C CLASS
-----------------
PROSPECTUS
NOVEMBER 29, 1995
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, tax-free funds, money market funds,
global and international funds and closed-end equity funds give investors the
ability to create a portfolio that fits their personal financial goals. For more
information, contact your financial adviser or call Delaware Group at
800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, NY 10260
[ARTWORK]
DELAWARE
GROUP
============
PHILADELPHIA - LONDON
[LOGO - PRINTED IN THE U.S.A. ON RECYCLED PAPER.]
P-011[--]BP11/95
<PAGE> 47
PROSPECTUS
NOVEMBER 29, 1995
<TABLE>
<S> <C>
TAX-FREE USA FUND TAX-FREE INSURED FUND
A CLASS SHARES A CLASS SHARES
B CLASS SHARES B CLASS SHARES
C CLASS SHARES C CLASS SHARES
</TABLE>
- --------------------------------------------------------------------------------
1818 MARKET STREET, PHILADELPHIA, PA 19103
FOR PROSPECTUS AND PERFORMANCE: NATIONWIDE 800-523-4640, PHILADELPHIA
215-988-1333
INFORMATION ON EXISTING ACCOUNTS: (SHAREHOLDERS ONLY) NATIONWIDE 800-523-1918,
PHILADELPHIA 215-988-1241
DEALER SERVICES: (BROKER/DEALERS ONLY) NATIONWIDE 800-362-7500, PHILADELPHIA
215-988-1050
Delaware Group Tax-Free Fund, Inc. (the "Fund") is a professionally-managed
mutual fund of the series type. This Prospectus describes the Tax-Free USA Fund
("USA Fund") and the Tax-Free Insured Fund ("Insured Fund") (collectively, the
"Series"). Each Series currently offers three classes of shares: with respect to
the USA Fund, Tax-Free USA Fund A Class, Tax-Free USA Fund B Class and Tax-Free
USA Fund C Class; and with respect to the Insured Fund, Tax-Free Insured Fund A
Class, Tax-Free Insured Fund B Class and Tax-Free Insured Fund C Class
(collectively the "Classes"; and "Class A Shares," "Class B Shares" or "Class C
Shares" refer to such shares for both Series, except where noted). This
Prospectus describes each Series and each Class, except where noted. The
objective of each Series is 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. The
Insured Fund seeks to achieve its objective by investing primarily in municipal
bonds protected by insurance guaranteeing the payment of principal and interest
when due. See Quality Restrictions for a discussion of the insurance that
applies to the Series' portfolio securities.
Class A Shares may be purchased at the public offering price, which is equal to
the next determined net asset value per share, plus a front-end sales charge.
Class B Shares and Class C Shares may be purchased at a price equal to the next
determined net asset value per share. Class A Shares are subject to a maximum
front-end sales charge of 4.75% and annual 12b-1 Plan expenses of up to .30%.
Class B Shares are subject to a contingent deferred sales charge ("CDSC") which
may be imposed on redemptions made within six years of purchase and annual 12b-1
Plan expenses of 1%, which are assessed against the Class B Shares for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Buying Shares. Class C Shares are subject to a CDSC which may be
imposed on redemptions made within twelve months of purchase and annual 12b-1
Plan expenses of 1%, which are assessed against the Class C Shares for the life
of the investment. See Summary of Expenses. These alternatives permit an
investor to choose the method of purchasing shares that is most suitable for his
or her needs. In choosing the most suitable class, an investor should consider
the differences among the Classes, including the effect of sales charges and
12b-1 Plan expenses, given the amount of the purchase, the length of time the
investor expects to hold the shares and other circumstances. See Buying Shares.
This Prospectus relates only to the Classes listed above and sets forth
information that you should read and consider before you invest. Please retain
it for future reference. Part B of the Fund's registration statement, dated
November 29, 1995, as it may be amended from time to time, contains additional
information about the Series and has been filed with the Securities and Exchange
Commission. Part B is incorporated by reference into this Prospectus and is
available, without charge, by writing to Delaware Distributors, L.P. at the
above address or by calling the above numbers. The Series' financial statements
appear in their Annual Report, which will accompany any response to requests for
Part B.
The Fund also offers the Tax-Free USA Intermediate Fund, which offers three
classes of shares: Tax-Free USA Intermediate Fund A Class, Tax-Free USA
Intermediate Fund B Class and Tax-Free USA Intermediate Fund C Class. A
prospectus for the Tax-Free USA Intermediate Fund can be obtained by writing to
Delaware Distributors, L.P. at the above address or by calling the above number.
<TABLE>
<S> <C>
TABLE OF CONTENTS
COVER PAGE............................................ 1
SYNOPSIS.............................................. 2
SUMMARY OF EXPENSES................................... 4
FINANCIAL HIGHLIGHTS.................................. 6
INVESTMENT OBJECTIVE AND POLICIES
SUITABILITY......................................... 10
INVESTMENT STRATEGY................................. 10
THE DELAWARE DIFFERENCE
PLANS AND SERVICES.................................. 13
BUYING SHARES......................................... 15
REDEMPTION AND EXCHANGE............................... 23
DIVIDENDS AND DISTRIBUTIONS........................... 28
TAXES................................................. 29
CALCULATION OF OFFERING PRICE AND
NET ASSET VALUE PER SHARE........................... 30
MANAGEMENT OF THE FUND................................ 31
APPENDIX A--INVESTMENT ILLUSTRATIONS.................. 35
APPENDIX B--RATINGS................................... 36
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK
OR CREDIT UNION DEPOSITS.
- - 1
<PAGE> 48
SYNOPSIS
CAPITALIZATION
The Fund has a present authorized capitalization of five hundred million
shares of capital stock with a $.01 par value per share. Two hundred twenty-five
million shares are allocated to the USA Fund with one hundred seventy-five
million shares allocated to the Class A Shares, twenty-five million shares
allocated to the Class B Shares and twenty-five million shares allocated to the
Class C Shares. One hundred seventy-five million shares are allocated to the
Insured Fund with one hundred twenty-five million shares allocated to the Class
A Shares, twenty-five million shares allocated to the Class B Shares and
twenty-five million shares allocated to the Class C Shares. See Shares under
Management of the Fund.
INVESTMENT MANAGER, DISTRIBUTOR AND SERVICE AGENT
Delaware Management Company, Inc. (the "Manager") is the investment manager
for the Fund. The Manager or its affiliate, Delaware International Advisers
Ltd., also manages the other funds in the Delaware Group. Delaware Distributors,
L.P. (the "Distributor") is the national distributor for the Fund and for all of
the other mutual funds in the Delaware Group. Delaware Service Company, Inc.
(the "Transfer Agent") is the shareholder servicing, dividend disbursing and
transfer agent for the Fund and for all of the other mutual funds in the
Delaware Group. See Management of the Fund.
SALES CHARGES
The price of the Class A Shares includes a maximum front-end sales charge of
4.75% of the offering price, which, based on the net asset value per share of
the Class A Shares as of the end of the Fund's most recent fiscal year, is
equivalent to 4.97% with respect to USA Fund and 4.98% with respect to Insured
Fund of the amount invested. The sales charge is reduced on certain transactions
of at least $100,000 but under $1,000,000. For purchases of $1,000,000 or more,
the front-end sales charge is eliminated. Class A Shares are subject to annual
12b-1 Plan expenses.
The price of the Class B Shares is equal to the net asset value per share.
Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed within
two years of purchase; (ii) 3% if shares are redeemed during the third or fourth
year following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; and (iv) 1% if shares are redeemed during the sixth year
following purchase. Class B Shares are subject to annual 12b-1 Plan expenses for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Buying Shares.
The price of the Class C Shares is equal to the net asset value per share.
Class C Shares are subject to a CDSC of 1% if shares are redeemed within twelve
months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses for
the life of the investment.
See Buying Shares and Distribution (12b-1) and Service under Management of the
Fund.
PURCHASE AMOUNTS
Generally, the minimum initial investment is $1,000 for Class A Shares, Class
B Shares and Class C Shares. Subsequent investments generally must be at least
$100. Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. An investor may exceed the maximum purchase
limitations for Class B Shares and Class C Shares by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more of Class A
Shares, which are subject to lower annual 12b-1 Plan expenses than Class B
Shares and Class C Shares and generally are not subject to a CDSC. See Buying
Shares.
- - 2
<PAGE> 49
INVESTMENT OBJECTIVE
The objective of each Series is 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.
The Insured Fund seeks to achieve its objective by investing primarily in
municipal bonds protected by insurance guaranteeing the payment of principal and
interest when due. Typically, the municipal bonds in both Series will have a
maturity range between five and 30 years. Although exempt from regular federal
income tax, interest paid on certain types of municipal obligations is deemed to
be a preference item under federal tax law and is subject to the federal
alternative minimum tax. Up to 20% of the net assets of each Series may be
invested in bonds the income from which is subject to the federal alternative
minimum tax. In addition, gain on the disposition of tax-exempt bonds that were
acquired after April 30, 1993 for a price less than the principal amount of the
bond is treated as ordinary income to the extent of the accrued market discount.
For further details, see Investment Objective and Policies.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Prospective investors should consider the following factors:
1. The USA Fund may invest up to 20% of its assets in high-yield securities
(junk bonds) and, consequently, greater risks may be involved with an investment
in the USA Fund. See Quality Restrictions under Investment Strategy.
2. While the USA Fund and the Insured Fund each intend to seek to qualify as a
"diversified" investment company under provisions of Subchapter M of the
Internal Revenue Code, neither Series will be diversified as defined by
Investment Company Act of 1940 (the "1940 Act"). Thus, while at least 50% of a
Series' total assets will be represented by cash, cash items, and other
securities limited in respect of any one issuer to an amount not greater than 5%
of the Series' total assets, it will not satisfy the 1940 Act definition of
"diversified," which applies the test set forth in this sentence to 75% of the
Series' assets. A nondiversified portfolio is believed to be subject to greater
risk because adverse effects on the portfolio's security holdings may affect a
larger portion of the overall assets.
OPEN-END INVESTMENT COMPANY
The Fund, which was organized as a Maryland corporation in 1983, is an
open-end management investment company. See Shares under Management of the Fund.
INVESTMENT MANAGEMENT FEES
The Manager furnishes investment management services to the Fund, subject to
the supervision and direction of the Board of Directors. Under the Investment
Management Agreement, the annual compensation paid to the Manager is equal to:
for the USA Fund, .60% on the first $500 million of average daily net assets,
.575% on the next $250 million and .55% on the average daily net assets in
excess of $750 million; and, for the Insured Fund, .60% of the average daily net
assets of the Series, in each case less a proportionate share of all directors'
fees paid to the unaffiliated directors by the Series. See Management of the
Fund.
REDEMPTION AND EXCHANGE
Class A Shares of each Series may be redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request. Neither
the Series nor the Distributor assesses a charge for redemptions or exchanges of
Class A Shares, except for certain redemptions of such shares purchased at net
asset value, which may be subject to a contingent deferred sales charge if such
purchase triggered the payment of a dealer's commission. See Front-End Sales
Charge Alternative--Class A Shares under Buying Shares. Class B and Class C
Shares may be redeemed or exchanged at the net asset value calculated after
receipt of the redemption or exchange request subject, in the case of
redemptions to any applicable CDSC. Neither the Fund nor the Distributor
assesses any charges other than the CDSC for redemptions or exchanges of Class B
or Class C Shares. There are certain limitations on an investor's ability to
exchange shares between the various classes of shares that are offered. See
Redemption and Exchange.
- - 3
<PAGE> 50
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses applicable
to Class A, Class B and Class C Shares follows:
<TABLE>
<CAPTION>
USA FUND
CLASS A CLASS B CLASS C
SHAREHOLDER TRANSACTION EXPENSES SHARES SHARES SHARES
---------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases
(as a percentage of offering
price).......................... 4.75% None None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of offering price).... None None None
Maximum Contingent Deferred Sales
Charge
(as a percentage of original
purchase price or redemption
proceeds, whichever is lower).... None* 4.00%* 1.00%*
Redemption Fees................... None** None** None**
</TABLE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES USA FUND
(AS A PERCENTAGE OF AVERAGE CLASS A CLASS B CLASS C
DAILY NET ASSETS) SHARES SHARES SHARES
--------------------------------------------------------------
<S> <C> <C> <C>
Management Fees................. 0.59% 0.59% 0.59%
12b-1 Plan Expenses (including
service fees).................. 0.18%+/++ 1.00%++ 1.00%++
Other Operating Expenses........ 0.15% 0.15% 0.15%+++
----- ----- -----
Total Operating Expenses..... 0.92% 1.74% 1.74%
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
INSURED FUND
CLASS A CLASS B CLASS C
SHAREHOLDER TRANSACTION EXPENSES SHARES SHARES SHARES
---------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price)................. 4.75% None None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of offering price).... None None None
Maximum Contingent Deferred Sales
Charge
(as a percentage of original
purchase price or redemption
proceeds, whichever is lower).... None* 4.00%* 1.00%*
Redemption Fees................... None** None** None**
</TABLE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES INSURED FUND
(AS A PERCENTAGE OF AVERAGE CLASS A CLASS B CLASS C
DAILY NET ASSETS) SHARES SHARES SHARES
---------------------------------------------------------------
<S> <C> <C> <C>
Management Fees................. 0.59% 0.59% 0.59%
12b-1 Plan Expenses (including
service fees).................. 0.18%+/++ 1.00%++ 1.00%++
Other Operating Expenses........ 0.21% 0.21% 0.21%+++
----- ----- -----
Total Operating Expenses..... 0.98% 1.80% 1.80%
===== ===== =====
</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in any of the Classes will bear
directly or indirectly.
*With respect to Class A Shares, purchases of $1 million or more may be made
at net asset value; however, if in connection with any such purchase, certain
dealer commissions are paid to the financial adviser through whom such
purchase is effected, a contingent deferred sales charge of 1% will be
imposed on certain redemptions within 12 months of purchase ("Limited CDSC").
Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed within
two years of purchase; (ii) 3% if shares are redeemed during the third or
fourth year following purchase; (iii) 2% if shares are redeemed during the
fifth year following purchase; (iv) 1% if shares are redeemed during the
sixth year following purchase; and (v) 0% thereafter. Class C Shares are
subject to a CDSC of 1% if the shares are redeemed within twelve months of
purchase. See Contingent Deferred Sales Charge for Certain Purchases of Class
A Shares Made at Net Asset Value under Redemption and Exchange; Deferred
Sales Charge Alternative--Class B Shares and Level Sales Charge
Alternative--Class C Shares under Buying Shares.
**CoreStates Bank, N.A. currently charges $7.50 per redemption for redemptions
payable by wire.
+The actual 12b-1 Plan expenses to be paid and, consequently, the Total
Operating Expenses of the Class A Shares, may be somewhat more (but the 12b-1
Plan expenses may be no more than .30%) or somewhat less (but the 12b-1 Plan
expenses may be no less than .10%) because of the formula adopted by the
Board of Directors for use in calculating the 12b-1 Plan expenses beginning
June 1, 1992. See Distribution (12b-1) and Service under Management of the
Fund.
++Class A Shares, Class B Shares and Class C Shares of each Series are subject
to separate 12b-1 Plans. Long-term shareholders of the Classes may pay more
than the economic equivalent of the maximum front-end sales charges permitted
by rules of the National Association of Securities Dealers, Inc. (the
"NASD"). See Distribution (12b-1) and Service under Management of the Fund.
+++"Other Operating Expenses" for Class C Shares are estimates based on the
actual expenses incurred by the Class B Shares for the fiscal year ended
August 31, 1995.
- - 4
<PAGE> 51
SUMMARY OF EXPENSES
(Continued)
The following example illustrates the expenses that an investor would pay on a
$1,000 investment over various time periods, assuming (1) a 5% annual rate of
return, (2) redemption at the end of each time period and (3) with respect to
Class B Shares and Class C Shares, payment of a CDSC at the time of redemption,
if applicable.
USA FUND
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
CLASS A SHARES $56(1) $75 $ 96 $155
CLASS B SHARES $58 $85 $114 $183(2)
CLASS C SHARES $28 $55 $ 94 $205
</TABLE>
INSURED FUND
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
CLASS A SHARES $57(1) $77 $ 99 $162
CLASS B SHARES $58 $87 $117 $190(2)
CLASS C SHARES $28 $57 $ 97 $212
</TABLE>
An investor would pay the following expenses on the same $1,000 investment,
assuming no redemption at the end of the period:
USA FUND
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
CLASS A SHARES $56 $75 $96 $155
CLASS B SHARES $18 $55 $94 $183(2)
CLASS C SHARES $18 $55 $94 $205
</TABLE>
INSURED FUND
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
CLASS A SHARES $57 $77 $99 $162
CLASS B SHARES $18 $57 $97 $190(2)
CLASS C SHARES $18 $57 $97 $212
</TABLE>
(1)Generally, the Fund does not assess a redemption charge upon redemption of
Class A Shares. Under certain circumstances, however, a Limited CDSC, which
has not been reflected in this calculation, may be imposed on certain
redemptions within 12 months of purchase. See Contingent Deferred Sales
Charge for Certain Purchases of Class A Shares Made at Net Asset Value under
Redemption and Exchange.
(2)At the end of approximately eight years after purchase, Class B Shares will
be automatically converted into Class A Shares of the relevant Series. The
example above assumes conversion of Class B Shares at the end of the eighth
year. However, the conversion may occur as late as three months after the
eighth anniversary of purchase, during which time the higher 12b-1 Plan fees
payable by Class B Shares will continue to be assessed. Information for the
ninth and tenth years reflects expenses of the Class A Shares. See Automatic
Conversion of Class B Shares under Buying Shares for a description of the
automatic conversion feature.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
- - 5
<PAGE> 52
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Tax-Free Fund, Inc.--Tax-Free USA Fund and Tax-Free Insured Fund
and have been audited by Ernst & Young LLP, independent auditors. The data
should be read in conjunction with the financial statements, related notes, and
the report of Ernst & Young LLP covering such financial information and
highlights, all of which are incorporated by reference into Part B. Further
information about the Series' performance is contained in their Annual Report to
shareholders. A copy of the Series' Annual Report (including the report of Ernst
& Young LLP) may be obtained from the Fund upon request at no charge.
Information regarding Class C Shares has not been included in these tables
because such shares were not offered to the public prior to the date of this
Prospectus.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX-FREE USA FUND A CLASS
---------------------------------------------------------------------------------
YEAR ENDED
8/31/95 8/31/94 8/31/93 8/31/92(1) 8/31/91 8/31/90 8/31/89
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period...... $12.040 $12.640 $12.130 $11.560 $11.070 $11.600 $11.020
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income..................... 0.746 0.751 0.751 0.765 0.783 0.817 0.844
Net Gains (Losses) on Securities
(both realized and unrealized)........... 0.030 (0.566) 0.610 0.570 0.490 (0.530) 0.580
------ ------ ------ ------ ------ ------ ------
Total From Investment Operations......... 0.776 0.185 1.361 1.335 1.273 0.287 1.424
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from Net Investment Income...... (0.746) (0.751) (0.751) (0.765) (0.783) (0.817) (0.844)
Distributions from Capital Gains.......... none (0.034) (0.100) none none none none
Returns of Capital........................ none none none none none none none
------ ------ ------ ------ ------ ------ ------
Total Distributions...................... (0.746) (0.785) (0.851) (0.765) (0.783) (0.817) (0.844)
------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period............ $12.070 $12.040 $12.640 $12.130 $11.560 $11.070 $11.600
======= ======= ======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(2)........................... 6.74% 1.49% 11.66% 11.91% 11.88% 2.50% 13.30%
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's
omitted)................................. $758,470 $745,796 $762,574 $702,988 $669,546 $611,505 $519,867
Ratio of Expenses to Average Daily Net
Assets................................... 0.92% 0.89% 0.89% 0.80% 0.74% 0.75% 0.75%
Ratio of Net Investment Income to Average
Daily Net Assets......................... 6.29% 6.07% 6.10% 6.47% 6.91% 7.12% 7.35%
Portfolio Turnover Rate................... 27% 10% 12% 21% 19% 14% 8%
<CAPTION>
8/31/88 8/31/87 8/31/86
<S> <C> <C> <C>
Net Asset Value, Beginning of Period...... $10.930 $11.730 $10.230
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income..................... 0.842 0.865 0.938
Net Gains (Losses) on Securities
(both realized and unrealized)........... 0.090 (0.537) 1.500
------ ------ ------
Total From Investment Operations......... 0.932 0.328 2.438
------ ------ ------
LESS DISTRIBUTIONS
Dividends from Net Investment Income...... (0.842) (0.865) (0.938)
Distributions from Capital Gains.......... none (0.263) none
Returns of Capital........................ none none none
------ ------ ------
Total Distributions...................... (0.842) (1.128) (0.938)
------ ------ ------
Net Asset Value, End of Period............ $11.020 $10.930 $11.730
======= ======= =======
- ---------------------------------------------------------------------------
TOTAL RETURN(2)........................... 8.93% 0.50% 24.81%
- ---------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's
omitted)................................. $390,987 $372,514 $252,897
Ratio of Expenses to Average Daily Net
Assets................................... 0.77% 0.78% 0.80%
Ratio of Net Investment Income to Average
Daily Net Assets......................... 7.76% 7.47% 8.29%
Portfolio Turnover Rate................... 25% 69% 47%
</TABLE>
- ------------------
(1)Beginning June 1, 1992, the USA Fund began paying distribution expenses
pursuant to a Rule 12b-1 Plan.
(2)Does not reflect maximum sales charge of 4.75% nor the 1% Limited CDSC that
would apply in the event of certain redemptions within 12 months of purchase.
- - 6
<PAGE> 53
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX-FREE USA FUND B
CLASS
--------------------
PERIOD
YEAR 5/2/94(1)
ENDED THROUGH
8/31/95 8/31/94
<S> <C> <C>
Net Asset Value, Beginning of Period.................. $12.040 $12.080
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................. 0.649 0.214
Net Gains (Losses) on Securities (both realized and
unrealized).......................................... 0.030 (0.040)
------ ------
Total From Investment Operations..................... 0.679 0.174
------ ------
LESS DISTRIBUTIONS
Dividends from Net Investment Income.................. (0.649) (0.214)
Distributions from Capital Gains...................... none none
Returns of Capital.................................... none none
------ ------
Total Distributions.................................. (0.649) (0.214)
------ ------
Net Asset Value, End of Period........................ $12.070 $12.040
====== ======
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN(2)....................................... 5.88% 1.45%
- ----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)............. $17,779 $ 3,937
Ratio of Expenses to Average Daily Net Assets......... 1.74% 1.74%
Ratio of Net Investment Income to Average Daily Net
Assets............................................... 5.47% 5.22%
Portfolio Turnover Rate............................... 27% 10%
</TABLE>
- ------------------
(1)Date of initial public offering. Ratios have been annualized but total return
has not been annualized. Total return for this short of a time period may not
be representative of longer-term results.
(2)Total return does not reflect any applicable CDSC.
- - 7
<PAGE> 54
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX-FREE INSURED FUND A CLASS
---------------------------------------------------------------------------------
YEAR ENDED
8/31/95 8/31/94 8/31/93 8/31/92(1) 8/31/91 8/31/90 8/31/89
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period...... $11.020 $11.680 $11.310 $10.900 $10.460 $10.690 $10.300
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income..................... 0.639 0.622 0.638 0.674 0.699 0.714 0.727
Net Gains (Losses) on Securities
(both realized and unrealized)........... 0.030 (0.560) 0.400 0.410 0.440 (0.230) 0.390
------ ------ ------ ------ ------ ------ ------
Total From Investment Operations......... 0.669 0.062 1.038 1.084 1.139 0.484 1.117
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from Net Investment Income...... (0.639) (0.622) (0.638) (0.674) (0.699) (0.714) (0.727)
Distributions from Capital Gains.......... none (0.100) (0.030) none none none none
Returns of Capital........................ none none none none none none none
------ ------ ------ ------ ------ ------ ------
Total Distributions...................... (0.639) (0.722) (0.668) (0.674) (0.699) (0.714) (0.727)
------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period............ $11.050 $11.020 $11.680 $11.310 $10.900 $10.460 $10.690
====== ======= ====== ====== ====== ====== =======
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(2)........................... 6.33% 0.54% 9.48% 10.23% 11.20% 4.63% 11.15%
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted).......................... $86,756 $91,235 $96,118 $85,660 $76,700 $61,394 $54,131
Ratio of Expenses to Average Daily Net
Assets................................... 0.98% 0.98% 0.98% 0.86% 0.83% 0.83% 0.82%
Ratio of Net Investment Income to Average
Daily Net Assets......................... 5.89% 5.48% 5.58% 6.06% 6.50% 6.69% 6.86%
Portfolio Turnover Rate................... 68% 56% 8% 29% 10% 13% 14%
<CAPTION>
8/31/88 8/31/87 8/31/86
<S> <C> <C> <C>
Net Asset Value, Beginning of Period...... $10.300 $10.770 $9.510
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income..................... 0.725 0.720 0.790
Net Gains (Losses) on Securities
(both realized and unrealized)........... none (0.470) 1.260
------ ------ ------
Total From Investment Operations......... 0.725 0.250 2.050
------ ------ ------
LESS DISTRIBUTIONS
Dividends from Net Investment Income...... (0.725) (0.720) (0.790)
Distributions from Capital Gains.......... none none none
Returns of Capital........................ none none none
------ ------ ------
Total Distributions...................... (0.725) (0.720) (0.790)
------ ------ ------
Net Asset Value, End of Period............ $10.300 $10.300 $10.770
====== ====== ======
- ------------------------------------------------------------------------------
TOTAL RETURN(2)........................... 7.34% 2.31%(2) 22.36%(2)
- ------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted).......................... $45,464 $44,929 $35,177
Ratio of Expenses to Average Daily Net
Assets................................... 0.82% 0.87%(3) 0.73%(3)
Ratio of Net Investment Income to Average
Daily Net Assets......................... 7.11% 6.71%(4) 7.54%(4)
Portfolio Turnover Rate................... 9% 32% 45%
</TABLE>
- ------------------
(1) Beginning June 1, 1992, the Insured Series began paying distribution
expenses pursuant to a Rule 12b-1 Plan.
(2) Does not reflect maximum sales charge of 4.75% nor the 1% Limited CDSC that
would apply in the event of certain redemptions within 12 months of
purchase. Total return for 1986 and 1987 reflect the expense limitations
referenced in Notes 3 and 4.
(3) Ratios of expenses to average daily net assets prior to expense limitation
were, for the Insured Fund, 0.89% for 1987 and 1.09% for 1986.
(4) Ratios of net investment income to average daily net assets prior to expense
limitation were, for the Insured Fund, 6.69% for 1987 and 7.18% for 1986.
- - 8
<PAGE> 55
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX-FREE INSURED FUND
B CLASS
---------------------
PERIOD
5/2/94(1)
THROUGH
8/31/95 8/31/94
<S> <C> <C>
Net Asset Value, Beginning of Period................. $11.020 $10.990
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................ 0.550 0.179
Net Gains (Losses) on Securities (both realized and
unrealized)......................................... 0.030 0.030
------ ------
Total From Investment Operations.................... 0.580 0.209
------ ------
LESS DISTRIBUTIONS
Dividends from Net Investment Income................. (0.550) (0.179)
Distributions from Capital Gains..................... none none
Returns of Capital................................... none none
------ ------
Total Distributions................................. (0.550) (0.179)
------ ------
Net Asset Value, End of Period....................... $11.050 $11.020
====== ======
- ------------------------------------------------------------------------------
TOTAL RETURN(2)...................................... 5.47% 1.91%(3)
- ------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)............ $ 2,448 $ 826
Ratio of Expenses to Average Daily Net Assets........ 1.80% 1.83%(3)
Ratio of Net Investment Income to Average Daily Net
Assets.............................................. 5.07% 4.63%(3)
Portfolio Turnover Rate.............................. 68% 56%
</TABLE>
- ------------------
(1)Date of initial public offering.
(2)Total return does not reflect any applicable CDSC.
(3)Ratios have been annualized but total return has not been annualized.
- - 9
<PAGE> 56
INVESTMENT OBJECTIVE
AND POLICIES
The objective of the USA Fund is to seek as high a level of current interest
income exempt from federal income tax as is available from municipal bonds and
as is consistent with prudent investment management and preservation of capital.
The objective of the Insured Fund is to seek as high a level of current
interest income exempt from federal income tax as is available from municipal
bonds which are protected by insurance guaranteeing the payment of principal and
interest when due and as is consistent with prudent investment management and
preservation of capital.
The objective of each Series cannot be changed without approval by the
shareholders of that Series. There is no assurance that the objective of each
Series can be achieved. Bond insurance reduces the risk of loss due to default
by an issuer, but such bonds remain subject to the risk of market fluctuation.
Also, there is no assurance that any insurance company will meet its
obligations.
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.
SUITABILITY
Each Series may be suitable for longer-term investors. Investors should be
willing to accept the risk of investments in municipal bonds. An investment in
either Series of the Fund permits an investor to participate in these types of
instruments while affording the advantages of diversification and a high degree
of liquidity. Ownership of Series shares also reduces the bookkeeping and
administrative inconveniences connected with the direct purchase of such
obligations.
The insurance features of the Insured Fund may somewhat lessen risk as well as
yield. The net asset value of each Series' shares can generally be expected to
fluctuate inversely to changes in interest rates.
INVESTMENT STRATEGY
TAX-EXEMPT INVESTMENTS
Each Series invests primarily in municipal securities paying interest income
which, in the opinion of the bond issuer's counsel, is exempt from federal
income tax. These securities include debt obligations issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies, authorities and
instrumentalities. Typically, the maturity of municipal bonds in which the USA
Fund and the Insured Fund invest will range between five and 30 years.
Each Series intends to invest at least 80% of its net assets under normal
market conditions in the types of securities described above as a fundamental
policy. Each Series may invest up to 20% of its net assets in bonds the income
from which is subject to the federal alternative minimum tax. Although exempt
from regular federal income tax, interest paid on certain types of municipal
obligations (commonly referred to as "private activity" or "private purpose"
bonds) is deemed to be a preference item under federal tax law and is subject to
the federal alternative minimum tax.
The following table shows what the impact of tax-free investing can be for
shareholders.
<TABLE>
<CAPTION>
1995 RATES 4.0%* 5.0%* 6.0%* 7.0%*
FEDERAL FEDERAL FEDERAL FEDERAL FEDERAL
TAXABLE INCOME TAX TAXABLE TAXABLE TAXABLE TAXABLE
JOINT RETURN SINGLE RETURN RATE EQUIVALENT EQUIVALENT EQUIVALENT EQUIVALENT
<S> <C> <C> <C> <C> <C> <C>
$0-38,000 $0-22,750 15% 4.7% 5.9% 7.1% 8.2%
$38,001-91,850 $22,751-55,100 28% 5.6% 6.9% 8.3% 9.7%
$91,851-140,000 $55,101-115,000 31% 5.8% 7.2% 8.7% 10.1%
$140,001-250,000 $115,001-250,000 36%+ 6.3% 7.8% 9.4% 10.9%
Over $250,000 Over $250,000 39.6%+ 6.6% 8.3% 9.9% 11.6%
</TABLE>
The equivalent yields are calculated on 4, 5, 6 and 7 percent tax-free yields.
While it is expected that the Series will invest principally in obligations
generating interest exempt from federal income tax, other income received by the
Series may be taxable and certain income received by the Series may be subject
to the federal alternative minimum tax.
*This should not be considered representative of the Series' yield at any
specific time.
+For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate. In
addition, a 10% surtax (not applicable to capital gains) applies to certain
high-income taxpayers. It is computed by applying a 39.6% rate to taxable
income in excess of $250,000. The above table does not reflect the personal
exemption phaseout nor the limitations of itemized deductions that may apply.
QUALITY RESTRICTIONS
The USA Fund intends to invest at least 80% of its portfolio in debt
obligations that are rated in the top four grades by Moody's Investors Service,
Inc. ("Moody's") or Standard & Poor's Rating Group ("S&P") at the time of
purchase. The fourth grade is considered medium grade and may have speculative
characteristics. The USA Fund may invest up to 20% of its assets in securities
with a rating lower than the top four grades and in unrated securities. These
securities are speculative and may involve greater risks and have higher yields.
- - 10
<PAGE> 57
The market values of such securities tend to reflect individual developments
affecting the issuer to a greater extent than do higher-rated securities, which
react primarily to fluctuations in the general level of interest rates. Such
lower-rated securities also tend to be more sensitive to economic conditions and
generally involve more credit risk than higher-rated securities.
Projects which are financed by the issuance of high yielding, fixed-income
securities are often highly leveraged and may not have more traditional methods
of financing available to them. Therefore, the risk associated with acquiring
the securities of such issuers is generally greater than is the case with
higher-rated securities. For example, during an economic downturn or a sustained
period of rising interest rates, projects financed by high yielding securities
may experience financial stress. During such periods, such projects may not have
sufficient funds to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments, or the issuer's inability to meet specific projected
revenue forecasts, or by the unavailability of additional financing.
The market for lower-rated fixed-income securities generally tends to be
concentrated among a smaller number of dealers than is the case for securities
which trade in a broader secondary retail market. Generally, purchasers of these
securities are predominantly dealers and other institutional buyers, rather than
individuals. To the extent a secondary trading market for high yielding,
fixed-income securities does exist, it is generally not as liquid as the
secondary market for higher-rated securities.
Factors adversely impacting the market value of high yielding securities may
adversely impact the USA Fund's net asset value. In addition, the USA Fund may
incur additional expenses to the extent it is required to seek recovery upon a
default in the payment of principal or interest on its portfolio holding. The
USA Fund will rely on the investment manager's judgment, analysis and experience
in evaluating the creditworthiness of an issuer. In this evaluation, the
investment manager will take into consideration, among other things, the
issuer's financial resources, its sensitivity to economic conditions and trends,
its operating history, the quality of the issuer's management and regulatory
matters.
Some municipal bonds are backed by the issuer's full faith and credit while
others are secured by a specific revenue source and are not backed by any
general taxing power. The USA Fund will invest in both types.
The Insured Fund intends to invest at least 80% of its assets in debt
obligations which are insured by various insurance companies that undertake to
pay to a holder the interest or principal amount of an obligation if the
interest or principal is not paid by the issuer when due. At present, the
Municipal Bond Insurance Association ("MBIA"), AMBAC Indemnity Corporation
("AMBAC Indemnity") and Financial Guaranty Insurance Company ("FGIC") provide a
substantial portion of such insurance. Accordingly, at different times, a
substantial portion of the Insured Fund's portfolio may consist of municipal
bonds that are insured by a single insurance company. In the event of a default,
the insurer is required to make payments of interest and principal when due to
the bondholders. There is no assurance that the insurance company will meet its
obligations. The Manager does not look to the creditworthiness of a private
insurer. Instead, the Manager reviews the creditworthiness of the actual issuer
and its ability to pay interest and principal. Insurance on municipal bonds that
is purchased by the Insured Fund will generally have been obtained by the bond
issuer and attached to the bonds for their lifetime, although in some instances
this Series will obtain insurance on bonds while they are held by the Series.
DIVERSIFICATION
Each Series' portfolio of assets is nondiversified as defined by the 1940 Act.
This means that the Manager has the flexibility to invest as much as 50% of each
Series' assets in as few as two issuers provided no single issuer accounts for
more than 25% of the portfolio. The remaining 50% of each portfolio must be
diversified so that no more than 5% of it is invested in the securities of a
single issuer. Those limitations notwithstanding, and except as otherwise
provided herein, each Series may invest up to 20% of its assets in U.S.
Government securities and government agency securities that are backed by the
U.S. Government, its agencies or instrumentalities. Because the Series may
invest their assets in fewer issuers, the value of Series shares may increase or
decrease more rapidly than if the Fund were fully diversified. In the event a
Series invests more than 5% of its assets in a single issuer, it would be
affected more than a fully diversified fund if that issuer were to encounter
difficulties in satisfying its financial obligations.
- - 11
<PAGE> 58
Each Series 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, each Series 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. A Series
will not, 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.
OTHER CONSIDERATIONS
Each Series may invest, without limit, in short-term, tax-free instruments
such as tax-exempt commercial paper and general obligation, revenue and project
notes, as well as variable and floating rate demand obligations. Short-term
securities will be rated in the top two grades by a nationally-recognized rating
agency.
Under abnormal conditions, each Series may invest in taxable instruments for
temporary defensive purposes. These would include instruments such as
obligations of the U.S. Government, its agencies and instrumentalities,
commercial paper, certificates of deposit of domestic banks and other debt
instruments. The above investments will be rated at least A-2, P-2 or MIG-2.
Each Series may invest in "when-issued securities." When-issued securities
involve commitments to buy a new issue with settlement up to 45 days later.
During the time between the commitment and settlement the Series does not accrue
interest, but the market value may fluctuate. This can result in a Series' share
value increasing or decreasing. If a Series invests in securities of this type,
it will maintain a segregated account to pay for them and mark them to market
daily.
The Tax Reform Act of 1986 limits the amount of new "private purpose" bonds
that each state can issue and subjects interest income from these bonds to the
federal alternative minimum tax. "Private purpose" bonds are issues whose
proceeds are used to finance certain nongovernment activities, and could include
some types of industrial revenue bonds such as privately-owned sports and
convention facilities. The Act also makes the tax-exempt status of certain bonds
depend on the issuer's compliance with specific requirements after the bonds are
issued.
Each Series intends to seek to achieve a high level of tax-exempt income.
However, if a Series invests in newly-issued private purpose bonds, a portion of
that Series' distributions would be subject to the federal alternative minimum
tax. Each Series may invest up to 20% of its assets in bonds the income from
which is subject to the federal alternative minimum tax.
While the Series are permitted, they normally do not borrow money or invest in
repurchase agreements. A Series will not purchase investment securities while it
has an outstanding borrowing. Each Series may invest in restricted securities,
including securities eligible for resale without registration pursuant to Rule
144A ("Rule 144A Securities") under the Securities Act of 1933, as discussed
more fully below. A Series may invest no more than 10% of the value of its net
assets in illiquid securities. Part B sets forth other more specific investment
restrictions and descriptions of Moody's and S&P ratings.
The weighted portfolio maturity at the end of the fiscal year was 22 years for
USA Fund and 24 years for Insured Fund.
RULE 144A SECURITIES
Rule 144A permits many privately placed and legally restricted securities to
be freely traded among certain institutional buyers such as the Series. While
maintaining oversight, the Board of Directors has delegated to the Manager the
day-to-day function of determining whether or not individual Rule 144A
Securities are liquid for purposes of the Series' 10% limitation on investments
in illiquid assets. The Board has instructed the Manager to consider the
following factors in determining the liquidity of a Rule 144A Security: (i) the
frequency of trades and trading volume for the security; (ii) whether at least
three dealers are willing to purchase or sell the security and the number of
potential purchasers; (iii) whether at least two dealers are making a market in
the security; (iv) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was previously
determined to be liquid is no longer liquid and, as a result, the Series'
holdings of illiquid securities exceed the Series' 10% limit on investments in
such securities, the Manager will determine what action to take to ensure that
the Series continues to adhere to such limitation.
- - 12
<PAGE> 59
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.
SHAREHOLDER PHONE DIRECTORY
INVESTOR INFORMATION CENTER
800-523-4640
(PHILADELPHIA 215-988-1333)
FUND INFORMATION; LITERATURE;
PRICE, YIELD AND PERFORMANCE FIGURES
SHAREHOLDER SERVICE CENTER
800-523-1918
(PHILADELPHIA 215-988-1241)
INFORMATION ON EXISTING REGULAR INVESTMENT ACCOUNTS AND RETIREMENT PLAN
ACCOUNTS;
WIRE INVESTMENTS; WIRE LIQUIDATIONS;
TELEPHONE LIQUIDATIONS; TELEPHONE EXCHANGES
DELAPHONE
800-362-FUND
(800-362-3863)
SHAREHOLDER SERVICES
During business hours, you can call the Fund's Shareholder Service Center. Our
representatives can answer any questions about your account, the Series, various
service features and other funds in the Delaware Group.
PERFORMANCE INFORMATION
During business hours, you can call the Investor Information Center to get
current yield information. Current yield and total return information may also
be included in advertisements and information given to shareholders. Yields are
computed on an annual basis over a 30-day period.
DELAPHONE SERVICE
Delaphone is an account inquiry service for investors with Touch-Tone(R) phone
service. It enables you to get information faster than the mailed statements and
confirmations. Delaphone is available seven days a week, 24 hours a day.
STATEMENTS AND CONFIRMATIONS
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of distributions. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.
DUPLICATE CONFIRMATIONS
If your investment dealer is noted on your investment application, we will
send your dealer a duplicate confirmation. This makes it easier for your
investment dealer to help you manage your investments.
DIVIDEND REINVESTMENT PLAN
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your account. Also, you may invest
your distributions in certain other funds in the Delaware Group, subject to the
exceptions noted below as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of the Series or of other
Delaware Group funds are made without a front-end sales charge. Reinvestments of
distributions into Class B Shares of the Series or of other Delaware Group funds
or into Class C Shares of the Series or of other Delaware Group funds are also
made without any sales charge and will not be subject to a CDSC if later
redeemed. See Automatic Conversion of Class B Shares under Buying Shares for
information concerning the automatic conversion of Class B Shares acquired by
reinvesting dividends.
Holders of Class A Shares of the Series may not reinvest their distributions
into Class B Shares or Class C Shares of any fund in the Delaware Group,
including the Series. Holders of Class B Shares of the Series may reinvest their
distributions only into Class B Shares of the funds in the Delaware Group which
offer that class of shares (the "Class B Funds"). Similarly, holders of Class C
Shares of the Series may reinvest their distributions only into Class C Shares
of the funds in the Delaware Group which offer that class of shares (the "Class
C Funds"). See Class B Funds and Class C Funds under Buying Shares for a list of
the funds offering those classes of shares. For more information about
reinvestments, please call the Shareholder Service Center.
- - 13
<PAGE> 60
EXCHANGE PRIVILEGE
The Exchange Privilege permits shareholders to exchange all or part of their
shares into shares of the other funds in the Delaware Group, subject to certain
exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption and Exchange.
WEALTH BUILDER OPTION
You may elect to have amounts in your account automatically invested in shares
of other funds in the Delaware Group. Investments under this feature are
exchanges and are therefore subject to the same conditions and limitations as
other exchanges of Class A, Class B and Class C Shares. See Redemption and
Exchange.
RIGHT OF ACCUMULATION
With respect to Class A Shares, the Right of Accumulation feature allows you
to combine the value of your current holdings of Class A Shares, Class B Shares
and Class C Shares of the Series with the dollar amount of new purchases of
Class A Shares to qualify for a reduced front-end sales charge. Under the
COMBINED PURCHASES PRIVILEGE, you may also include certain shares that you own
in other funds in the Delaware Group. See Buying Shares.
LETTER OF INTENTION
The Letter of Intention feature permits you to obtain a reduced front-end
sales charge on purchases of Class A Shares by aggregating certain of your
purchases of Delaware Group fund shares over a 13-month period. See Buying
Shares and Part B.
12-MONTH REINVESTMENT PRIVILEGE
The 12-Month Reinvestment Privilege permits you to reinvest proceeds of Class
A Shares within one year of the date of redemption, without a front-end sales
charge. See Part B.
DELAWARE GROUP ASSET PLANNER
Delaware Group Asset Planner is an asset allocation service that gives
investors, working with a professional financial adviser, the ability to more
easily design and maintain investments in a diversified selection of Delaware
Group mutual funds. The Asset Planner service offers a choice of four
pre-designed allocation Strategies (each with a different risk/reward profile)
made up of separate investments in predetermined percentages of Delaware Group
funds. With the guidance of a financial adviser, investors may also tailor a
Strategy that meets their personal needs and goals. See How to Buy Shares under
Buying Shares.
FINANCIAL INFORMATION ABOUT THE FUND
Each fiscal year, you will receive an audited annual report and an unaudited
semi-annual report. These reports provide detailed information about the Series'
investments and performance. The Fund's fiscal year ends on August 31.
- - 14
<PAGE> 61
BUYING SHARES
PURCHASE AMOUNTS
Generally, the minimum initial purchase is $1,000 for Class A Shares, Class B
Shares and Class C Shares. Subsequent purchases generally must be $100 or more.
In addition, there is a maximum purchase limitation of $250,000 on each purchase
of Class B Shares; for Class C Shares, each purchase must be in an amount that
is less than $1,000,000. An investor may exceed these maximum purchase
limitations by making cumulative purchases over a period of time. In doing so,
an investor should keep in mind that reduced front-end sales charges are
available on investments of $100,000 or more in Class A Shares, and that Class A
Shares (i) are subject to lower annual 12b-1 Plan expenses than Class B Shares
and Class C Shares and (ii) generally are not subject to a CDSC.
ALTERNATIVE PURCHASE ARRANGEMENTS
Shares may be purchased at a price equal to the next determined net asset
value per share, subject to a sales charge which may be imposed, at the election
of the purchaser, at the time of the purchase with respect to Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis with
respect to Class B Shares ("deferred sales charge alternative") or Class C
Shares ("level sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge alternative
acquires Class A Shares. Class A Shares incur a sales charge when they are
purchased but generally are not subject to any sales charge when they are
redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of .30% of average daily net assets of such shares. See Contingent
Deferred Charges for Certain Purchases of Class A Shares Made at Net Asset Value
and Distribution (12b-1) and Service. Certain purchases of Class A Shares
qualify for reduced front-end sales charges. See Front-End Sales Charge
Alternative-Class A Shares, below.
Class B Shares. An investor who elects the deferred sales charge alternative
acquires Class B Shares. Class B Shares do not incur a front-end sales charge
when they are purchased, but are subject to a sales charge if they are redeemed
within six years of purchase and are subject to annual 12b-1 Plan expenses of up
to a maximum of 1% (.25% of which are service fees to be paid to the
Distributor, dealers and others for providing personal service and/or
maintaining shareholder accounts) of average daily net assets of such shares for
approximately eight years after purchase. Class B Shares permit all of the
investor's dollars to work from the time the investment is made. The higher
12b-1 Plan expenses paid by Class B Shares will cause such shares to have a
higher expense ratio and to pay lower dividends than those related to the Class
A Shares. At the end of approximately eight years after purchase, the Class B
Shares will automatically be converted into Class A Shares of the relevant
Series. See Automatic Conversion of Class B Shares, below.
Class C Shares. An investor who elects the level sales charge alternative
acquires Class C Shares. Class C Shares do not incur a front-end sales charge
when they are purchased, but are subject to a sales charge if they are redeemed
within twelve months of purchase and are subject to annual 12b-1 Plan expenses
of up to a maximum of 1% (.25% of which are service fees to be paid to the
Distributor, dealers or others for providing personal service and/or maintaining
shareholder accounts) of average daily net assets of such shares for the life of
the investment. The higher 12b-1 Plan expenses paid by Class C Shares will cause
such shares to have a higher expense ratio and to pay lower dividends than those
related to the Class A Shares. Unlike Class B Shares, Class C Shares do not
convert to another class.
- - 15
<PAGE> 62
The alternative purchase arrangements described above permit investors in the
Series to choose the method of purchasing shares that is most suitable given the
amount of their purchase, the length of time they expect to hold their shares
and other relevant circumstances. Investors should determine whether, given
their particular circumstances, it is more advantageous to purchase Class A
Shares and incur a front-end sales charge, purchase Class B Shares and have the
entire initial purchase amount invested in the Series with their investment
being subject to a CDSC if they redeem shares within six years of purchase, or
purchase Class C Shares and have the entire initial purchase amount invested in
the Series with their investment being subject to a CDSC if they redeem shares
within twelve months of purchase. In addition, investors should consider the
level of annual 12b-1 Plan expenses to which each of the Classes is subject and,
in comparing Class B Shares to Class C Shares, the desirability of an automatic
conversion feature, which is available only for Class B Shares.
As an illustration, investors who qualify for significantly reduced front-end
sales charges on purchases of Class A Shares, as described below, might elect
the front-end sales charge alternative because similar sales charge reductions
are not available under either the deferred sales charge alternative or the
level sales charge alternative. Moreover, shares acquired under the front-end
sales charge alternative are subject to annual 12b-1 Plan expenses of up to
.30%, whereas Class B Shares acquired under the deferred sales charge
alternative are subject to annual 12b-1 Plan expenses of up to 1% for
approximately eight years after purchase (see Automatic Conversion of Class B
Shares) and Class C Shares acquired under the level sales charge alternative are
subject to annual 12b-1 Plan expenses of up to 1% for the life of the
investment. However, because front-end sales charges are deducted from the
purchase amount at the time of purchase, investors who buy Class A Shares will
not have their full purchase amount invested in the Series.
Certain other investors might determine it to be more advantageous to purchase
Class B Shares and have all their funds invested initially, although they would
be subject to a CDSC for up to six years after purchase, as well as annual 12b-1
Plan expenses of up to 1% until the shares are automatically converted into
Class A Shares of the relevant Series. Still other investors might determine it
to be more advantageous to purchase Class C Shares and have all of their funds
invested initially, recognizing that they would be subject to a CDSC for just
twelve months after purchase but that Class C Shares do not offer a conversion
feature, so their shares would be subject to annual 12b-1 Plan expenses of up to
1% for the life of the investment. The higher 12b-1 Plan expenses on Class B
Shares and Class C Shares will be offset to the extent a return is realized on
the additional money initially invested under the deferred sales charge
alternative or the level sales charge alternative. However, there can be no
assurance as to the return, if any, that will be realized on such additional
money.
Prospective investors should refer to Appendix A to this Prospectus for an
illustration of the potential impact on a long-term shareholder's investment in
a Series under each of the purchase options.
For the distribution and related services provided to, and the expenses borne
on behalf of, the Series, the Distributor and others will be paid, in the case
of the Class A Shares, from the proceeds of the front-end sales charge and 12b-1
Plan fees and, in the case of the Class B Shares and the Class C Shares, from
the proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Sales personnel may receive different compensation for selling Class
A, Class B and Class C Shares. Investors should understand that the purpose and
function of the respective 12b-1 Plans and the CDSCs applicable to Class B
Shares and Class C Shares are the same as those of the 12b-1 Plan and the
front-end sales charge applicable to Class A Shares in that such fees and
charges provide for the financing of the distribution of the respective Classes.
See 12b-1 Distribution Plans--Class A, Class B and Class C Shares.
Dividends paid by the Series with respect to the Class A, Class B and Class C
Shares, to the extent any dividends are paid, will be calculated in the same
manner, at the same time, on the same day and will be in the same amount, except
that the additional amount of 12b-1 Plan expenses relating to the Class B Shares
and the Class C Shares will be borne exclusively by such shares. See Calculation
of Offering Price and Net Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. The Fund and the Distributor intend to operate in compliance with these
rules.
FRONT-END SALES CHARGE ALTERNATIVE--CLASS A SHARES
The Class A Shares may be purchased at the offering price, which reflects a
maximum front-end sales charge of 4.75%. See Calculation of Offering Price and
Net Asset Value Per Share.
- - 16
<PAGE> 63
Purchases of $100,000 or more carry a reduced front-end sales charge as shown
in the following table.
USA Fund and Insured Fund
A Class
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Front-End Sales Dealer's
Charge as % of Concession***
Offering Amount as % of
Amount of Purchase Price Invested** Offering Price
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
USA Insured
Fund Fund
Less than $100,000 4.75% 4.97% 4.98% 4.00%
$100,000 but under
$250,000 3.75 3.89 3.89 3.00
$250,000 but under
$500,000 2.50 2.57 2.53 2.00
$500,000 but under
$1,000,000* 2.00 2.07 2.08 1.60
</TABLE>
*There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% Limited CDSC
may apply upon redemption of such shares.
**Based on the net asset value per share of the Class A Shares as of the end of
the Fund's most recent fiscal year.
***Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify for the
reduced front-end sales charge on the basis of previous or current purchases.
The reduced front-end sales charge will be granted upon confirmation of the
shareholder's holdings by the Fund. Such reduced front-end sales charges are not
retroactive.
From time to time, upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the Distributor
may reallow to dealers up to the full amount of the front-end sales charge shown
above. In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Group products and services and who
increase sales of Delaware Group funds may receive an additional concession of
up to .15% of the offering price. Dealers who receive 90% or more of the sales
charge may be deemed to be underwriters under the Securities Act of 1933.
- --------------------------------------------------------------------------------
For initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through whom
such purchases are made in accordance with the following schedule:
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE DEALERS'S COMMISSION
- ---------------------------------------------------------------------
(as a percentage of amount purchased)
<S> <C>
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
</TABLE>
In determining a financial adviser's eligibility for the dealer's commission,
purchases of Class A Shares of other Delaware Group funds as to which a Limited
CDSC applies may be aggregated with the Class A Shares of the Series. Financial
advisers also may be eligible for a dealer's commission in connection with
certain purchases made under a Letter of Intention or pursuant to an investor's
Right of Accumulation. Financial advisers should contact the Distributor
concerning the applicability and calculation of the dealer's commission in the
case of combined purchases.
An exchange from other Delaware Group funds will not qualify for payment of
the dealer's commission, unless such exchange is from a Delaware Group fund with
assets as to which a dealer's commission or similar payment has not been
previously paid. The schedule and program for payment of the dealer's commission
are subject to change or termination at any time by the Distributor in its
discretion.
Redemptions of Class A Shares purchased at net asset value may result in the
imposition of a Limited CDSC if the dealer's commission described above was paid
in connection with the purchase of those shares. See Contingent Deferred Sales
Charge for Certain Purchases of Class A Shares Made at Net Asset Value under
Redemption and Exchange.
COMBINED PURCHASES PRIVILEGE
By combining your holdings of Class A Shares with your holdings of Class B
Shares and/or Class C Shares of the Series and shares of the other funds in the
Delaware Group, except those noted below, you can reduce the front-end sales
charges on any additional purchases of Class A Shares. Shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with ownership of variable
insurance products may be combined with other Delaware Group fund holdings.
Shares of other funds that do not carry a front-end sales charge or CDSC may not
be included, unless they were acquired through an exchange from a Delaware Group
fund that does carry a front-end sales charge or CDSC.
- - 17
<PAGE> 64
This privilege permits you to combine your purchases and holdings with those
of your spouse, your children under 21 and any trust, fiduciary or retirement
account for the benefit of such family members.
It also permits you to use these combinations under a Letter of Intention. A
Letter of Intention allows you to make purchases over a 13-month period and
qualify the entire purchase for a reduction in front-end sales charges on Class
A Shares.
Combined purchases of $1,000,000 or more, including certain purchases made at
net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may trigger the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative-- Class A Shares under Buying
Shares.
BUYING AT NET ASSET VALUE
Class A Shares of the Series may be purchased at net asset value under the
Delaware Group Dividend Reinvestment Plan and, under certain circumstances, the
12-Month Reinvestment Privilege and the Exchange Privilege. (See The Delaware
Difference and Redemption and Exchange for additional information.)
Purchases of Class A Shares may be made at net asset value by current and
former officers, directors and employees (and members of their immediate
families) of the Manager, any affiliate, any of the funds in the Delaware Group,
certain of their agents and registered representatives and employees of
authorized investment dealers and by employee benefit plans for such entities.
Individual purchases include retirement accounts and must be for accounts in the
name of the individual or a qualifying family member. Purchases of Class A
Shares may be made by clients of registered representatives of an authorized
investment dealer at net asset value within six months of a change of the
registered representative's employment, if the purchase is funded by proceeds
from an investment where a front-end sales charge has been assessed and the
redemption of the investment did not result in the imposition of a contingent
deferred sales charge or other redemption charge. Purchases of Class A Shares
also may be made at net asset value by bank employees who provide services in
connection with agreements between the bank and unaffiliated brokers or dealers
concerning sales of Class A Shares. Officers, directors and key employees of
institutional clients of the Manager, or any of its affiliates, may purchase
Class A Shares at net asset value. Moreover, purchases may be effected at net
asset value for the benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such broker, dealer
or investment adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in connection with
special investment products, such as wrap accounts or similar fee based
programs.
The Series must be notified in advance that an investment qualifies for
purchase at net asset value.
DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B Shares may be purchased at net asset value without the imposition of a
front-end sales charge and, as a result, the Series will invest the full amount
of the investor's purchase payment. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 4% of the dollar
amount purchased. As discussed below, however, Class B Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within six years of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees facilitates the ability of the Series to
sell the Class B Shares without deducting a front-end sales charge at the time
of purchase.
Shareholders of a Series' Class B Shares exercising the exchange privilege
described below will continue to be subject to the CDSC schedule described in
this Prospectus, even after the exchange. Such CDSC schedule may be higher than
the CDSC schedule relating to the Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
- - 18
<PAGE> 65
AUTOMATIC CONVERSION OF CLASS B SHARES
Except for shares acquired through a reinvestment of dividends, Class B Shares
held for eight years after purchase are eligible for automatic conversion into
Class A Shares of the same Series. The Fund will effect conversions of Class B
Shares into Class A Shares only four times in any calendar year, on the last
business day of the second full week of March, June, September and December
(each, a "Conversion Date"). If the eighth anniversary after a purchase of Class
B Shares falls on a Conversion Date, an investor's Class B Shares will be
converted on that date. If the eighth anniversary occurs between Conversion
Dates, an investor's Class B Shares will be converted on the next Conversion
Date after such anniversary. Consequently, if a shareholder's eighth anniversary
falls on the day after a Conversion Date, that shareholder will have to hold
Class B Shares for as long as three additional months after the eighth
anniversary after purchase before the shares will automatically convert into
Class A Shares.
Class B Shares of a fund acquired through reinvestment of dividends will
convert to the corresponding Class A Shares of that fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant Class)
pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.
LEVEL SALES CHARGE ALTERNATIVE--CLASS C SHARES
Class C Shares may be purchased at net asset value without the imposition of a
front-end sales charge and, as a result, the Series will invest the full amount
of the investor's purchase payment. The Distributor currently anticipates
compensating dealers or brokers for selling Class C Shares at the time of
purchase from its own assets in an amount equal to no more than 1% of the dollar
amount purchased. As discussed below, however, Class C Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within twelve months of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Shareholders of the Series' Class C Shares who exercise the exchange privilege
described below will continue to be subject to the CDSC schedule for the Series'
C Class shares described in this Prospectus. See Redemption and Exchange.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES AND CLASS C SHARES
Class B Shares redeemed within six years of purchase may be subject to a CDSC
at the rates set forth below and Class C Shares redeemed within twelve months of
purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price. In addition, no CDSC will be assessed on redemptions of shares
received through reinvestments of dividends or capital gains distributions. For
purposes of this formula, the "net asset value at the time of purchase" will be
the net asset value at purchase of either the Class B Shares or the Class C
Shares of a Series, even if those shares are later exchanged for shares of
another Delaware Group fund. In the event of an exchange of the shares, the "net
asset value of such shares at the time of redemption" will be the net asset
value of the shares that were acquired in the exchange.
The following table sets forth the rates of the CDSC for the Class B Shares of
each Series:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
(AS A PERCENTAGE OF
YEAR AFTER DOLLAR AMOUNT
PURCHASE MADE SUBJECT TO CHARGE)
- -------------- -------------------
<S> <C>
0-2 4%
3-4 3%
5 2%
6 1%
7 and
thereafter None
</TABLE>
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares of the relevant Series, the Class B Shares
will still be subject to the annual 12b-1 Plan expenses of up to 1% of average
daily net assets of those shares. See Automatic Conversion of Class B Shares
above. Investors are reminded that the Class A Shares into which the Class B
Shares will convert are subject to ongoing annual 12b-1 Plan expenses of up to a
maximum of .30% of average daily net assets representing such shares.
- - 19
<PAGE> 66
In determining whether a CDSC is applicable to a redemption of Class B Shares,
it will be assumed that shares held for more than six years are redeemed first,
followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to the Class C Shares, it will be assumed that shares held for more
than twelve months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for
twelve months or less. All investments made during a calendar month, regardless
of what day of the month the investment occurred, will age one month on the last
day of that month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of CDSC under Redemption and Exchange.
12B-1 DISTRIBUTION PLANS--CLASS A, CLASS B AND CLASS C SHARES
Under the distribution plans adopted by the Fund in accordance with Rule 12b-1
under the 1940 Act, each Series is permitted to pay the Distributor annual
distribution fees of up to .30% of the average daily net assets of the relevant
Class A Shares, 1% of the average daily net assets of the relevant Class B
Shares and 1% of the average daily net assets of the relevant Class C Shares.
These fees, which are payable monthly, compensate the Distributor for providing
distribution and related services and bearing certain expenses of each Class.
The 12b-1 Plans applicable to the Class B Shares and the Class C Shares are
designed to permit an investor to purchase Class B Shares or Class C Shares
through dealers or brokers without the assessment of a front-end sales charge
while enabling the Distributor to compensate dealers and brokers for the sale of
such shares. For more detailed discussion of the 12b-1 Plans relating to the
Class A, Class B and Class C Shares, see Distribution (12b-1) and Service under
Management of the Fund.
OTHER PAYMENTS TO DEALERS--CLASS A, CLASS B AND CLASS C SHARES
In addition, from time to time at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of the Classes exceed certain
limits as set by the Distributor, may receive from the Distributor an additional
payment of up to .25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Subject to pending amendments to the NASD's Rules of Fair Practice, in
connection with the promotion of Delaware Group fund shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Rules of Fair Practice will be amended such that
the ability of the Distributor to pay non-cash compensation as described above
will be restricted in some fashion. The Distributor intends to comply with the
NASD's Rules of Fair Practice as they may be amended. In addition, as noted
above, the Distributor may pay dealers a commission in connection with net asset
value purchases.
CLASS B FUNDS AND CLASS C FUNDS
The following funds currently offer Class B Shares and Class C Shares:
Delaware Group Delchester High-Yield Bond Fund, Inc., Delaware Group Government
Fund, Inc., Limited-Term Government Fund of Delaware Group Limited-Term
Government Funds, Inc., Delaware Group Cash Reserve, Inc., Tax-Free USA
Intermediate Fund of the Fund, Delaware Group DelCap Fund, Inc., Delaware Fund
and Devon Fund of Delaware Group Delaware Fund, Inc., Delaware Group Trend Fund,
Inc., Delaware Group Value Fund, Inc., Decatur Income Fund and Decatur Total
Return Fund of Delaware Group Decatur Fund, Inc., Global Assets Series, Global
Bond Series and International Equity Series of Delaware Group Global &
International Funds, Inc., DMC Tax-Free Income Trust--Pennsylvania and each
Series of the Fund.
DIVIDEND ORDERS
YOU MAY HAVE THE DIVIDENDS EARNED IN ONE FUND AUTOMATICALLY INVESTED IN
ANOTHER DELAWARE GROUP FUND WITH A DIFFERENT INVESTMENT OBJECTIVE. For more
information, see Dividend Reinvestment Plan under The Delaware Difference or
call the Shareholder Service Center.
- - 20
<PAGE> 67
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer.
INVESTING THROUGH YOUR INVESTMENT DEALER
You can make a purchase of shares of the Classes through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one, we
can refer you to one.
INVESTING BY MAIL
1. Initial Purchases--An Investment Application must be completed, signed and
sent with a check payable to the specific Class selected at 1818 Market Street,
Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the specific Class selected. Your check should be identified
with your name(s) and account number. An investment slip (similar to a deposit
slip) is provided at the bottom of transaction confirmations and dividend
statements that you will receive from the Fund. Use of this investment slip can
help expedite processing of your check when making additional purchases. Your
investment may be delayed if you send additional purchases by certified mail.
INVESTING BY WIRE
You may purchase shares by requesting your bank to transmit funds by wire to
CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include your
name(s) and your account number for the Class in which you are investing).
1. Initial Purchases--Before you invest, telephone the Fund's Shareholder
Service Center to get an account number. If you do not call first, processing of
your investment may be delayed. In addition, you must promptly send your
Investment Application to the specific Class selected at 1818 Market Street,
Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the Fund's
Shareholder Service Center by telephone of each wire you send.
DELAWARE GROUP ASSET PLANNER
To invest in Delaware Group funds using the Asset Planner service, you should
complete a Delaware Group Asset Planner Account Registration Form, which is
available only from a financial adviser. The sales charge on the investment is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. The minimum initial investment
per Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available for use inside the Asset
Planner service; however, only "like" class shares may be used within the same
Strategy.
An annual maintenance fee, currently $35 per Strategy, is due at the time of
initial investment and by September 30th of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of your Fund accounts if not paid by September 30th. See the Statement of
Additional Information.
Investors will receive a customized quarterly Strategy Report summarizing all
Delaware Group Asset Planner investment performance and account activity during
the prior period. Confirmation statements will be sent following all
transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the Asset
Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
INVESTING BY EXCHANGE
If you have an investment in another mutual fund in the Delaware Group, you
may write and authorize an exchange of part or all of your investment into
shares of a Series. 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.
- - 21
<PAGE> 68
Shareholders of Class A Shares may exchange all or part of their shares for
certain of the shares of other funds in the Delaware Group, including other
Class A Shares, but may not exchange their shares for Class B Shares or Class C
Shares of the Series or for Class B Shares or Class C Shares of any other fund
in the Delaware Group. Shareholders of Class B Shares of the Series are
permitted to exchange all or part of their Class B Shares only into the
corresponding class of shares of the Class B Funds. Similarly, shareholders of
Class C Shares of the Series are permitted to exchange all or part of their
Class C Shares only into the corresponding class of shares of the Class C Funds.
Class B Shares of the Series and Class C Shares of the Series acquired by
exchange will continue to carry the contingent deferred sales charge 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 the Class B Shares a Series 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
Series.
Permissible exchanges into Class A Shares of the Series will be made without a
front-end sales charge imposed by the Series, except for exchanges from funds
not subject to a front-end sales charge (unless such shares were acquired in an
exchange from a fund subject to such a charge or such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of the Series will be made without the imposition of a
contingent deferred sales charge by the fund from which the exchange is being
made at the time of the exchange.
ADDITIONAL METHODS OF ADDING TO YOUR INVESTMENT
Call the Shareholder Service Center for more information if you wish to use
the following services:
1. Direct Deposit
YOU MAY HAVE YOUR EMPLOYER OR BANK MAKE REGULAR INVESTMENTS DIRECTLY TO YOUR
ACCOUNT FOR YOU (for example: payroll deduction, pay by phone, annuity
payments). The Series also accept preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad Retirement
benefits, etc.
2. Automatic Investing Plan
THE AUTOMATIC INVESTING PLAN ENABLES YOU TO MAKE REGULAR MONTHLY INVESTMENTS
WITHOUT WRITING OR MAILING CHECKS. You may authorize the Fund to transfer a
designated amount monthly from your checking account to your Series account.
Shareholders should allow a reasonable amount of time for initial purchases and
changes to these plans to become effective.
* * *
Should investments by these two methods be reclaimed or returned for some
reason, the Fund has the right to liquidate your shares to reimburse the
government or transmitting bank. If there are insufficient funds in your
account, you are obligated to reimburse the Series.
PURCHASE PRICE AND EFFECTIVE DATE
The offering price and net asset value of the Class A, Class B and Class C
Shares are determined as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The effective date of a purchase made through an investment dealer is the date
the order is received by the Series. The effective date of a direct purchase is
the day your wire, electronic transfer or check is received, unless it is
received after the time the offering price or net asset value of shares is
determined, as noted above. Purchase orders received after such time will be
effective the next business day.
THE CONDITIONS OF YOUR PURCHASE
The Fund reserves the right to reject any purchase order. If a purchase is
canceled because your check is returned unpaid, you are responsible for any loss
incurred. The 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 Group. The 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.
- - 22
<PAGE> 69
The Fund also reserves the right, following shareholder notification, to
charge a service fee on accounts that have remained below the minimum stated
account balance for a period of three or more consecutive months. Holders of
such accounts may be notified of their below minimum status 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 contingent deferred sales charge will apply to such
assessments.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under a class' minimum initial
purchase amount as a result of redemptions. An investor making the minimum
initial investment may be subject to involuntary redemption without the
imposition of a CDSC or Limited CDSC if he or she redeems any portion of his or
her account.
REDEMPTION AND EXCHANGE
YOU CAN REDEEM OR EXCHANGE YOUR SHARES IN A NUMBER OF DIFFERENT WAYS. The
exchange service is useful if your investment requirements change and you want
an easy way to invest in other tax-advantaged funds, equity funds, bond funds or
money market funds. This service is also useful if you are anticipating a major
expenditure and want to move a portion of your investment into a fund that has
the checkwriting feature. Exchanges are subject to the requirements of each fund
and all exchanges of shares from one fund or class to another constitute taxable
events. See Taxes. Further, in order for an exchange to be processed, shares of
the fund being acquired must be registered in the state where the acquiring
shareholder resides. You may want to consult your financial adviser or
investment dealer to discuss which funds in the Delaware Group will best meet
your changing objectives and the consequences of any exchange transaction. You
may also call the Delaware Group directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net asset
value next determined after we receive your request in good order subject, in
the case of a redemption, to any applicable CDSC or Limited CDSC. Redemption or
exchange requests received in good order after the time the offering price and
net asset value of shares are determined, as noted above, will be processed on
the next business day. See Purchase Price and Effective Date under Buying
Shares. A shareholder submitting a redemption may indicate that he or she wishes
to receive redemption proceeds of a specific dollar amount. In the case of such
a request, and in the case of certain redemptions from retirement plan accounts,
the Fund will redeem the number of shares necessary to deduct the applicable
CDSC, in the case of Class B or Class C Shares or, if applicable, the Limited
CDSC in the case of Class A Shares, and tender to the shareholder the requested
amount, assuming the shareholder holds enough shares in his or her account for
the redemption to be processed in this manner. Otherwise, the amount tendered to
the shareholder upon redemption will be reduced by the amount of the applicable
CDSC or Limited CDSC.
- - 23
<PAGE> 70
Except as noted below, for a redemption request to be in "good order," you
must provide your account number, account registration, and the total number of
shares or dollar amount of the transaction. For exchange requests, you must also
provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Fund at 800-523-1918 (in Philadelphia, 215-988-1241).
The Fund may suspend, terminate, or amend the terms of the exchange privilege
upon 60 days' written notice to shareholders.
The Fund will honor written redemption requests of shareholders who recently
purchased shares by check, but will not mail the proceeds until it is reasonably
satisfied the purchase check has cleared, which may take up to 15 days from the
purchase date. The Fund will not honor telephone redemptions for shares recently
purchased by check unless it is reasonably satisfied that the purchase check has
cleared. You can avoid this potential delay if you purchase shares by wiring
Federal Funds. The 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.
There is no front-end sales charge or fee for exchanges made between shares of
funds which both carry a front-end sales charge. Any applicable front-end sales
charge will apply to exchanges from shares of funds not subject to a front-end
sales charge, except for transfers involving assets that were previously
invested in a fund with a front-end sales charge and/or transfers involving the
reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for Class B Shares of other Class B Funds or Class C Shares
of other Class C Funds, as applicable (in each case, "New Shares"), will not be
subject to a CDSC that might otherwise be due upon redemption of the Original
Shares. However, such shareholders will continue to be subject to the CDSC and,
in the case of Class B Shares, the automatic conversion schedule of the Original
Shares as described in this Prospectus and any CDSC assessed upon redemption
will be charged by the relevant Series. In an exchange of Class B Shares, the
Series' 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 the New Shares by exchange may subject an
investor to the higher 12b-1 fees applicable to Class B Shares for a longer
period of time than if the investment in the New Shares were made directly.
Various redemption and exchange methods are outlined below. Except for the
CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the Fund or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares redeemed
or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of the
features described below, shall continue in effect until such time as a written
revocation or modification has been received by the Fund or its agent.
All exchanges involve a purchase of shares of the fund into which the exchange
is made. As with any purchase, an investor should obtain and carefully read that
fund's prospectus before buying shares in an exchange. The prospectus contains
more complete information about the fund, including charges and expenses.
WRITTEN REDEMPTION
You can write to the 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 Fund requires a signature by all owners of the account and a
signature guarantee for each owner. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
- - 24
<PAGE> 71
Payment is normally mailed the next business day, but no later than seven
days, after receipt of your redemption request. If your Class A Shares are in
certificate form, the certificate must accompany your request and also be in
good order. The Fund issues certificates for Class A Shares only if a
shareholder submits a specific request. The Fund does not issue certificates for
Class B Shares or Class C Shares.
WRITTEN EXCHANGE
You may also write to the Fund (at 1818 Market Street, Philadelphia, PA 19103)
to request an exchange of any or all of your shares into another mutual fund in
the Delaware Group, subject to the same conditions and limitations as other
exchanges noted above.
TELEPHONE REDEMPTION AND EXCHANGE
To get the added convenience of the telephone redemption and exchange methods,
you must have the Transfer Agent hold your shares (without charge) for you. If
you choose to have your Class A Shares in certificate form, you may only redeem
or exchange by written request and you must return your certificates.
The Telephone Redemption--Check to Your Address of Record service and the
Telephone Exchange service, both of which are described below, are automatically
provided unless you notify the Fund in writing that you do not wish to have such
services available with respect to your account. The 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 Fund by telephone during periods
when market or economic conditions lead to an unusually large volume of
telephone requests.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Series shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the 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, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
TELEPHONE REDEMPTION--CHECK TO YOUR ADDRESS OF RECORD
THE TELEPHONE REDEMPTION FEATURE IS A QUICK AND EASY METHOD TO REDEEM SHARES.
You or your investment dealer of record can have redemption proceeds of $50,000
or less mailed to you at your address of record. Checks will be payable to the
shareholder(s) of record. Payment is normally mailed the next business day, but
no later than seven days, after receipt of the request. This service is only
available to individual, joint and individual fiduciary-type accounts.
TELEPHONE REDEMPTION--PROCEEDS TO YOUR BANK
Redemption proceeds of $1,000 or more can be transferred to your predesignated
bank account by wire or by check. You should authorize this service when you
open your account. If you change your predesignated bank account, the Fund
requires an Authorization Form with your signature guaranteed. For your
protection, your authorization must be on file. If you request a wire, your
funds will normally be sent the next business day. CoreStates Bank, N.A.'s fee
(currently $7.50) will be deducted from your redemption. If you ask for a check,
it will normally be mailed the next business day, but no later than seven days,
after receipt of your request to your predesignated bank account. Except for any
CDSC which may be applicable to Class B and Class C Shares and the Limited CDSC
which may be applicable to certain Class A Shares, there are no fees for this
redemption method, but the mail time may delay getting funds into your bank
account. Simply call the Fund's Shareholder Service Center prior to the time the
offering price and net asset value are determined, as noted above.
If expedited payment by check or wire could adversely affect the Series, the
Fund may take up to seven days to pay.
TELEPHONE EXCHANGE
The Telephone Exchange feature is a convenient and efficient way to adjust
your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into any fund in the Delaware Group under the same registration, subject
to the same conditions and limitations as other exchanges noted above. As with
the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
- - 25
<PAGE> 72
SYSTEMATIC WITHDRAWAL PLANS
This plan provides shareholders with a consistent monthly (or quarterly)
payment. THIS IS PARTICULARLY USEFUL TO SHAREHOLDERS LIVING ON FIXED INCOMES,
SINCE IT CAN PROVIDE THEM WITH A STABLE SUPPLEMENTAL AMOUNT. With accounts of at
least $5,000, you may elect monthly withdrawals of $25 (quarterly $75) or more.
The Fund does not recommend any particular monthly amount, as each shareholder's
situation and needs vary. Payments are normally made by check. You may elect to
have your payments transferred from your Series account to your predesignated
bank account through the Delaware Group's MoneyLine service. Your funds will
normally be credited to your bank account two business days after the payment
date. Except for the Limited CDSC which may be applicable to Class A Shares and
the CDSC which may be applicable to Class B and Class C Shares as noted below,
there are no fees for this redemption method. You can initiate the MoneyLine
service by completing an Authorization Agreement. If the name and address on
your bank account are not identical to the name and address on your Series
account, you must have your signature guaranteed. Please call the Shareholder
Service Center for additional information.
* * *
Shareholders should not purchase Class A Shares while participating in a
Systematic Withdrawal Plan. Also, redemptions of Class A Shares via a Systematic
Withdrawal Plan may be subject to a Limited CDSC if the original purchase was
made at net asset value within the 12 months prior to the withdrawal and a
dealer's commission has been paid on that purchase. See Contingent Deferred
Sales Charge for Certain Purchases of Class A Shares Made at Net Asset Value,
below. With respect to Class B Shares and Class C Shares redeemed via a
Systematic Withdrawal Plan, any applicable CDSC will be waived if, on the date
that the Plan is established, the annual amount selected to be withdrawn is less
than 12% of the account balance. If the annual amount selected to be withdrawn
exceeds 12% of the account balance on the date that the Systematic Withdrawal
Plan is established, all redemptions under the Plan will be subject to the
applicable CDSC. Whether a waiver of the CDSC is available or not, the first
shares to be redeemed for each Systematic Withdrawal Plan payment will be those
not subject to a CDSC because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions. The 12%
annual limit will be reset on the date that any Systematic Withdrawal Plan is
modified (for example, a change in the amount selected to be withdrawn or the
frequency or date of withdrawals), based on the balance in the account on that
date. See Waiver of CDSC--Class B and Class C Shares below.
For more information on Systematic Withdrawal Plans, call the Shareholder
Service Center.
WEALTH BUILDER OPTION
Shareholders may elect to invest in other mutual funds in the Delaware Group
through our Wealth Builder Option. Under this automatic exchange program,
shareholders can authorize regular monthly amounts (minimum of $100 per fund) to
be liquidated from their Series account and invested automatically into an
account in one or more funds in the Delaware Group. If, in connection with the
Wealth Builder Option, a shareholder wishes to open a new account in such other
fund or funds to receive the automatic investment, such new account in any fund
must meet such other fund's minimum initial purchase requirements. Investments
under this option are exchanges and are therefore subject to the same conditions
and limitations as other exchanges noted above.
Shareholders can use the Wealth Builder Option to invest in the Series through
regular liquidations of shares in their accounts in other funds in the Delaware
Group, subject to the same conditions and limitations as other exchanges noted
above. Shareholders can terminate their participation at any time by written
notice to the Fund. See Redemption and Exchange.
CONTINGENT DEFERRED SALES CHARGE FOR
CERTAIN PURCHASES OF CLASS A SHARES MADE AT
NET ASSET VALUE
A Limited CDSC will be imposed by the Series upon certain redemptions of Class
A Shares (or shares into which such Class A Shares are exchanged) made within 12
months of purchase, if such purchases were made at net asset value and triggered
the payment by the Distributor of the dealer's commission described above. See
Buying Shares.
- - 26
<PAGE> 73
The Limited CDSC will be paid to the Distributor and will be equal to the
lesser of 1% of: (1) the net asset value at the time of purchase of the Class A
Shares being redeemed; or (2) the net asset value of such Class A Shares at the
time of redemption. For purposes of this formula, the "net asset value at the
time of purchase" will be the net asset value at purchase of the Class A Shares
even if those shares are later exchanged for shares of another Delaware Group
fund and, in the event of an exchange of Class A Shares, the "net asset value of
such shares at the time of redemption" will be the net asset value of the shares
acquired in the exchange.
Redemptions of such Class A Shares held for more than 12 months will not be
subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited CDSC
at the time of such exchange. The period a shareholder owns shares into which
Class A Shares are exchanged will count towards satisfying the 12-month holding
period. The Series assesses the Limited CDSC if such 12-month period is not
satisfied irrespective of whether the redemption triggering its payment is of
the Class A Shares of the Series or the Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed that
shares not subject to the Limited CDSC are the first redeemed followed by other
shares held for the longest period of time. The Limited CDSC will not be imposed
upon shares representing reinvested dividends or capital gains distributions, or
upon amounts representing share appreciation. All investments made during a
calendar month, regardless of what day of the month the investment occurred,
will age one month on the last day of that month and each subsequent month.
WAIVER OF LIMITED CDSC--CLASS A SHARES
The Limited CDSC for Class A Shares on which a dealer's commission has been
paid will be waived in the following instances: (i) redemptions that result from
the 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) redemptions by the classes of shareholders who are
permitted to purchase shares at net asset value, regardless of the size of the
purchase (see Buying at Net Asset Value under Buying Shares).
WAIVER OF CDSC--CLASS B AND CLASS C SHARES
The CDSC is waived on redemptions of Class B Shares if the redemption results
from the 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.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the 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 of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts,
the waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Internal Revenue Code) of
all registered owners occurring after the purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B 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.
- - 27
<PAGE> 74
DIVIDENDS AND DISTRIBUTIONS
The Fund declares a dividend on each Series to all shareholders of record at
the time the offering price of shares is determined. See Purchase Price and
Effective Date under Buying Shares. Thus, when redeeming shares, dividends
continue to be credited up to and including the date of redemption.
Purchases of shares by wire begin earning dividends when converted into
Federal Funds and available for investment, normally the next business day after
receipt. However, if the Fund is given prior notice of Federal Funds wire and an
acceptable written guarantee of timely receipt from an investor satisfying the
Fund's credit policies, the purchase will start earning dividends on the date
the wire is received. Purchases by check earn dividends upon conversion to
Federal Funds, normally one business day after receipt.
Each Class of a Series will share proportionately in the investment income and
expenses of that Series, except that the per share dividends from net investment
income on the Class A Shares, the Class B Shares and the Class C Shares of a
Series will vary due to the expenses under the 12b-1 Plan applicable to each
Class. Generally, the dividends per share on Class B Shares and Class C Shares
can be expected to be lower than the dividends per share on Class A Shares
because the expenses under the 12b-1 Plans relating to Class B and Class C
Shares will be higher than the expenses under the 12b-1 Plan relating to Class A
Shares. See Distribution (12b-1) and Service under Management of the Fund.
Dividends are declared daily and paid monthly on the first business day
following the end of each month. Payment by check of cash dividends will
ordinarily be mailed within three business days after the payable date. Any
distributions from net realized securities profits will be distributed annually
in the quarter following the close of the fiscal year.
Both dividends and distributions, if any, are automatically reinvested in your
account at net asset value unless you elect otherwise. Any check in payment of
dividends or other distributions which cannot be delivered by the United States
Post Office or which remains uncashed for a period of more than one year may be
reinvested in the shareholder's account at the then-current net asset value and
the dividend option may be changed from cash to reinvest. If you elect to take
your dividends and distributions in cash and such dividends and distributions
are in an amount of $25 or more, you may choose the Delaware Group's MoneyLine
service and have such payments transferred from your Series account to your
predesignated bank account. Your funds will normally be credited to your bank
account two business days after the payment date. There are no fees for the
MoneyLine service. See Systematic Withdrawal Plans under Redemption and Exchange
for information regarding authorization of this service. (See The Delaware
Difference for more information on reinvestment options.)
The Series anticipates that substantially all of its dividends from net
investment income paid to shareholders will be exempt from federal income tax.
During the fiscal year ended August 31, 1995, dividends totaling $0.746 and
$0.649 per share of the Class A Shares and the Class B Shares, respectively, of
the USA Fund, and $0.639 and $0.550 per share of the Class A Shares and the
Class B Shares, respectively, of the Insured Fund were paid from net investment
income, all of which were exempt from federal income tax. Class C Shares were
not offered prior to the date of this Prospectus.
- - 28
<PAGE> 75
TAXES
Each Series has qualified, and intends to continue to qualify, as a regulated
investment company under Subchapter M of the Internal Revenue Code (the "Code").
As such, each Series will not be subject to federal income tax, or to any excise
tax, to the extent its earnings are distributed as provided in the Code. Each
Series intends to distribute substantially all of the its net investment income
and net capital gains, if any.
Each Series intends to invest a sufficient portion of its assets in municipal
bonds and notes so that it will qualify to pay "exempt-interest dividends" to
shareholders. Such exempt-interest dividends distributed to shareholders are
excluded from a shareholder's gross income for federal tax purposes.
A portion of each Series' dividends may be derived from income on "private
activity" municipal bonds and therefore may be a preference item under federal
tax law and subject to the federal alternative minimum tax. No portion of a
Series' distributions will be eligible for the dividends-received deduction for
corporations.
To the extent dividends are derived from taxable income on temporary
investments or short-term capital gains, they are treated as ordinary income,
whether received in cash or in additional shares. In addition, gain from the
disposition of a tax-exempt bond that was acquired after April 30, 1993 for a
price less than the principal amount of the bond is taxable to shareholders as
ordinary income to the extent of the accrued market discount.
Distributions paid by a Series from long-term capital gains, whether received
in cash or in additional shares, are taxable to those investors who are subject
to income taxes as long-term capital gains, regardless of the length of time an
investor has owned shares in the Series. The Series do not seek to realize any
particular amount of capital gains during a year; rather, realized gains are a
byproduct of a Series' management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in a Series are made
shortly before the record date for a capital gains distribution, a portion of
the investment will be returned as a taxable distribution.
Dividends which are declared in October, November or December to shareholders
of record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by a Series and received by the shareholder
on December 31 of the calendar year in which they are declared.
The sale of shares of a Series is a taxable event and may result in a capital
gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
two mutual funds (or two series or portfolios of a mutual fund). Any loss
incurred on sale or exchange of a Series' shares which had been held for six
months or less, will be treated as a long-term capital loss to the extent of
capital gain dividends received with respect to such shares and will be
disallowed to the extent of exempt-interest dividends paid with respect to such
shares. All or a portion of the sales charge incurred in acquiring Series shares
will be excluded from the federal tax basis of any of such shares sold or
exchanged within ninety days of their purchase (for purposes of determining gain
or loss upon sale of such shares) if the sale proceeds are reinvested in the
Series or in another fund in the Delaware Group of funds and a sales charge that
would otherwise apply to the reinvestment is reduced or eliminated. Any portion
of such sales charge excluded from the tax basis of the shares sold will be
added to the tax basis of the shares acquired in the reinvestment.
Exempt-interest dividends paid by the Fund, although exempt from regular
federal income tax in the hands of a shareholder, are includable in the tax base
for determining the extent to which a shareholder's Social Security benefits
would be subject to federal income tax. Shareholders are required to disclose
their receipt of tax-exempt interest on their federal income tax returns.
The automatic conversion of Class B Shares into Class A Shares of the relevant
Series at the end of approximately eight years after purchase will be tax-free
for federal tax purposes. See Automatic Conversion of Class B Shares under
Buying Shares.
The exemption of dividends for regular federal income tax purposes may not
result in similar exemptions under the laws of a particular state or local
taxing authority. It is recommended that shareholders consult their tax advisers
in this regard.
- - 29
<PAGE> 76
Shares of each Series will be exempt from Pennsylvania county personal
property taxes. The Fund will report annually the percentage of interest income
earned on the municipal obligations on a state-by-state basis during the
proceeding calendar year.
Each year, the Fund will mail you information on the tax status of each
Series' dividends and distributions.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Account Registration Form your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
The tax discussion set forth above is included for general information only.
Investors should consult their own tax advisers concerning the federal, state,
local or foreign tax consequences of an investment in the Series.
See Taxes in Part B for additional information on tax matters relating to the
Series and its shareholders.
CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
Class A Shares are purchased at the offering price per share, while Class B
Shares and Class C Shares are purchased at the net asset value ("NAV"). The
offering price per share of Class A Shares consists of the NAV per share next
computed after the order is received, plus any applicable front-end sales
charges. The offering price and NAV are computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on
days when the Exchange is open.
The NAV per share for each Series is computed by adding the value of all
securities and other assets in that Series' portfolio, deducting any liabilities
of that Series (expenses and fees are accrued daily) and dividing by the number
of that Series' shares outstanding. Debt securities are priced at fair value by
an independent pricing service using methods approved by the Board of Directors.
Short-term investments having a maturity of less than 60 days are valued at
amortized cost, which approximates market value. All other securities are valued
at their fair value as determined in good faith and in a method approved by the
Fund's Board of Directors.
Each of a Series' three classes will bear, pro-rata, all of the common
expenses of the Series. The net asset values of all outstanding shares of each
class of the Series will be computed on a pro-rata basis for each outstanding
share based on the proportionate participation in the Series represented by the
value of shares of that class. All income earned and expenses incurred by a
Series will be borne on a pro-rata basis by each outstanding share of a class,
based on each class' percentage in that Series represented by the value of
shares of such classes, except that Class A Shares, Class B Shares and Class C
Shares will bear only 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 particular Series
may vary. However, the NAV per share of each class of a particular Series is
expected to be equivalent.
- - 30
<PAGE> 77
MANAGEMENT OF THE FUND
DIRECTORS
The business and affairs of the Fund are managed under the direction of its
Board of Directors. Part B contains additional information regarding the
directors and officers.
INVESTMENT MANAGER
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the Delaware
Group since 1938. On August 31, 1995, the Manager and its affiliate, Delaware
International Advisers Ltd., were supervising in the aggregate more than $27
billion in assets in the various institutional (approximately $17,506,688,000)
and investment company (approximately $10,068,867,000) accounts.
The Manager is an indirect, wholly-owned subsidiary of Delaware Management
Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly-owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now wholly-owned subsidiaries, and subject to
the ultimate control, of Lincoln National. Lincoln National, with headquarters
in Fort Wayne, Indiana, is a diversified organization with operations in many
aspects of the financial services industry, including insurance and investment
management. In connection with the merger, new Investment Management Agreements
between the Fund on behalf of each Series and the Manager were executed
following shareholder approval.
The Manager manages each Series' portfolio and makes and implements investment
decisions. The Manager also administers the Fund's affairs and pays the Fund's
rent and the salaries of all the directors, officers and employees of the Fund
who are affiliated with the Manager. For these services, the annual compensation
paid to the Manager is equal to: for the USA Fund, .60% on the first $500
million of average daily net assets, .575% on the next $250 million and .55% on
the average daily net assets in excess of $750 million; and for the Insured
Fund, .60% of the average daily net assets of the Series, less in each case a
proportionate share of all directors' fees paid to the unaffiliated directors by
the Series. The investment management fees paid by each of the USA Fund and the
Insured Fund for the fiscal year ended August 31, 1995 were .59% of average
daily net assets.
Patrick P. Coyne assumed primary responsibility for making day-to-day
investment decisions for each Series as of July 1, 1994. A graduate of Harvard
University with an MBA from the University of Pennsylvania's Wharton School, Mr.
Coyne joined the Delaware Group's fixed income department in 1990. Prior to
that, 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.
In making investment decisions for the Series, Mr. Coyne consults with Paul E.
Suckow, J. Michael Pokorny and other members of the Delaware Group's fixed
income department. Mr. Suckow is the Chief Investment Officer for fixed income.
A Chartered Financial Analyst, he is a graduate of Bradley University with an
MBA from Western Illinois University. Mr. Suckow was a fixed income portfolio
manager at the Delaware Group from 1981 to 1985. He returned to the Delaware
Group in 1993 after eight years with Oppenheimer Management Corporation. Mr.
Pokorny is a graduate of William and Mary College with over 29 years of fixed
income experience. He joined the Delaware Group in 1978.
PORTFOLIO TRADING PRACTICES
The Series may sell securities without regard to the length of time they have
been held. Trading will be undertaken principally to achieve the Series'
objectives in light of expected changes in interest rates. The degree of trading
activity will affect brokerage costs of the Series and may affect taxes payable
by the Series' shareholders. Given the Series' investment objectives, annual
portfolio turnover rates are not expected to exceed 100% for either Series.
During the past two fiscal years, portfolio turnover rates for the USA Fund were
10% for 1994 and 27% for 1995 and for the Insured Fund were 56% for 1994 and 68%
for 1995.
The Manager uses its best efforts to obtain the best available price and most
favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, the Manager may consider a
broker/dealer's sales of Series shares in placing portfolio orders, and may
place orders with broker/dealers that have agreed to defray certain Series
expenses such as custodian fees.
- - 31
<PAGE> 78
PERFORMANCE INFORMATION
From time to time, each Series may quote yield or total return performance of
its Classes in advertising and other types of literature.
The current yield for each of the Classes will be calculated by dividing the
annualized net investment income earned by that Class during a recent 30-day
period by the maximum offering price per share on the last day of the period.
The yield formula provides for semi-annual compounding, which assumes that net
investment income is earned and reinvested at a constant rate and annualized at
the end of a six-month period. The Series may also publish a tax-equivalent
yield concerning a Class based on federal and, if applicable, state tax rates,
which demonstrates the taxable yield necessary to produce an after-tax yield
equivalent to such Class' yield.
Total return will be based on a hypothetical $1,000 investment, reflecting the
reinvestment of all distributions at net asset value and: (i) in the case of
Class A Shares, the impact of the maximum front-end sales charge at the
beginning of each specified period; and (ii) in the case of Class B Shares and
Class C Shares, the deduction of any applicable CDSC at the end of the relevant
period. Each presentation will include the average annual total return for one-,
five- and ten-year periods, as relevant. The Series may, in addition, advertise
aggregate and average total return information over additional periods of time.
In addition, the Series may present total return information that does not
reflect the deduction of the maximum front-end sales charge or any applicable
CDSC. In this case, such total return information would be more favorable than
total return information that includes deductions of the maximum front-end sales
charge or any applicable CDSC.
Yield and net asset value fluctuate and are not guaranteed. Past performance
is not an indication of future results.
DISTRIBUTION (12B-1) AND SERVICE
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor for
each Series under separate Distribution Agreements dated April 3, 1995, as
amended on November 29, 1995.
The Fund has adopted a separate distribution plan under Rule 12b-1 for each of
the Class A Shares, Class B Shares and Class C Shares of each Series (the
"Plans"). The Plans permit the Series to pay the Distributor from the assets of
the respective Classes a monthly fee for its services and expenses in
distributing and promoting sales of shares. These expenses include, among other
things, preparing and distributing advertisements, sales literature, and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, holding special promotions for specified periods of time,
and paying distribution and maintenance fees to brokers, dealers and others. In
connection with the promotion of Class A, Class B and Class C Shares, the
Distributor may, from time to time, pay to participate in dealer-sponsored
seminars and conferences, and reimburse dealers for expenses incurred in
connection with preapproved seminars, conferences and advertising. The
Distributor may pay or allow additional promotional incentives to dealers as
part of preapproved sales contests and/or to dealers who provide extra training
and information concerning each Class and increase sales of each Class. In
addition, the Series may make payments from the assets of the respective Class
directly to others, such as banks, who aid in the distribution of its shares or
provide services in respect of the shares, pursuant to service agreements with
the Series.
The 12b-1 Plan expenses relating to each of the Class B Shares and the Class C
Shares are also used to pay the Distributor for advancing the commission costs
to dealers with respect to the initial sale of such shares.
The aggregate fees paid by a Series from the assets of the respective Classes
to the Distributor and others under the Plans may not exceed .30% of the Class A
Shares' average daily net assets in any year, and 1% (.25% of which are service
fees to be paid to the Distributor, dealers and others for providing personal
service and/or maintaining shareholder accounts) of each of the Class B Shares'
and the Class C Shares' average daily net assets in any year. The Class A, Class
B and Class C Shares will not incur any distribution expenses beyond these
limits, which may not be increased without shareholder approval. The Distributor
may, however, incur additional expenses and make additional payments to dealers
from its own resources to promote the distribution of shares of the Classes.
- - 32
<PAGE> 79
Effective June 1, 1992, the Board of Directors has determined that the annual
fee payable on a monthly basis, under the Plans for the Class A Shares of the
USA Fund and the Insured Fund, will be equal to the sum of: (i) the amount
obtained by multiplying .30% by the average daily net assets represented by the
Class A Shares of the Series that were acquired by shareholders on or after June
1, 1992; and (ii) the amount obtained by multiplying .10% by the average daily
net assets represented by the Class A Shares of the Series that were acquired
before June 1, 1992. While this is the method for calculating the Class A
Shares' 12b-1 expense, such expense is a Class A Shares' expense so that all
shareholders of the Class A Shares, regardless of when they purchased their
shares, will bear 12b-1 expenses at the same per share rate. As Class A Shares
are sold on or after June 1, 1992, the initial rate of at least .10% will
increase over time. Thus, as the proportion of Class A Shares purchased on or
after June 1, 1992 to Class A Shares outstanding prior to June 1, 1992
increases, the expenses attributable to payments under such Plans will also
increase (but will not exceed .30% of average daily net assets). While this
describes the current formula for calculating the expenses which will be payable
under the Plans relating to the Class A Shares, such Plans permit the Class A
Shares of each Series to pay a full .30% on all assets at any time following
Board approval.
While payments pursuant to the Plans may not exceed .30% annually with respect
to the Class A Shares, and 1% annually with respect to each of the Class B
Shares and Class C Shares, the Plans do not limit fees to amounts actually
expended by the Distributor. It is therefore possible that the Distributor may
realize a profit in any particular year. However, the Distributor currently
expects that its distribution expenses will likely equal or exceed payments to
it under the Plans. The monthly fees paid to the Distributor are subject to the
review and approval of the Fund's unaffiliated directors who may reduce the fees
or terminate the Plans at any time.
The Transfer Agent, Delaware Service Company, Inc., serves as the shareholder
servicing, dividend disbursing and transfer agent for the Series under
Agreements with each Series dated June 29, 1988. The directors annually review
service fees paid to the Transfer Agent.
The Distributor and the Transfer Agent are also indirect, wholly-owned
subsidiaries of DMH.
EXPENSES
Each Series is responsible for all of its own expenses other than those borne
by the Manager under its Investment Management Agreement and those borne by the
Distributor under its Distribution Agreement. The ratios of expenses to average
daily net assets for the Class A Shares and the Class B Shares of the USA Fund
for the fiscal year ended August 31, 1995 were 0.92% and 1.74%, respectively.
The ratios of expenses to average daily net assets for the Class A Shares and
the Class B Shares of the Insured Fund for the fiscal year ended August 31, 1995
were 0.98% and 1.80%, respectively. The Fund anticipates that the expense ratio
for Class C Shares will be identical to the expense ratio for the respective
Class B Shares. The expense ratio for each Class reflects the impact of its
12b-1 Plan.
SHARES
The Fund is an open-end management investment company and each Series'
portfolio of assets is nondiversified as defined by the 1940 Act. Commonly known
as a mutual fund, the Fund was organized as a Maryland corporation on August 17,
1983. The Fund currently offers three classes of shares for each of its series--
Tax-Free USA Fund, Tax-Free Insured Fund and Tax-Free USA Intermediate Fund
(shares of which are offered through a separate prospectus). The shares of each
Series have a par value of $.01, equal voting rights, except as noted below, and
are equal in all other respects.
Shares of each class within a Series represent proportionate interests in the
assets of that Series and have the same voting and other rights and preferences
as the other classes of shares of that Series, except that, as a general matter,
shareholders of Class A Shares, Class B Shares and Class C Shares of a Series
may vote only on matters affecting the 12b-1 Plan that relates to the class of
shares that they hold. However, the Class B Shares of a Series may vote on any
proposal to increase materially the fees to be paid by that Series under the
Rule 12b-1 Plan relating to the Class A Shares.
- - 33
<PAGE> 80
All Fund shares have noncumulative voting rights which means that the holders
of more than 50% of the Fund's shares voting for the election of directors can
elect 100% of the directors if they choose to do so. Shares of each Series have
a priority over shares of any other series of the Fund in the assets and income
of that Series, and each Series will vote separately on any matter which affects
only that Series. Under Maryland law, the Fund is not required, and does not
intend, to hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the 1940 Act. Shareholders of 10%
or more of the Fund's shares may request that a special meeting be called to
consider the removal of a director.
Prior to May 2, 1994, the Tax-Free USA Fund A Class was known as the Tax-Free
USA Fund, and prior to June 1, 1992, it was known as the USA Series. Prior to
May 2, 1994, the Tax-Free Insured Fund A Class was known as the Tax-Free Insured
Fund, and prior to June 1, 1992, it was known as the USA Insured Series.
- - 34
<PAGE> 81
APPENDIX A
TAX-FREE USA FUND
TAX-FREE INSURED FUND
ILLUSTRATIONS OF THE POTENTIAL IMPACT ON INVESTMENT BASED ON PURCHASE OPTION
$10,000 PURCHASE
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3
NO REDEMPTION REDEEM 1ST YEAR REDEEM 3RD YEAR
------------------------------- ------------------------------- -------------------------------
YEAR CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- ---- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000 9,525 10,000 10,000
1 10,192 10,630 10,630 10,192 10,230 10,530+ 10,192 10,630 10,630
2 10,905 11,300 11,300 10,905 11,300 11,300
3 11,669 12,012 12,012 11,669 11,712 12,012+
4 12,485 12,768 12,768
5 13,359 13,573 13,573
6 14,294 14,428 14,428
7 15,295 15,337 15,337
8 16,366+ 16,303 16,303
9 17,511 17,444* 17,330
10 18,737 18,665* 18,422
<CAPTION>
SCENARIO 4
REDEEM 5TH YEAR
-------------------------------
YEAR CLASS A CLASS B CLASS C
- ---- ------- ------- -------
<S> <C> <C> <C>
0 9,525 10,000 10,000
1 10,192 10,630 10,630
2 10,905 11,300 11,300
3 11,669 12,012 12,012
4 12,485 12,768 12,768
5 13,359 13,373 13,573+
6
7
8
9
10
</TABLE>
- ------------------
*This assumes that Class B Shares were converted to Class A Shares at the end of
the eighth year.
$250,000 PURCHASE
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3
NO REDEMPTION REDEEM 1ST YEAR REDEEM 3RD YEAR
------------------------------- ------------------------------- -------------------------------
YEAR CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- ---- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000 243,750 250,000 250,000
1 260,813 265,750 265,750 260,813 255,750 263,250+ 260,813 265,750 265,750
2 279,069 282,492 282,492 279,069 282,492 282,492
3 298,604 300,289 300,289 298,604 292,789 300,289+
4 319,507+ 319,207 319,207
5 341,872 339,318 339,318
6 365,803 360,695 360,695
7 391,409 383,418 383,418
8 418,808 407,574 407,574
9 448,124 436,104* 433,251
10 479,493 466,631* 460,546
<CAPTION>
SCENARIO 4
REDEEM 5TH YEAR
-------------------------------
YEAR CLASS A CLASS B CLASS C
- ---- ------- ------- -------
<S> <C> <C> <C>
0 243,750 250,000 250,000
1 260,813 265,750 265,750
2 279,069 282,492 282,492
3 298,604 300,289 300,289
4 319,507+ 319,207 319,207
5 341,872 334,318 339,318
6
7
8
9
10
</TABLE>
- ------------------
*This assumes that Class B Shares were converted to Class A Shares at the end of
the eighth year.
Assumes a hypothetical return for Class A of 7% per year, a hypothetical return
for Class B of 6.3% for years 1-8 and 7% for years 9-10, and a hypothetical
return for Class C of 6.3% per year. Hypothetical returns vary due to the
different expense structure for each Class and do not represent actual
performance.
Class A purchase subject to appropriate sales charge breakpoint (4.75% @
$10,000; 3.75% @ $100,000; 2.50% @ $250,000).
Class B purchase assessed appropriate CDSC upon redemption (4%-4%-3%-3%-2%-1% in
years 1-2-3-4-5-6).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which class offers the greater return potential
based on investment amount and holding period.
- - 35
<PAGE> 82
APPENDIX B--RATINGS
BONDS
Excerpts from Moody's description of its bond ratings: AAA--judged to be the
best quality. They carry the smallest degree of investment risk; AA--judged to
be of high quality by all standards; A--possess favorable attributes and are
considered "upper medium" grade obligations; BAA--considered as medium grade
obligations. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time; BA--judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; CAA--are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; CA--represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings; C--the lowest
rated class of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB--regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D--in default, and payment
of interest and/or repayment of principal is in arrears.
- - 36
<PAGE> 83
The Delaware Group includes funds
with a wide range of investment objectives.
Stock funds, income funds, tax-free funds,
money market funds, global and international
funds and closed-end equity funds give
investors the ability to create a portfolio
that fits their personal financial goals.
For more information, contact
your financial adviser or call
Delaware Group at 800-523-4640,
in Philadelphia call 215-988-1333.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
- ------------------------------------------------------
TAX-FREE USA FUND
- ------------------------------------------------------
TAX-FREE INSURED FUND
- ------------------------------------------------------
TAX-FREE USA
INTERMEDIATE FUND
- ------------------------------------------------------
DELAWARE GROUP TAX-FREE FUND, INC.
- ------------------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- ------------------------------------------------------
NOVEMBER 29, 1995
DELAWARE
GROUP
--------
<PAGE> 84
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 1
- ---------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 29, 1995
- ---------------------------------------------------------------
DELAWARE GROUP
- ---------------------------------------------------------------
TAX-FREE FUND, INC.
- ---------------------------------------------------------------
1818 MARKET STREET
PHILADELPHIA, PA 19103
- ---------------------------------------------------------------
FOR PROSPECTUS AND PERFORMANCE:
NATIONWIDE 800-523-4640
PHILADELPHIA 215-988-1333
INFORMATION ON EXISTING ACCOUNTS:
(SHAREHOLDERS ONLY)
NATIONWIDE 800-523-1918
PHILADELPHIA 215-988-1241
DEALER SERVICES:
(BROKER/DEALERS ONLY)
NATIONWIDE 800-362-7500
PHILADELPHIA 215-988-1050
- ---------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
- ---------------------------------------------------
COVER PAGE 1
- ---------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES 2
- ---------------------------------------------------
MUNICIPAL BOND INSURANCE 7
- ---------------------------------------------------
PERFORMANCE INFORMATION 7
- ---------------------------------------------------
TRADING PRACTICES AND BROKERAGE 11
- ---------------------------------------------------
PURCHASING SHARES 13
- ---------------------------------------------------
INVESTMENT PLANS 18
- ---------------------------------------------------
DETERMINING OFFERING PRICE AND
NET ASSET VALUE 20
- ---------------------------------------------------
REDEMPTION AND REPURCHASE 20
- ---------------------------------------------------
DIVIDENDS AND REALIZED SECURITIES PROFITS
DISTRIBUTIONS 23
- ---------------------------------------------------
TAXES 24
- ---------------------------------------------------
INVESTMENT MANAGEMENT AGREEMENT 25
- ---------------------------------------------------
OFFICERS AND DIRECTORS 27
- ---------------------------------------------------
EXCHANGE PRIVILEGE 30
- ---------------------------------------------------
GENERAL INFORMATION 32
- ---------------------------------------------------
APPENDIX A--DESCRIPTION OF RATINGS 34
- ---------------------------------------------------
APPENDIX B--EQUIVALENT YIELDS:
TAX-EXEMPT VS. TAXABLE SECURITIES 35
- ---------------------------------------------------
FINANCIAL STATEMENTS 36
- ---------------------------------------------------
</TABLE>
Delaware Group Tax-Free Fund, Inc. (the "Fund") is a professionally managed
mutual fund of the series type currently offering three Series: the Tax-Free USA
Fund ("USA Fund"), the Tax-Free USA Intermediate Fund ("USA Intermediate Fund")
and the Tax-Free Insured Fund ("Insured Fund") (collectively or, as relevant
separately, the "Series"). Each Series currently offers three classes of shares.
The USA Fund offers Tax-Free USA Fund A Class, Tax-Free USA Fund B Class and
Tax-Free USA Fund C Class. The USA Intermediate Fund offers Tax-Free USA
Intermediate Fund A Class, Tax-Free USA Intermediate Fund B Class and Tax-Free
USA Intermediate Fund C Class. The Insured Fund offers Tax-Free Insured Fund A
Class, Tax-Free Insured Fund B Class and Tax-Free Insured Fund C Class. Each
class is individually referred to as a "Class" and collectively referred to as
the "Classes"; and "Class A Shares," "Class B Shares" or "Class C Shares" refer
to such shares of all three Series, unless otherwise noted. This Part B
describes each Series and each Class, except where noted. Class B Shares and
Class C Shares may be purchased at a price equal to the next determined net
asset value per share. Class A Shares may be purchased at the public offering
price, which is equal to the next determined net asset value per share, plus a
front-end sales charge. Class A Shares are subject to a maximum front-end sales
charge of 4.75% with respect to the USA Fund and Insured Fund and 3.00% with
respect to the USA Intermediate Fund. Class A Shares are subject to annual 12b-1
Plan expenses of up to .30%. Class B Shares are subject to a contingent deferred
sales charge ("CDSC") which may be imposed on redemptions made within three
years of purchase with respect to the USA Intermediate Fund and six years of
purchase with respect to the USA Fund and Insured Fund. Class B Shares are
subject to annual 12b-1 Plan expenses of 1%, which are assessed against Class B
Shares for approximately five years after purchase with respect to the USA
Intermediate Fund and approximately eight years after purchase with respect to
the USA Fund and Insured Fund. See Automatic Conversion of Class B Shares under
Buying Shares in the Classes' Prospectuses. Class C Shares of each Series are
subject to a CDSC which may be imposed on redemptions made within twelve months
of purchase and annual 12b-1 Plan expenses of 1%, which are assessed against the
Class C Shares for the life of the investment. All references to "shares" in
this Statement of Additional Information ("Part B" of the registration
statement) refer to all Classes of shares of the Series, except where noted.
This Part B supplements the information contained in the current Prospectuses
of the Series dated November 29, 1995, as they may be amended from time to time.
It should be read in conjunction with the Series' Prospectuses. Part B is not
itself a prospectus but is, in its entirety, incorporated by reference into the
Prospectuses. The Prospectuses for the Series may be obtained by writing or
calling your investment dealer or by contacting the Fund's national distributor,
Delaware Distributors, Inc. (the "Distributor"), 1818 Market Street,
Philadelphia, PA 19103.
- 1
<PAGE> 85
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 2
INVESTMENT OBJECTIVES
AND POLICIES
The objective of the USA Fund and of the USA Intermediate Fund is to seek as
high a level of current interest income exempt from federal income tax as is
available from municipal bonds and as is consistent with prudent investment
management and preservation of capital. The USA Intermediate Fund pursues its
investment objective by investing in municipal bonds with a dollar weighted
average maturity of between three and ten years and utilizing various investment
strategies, as described below, which differ from the strategies utilized by the
USA Fund and the Insured Fund.
The objective of the Insured Fund is to seek as high a level of current
interest income exempt from federal income tax as is available from municipal
bonds and as is consistent with prudent investment management and preservation
of capital. The Insured Fund seeks to achieve its objective by investing
primarily in municipal bonds that are protected by insurance guaranteeing the
payment of principal and interest, when due.
The investment objective of each Series, described above, is a matter of
fundamental policy and may not be changed without shareholder approval of the
affected Series. There is no assurance that the objective of each Series can be
achieved. Bond insurance reduces the risk of loss due to default by an issuer,
but such bonds remain subject to the risk that market value may shift for other
reasons. Also, there is no assurance that any insurance company will meet its
obligations.
Appendix A contains excerpts describing ratings of municipal obligations from
Standard & Poor's Rating Group ("S&P") and Moody's Investors Service, Inc.
("Moody's").
The USA Fund and the Insured Fund seek to achieve their respective objectives
by investing their assets in a nondiversified portfolio consisting primarily of
intermediate obligations up to ten years and long-term obligations up to 50
years in maturity, and the USA Intermediate Fund seeks to achieve its objective
by investing its assets in a nondiversified portfolio consisting primarily of
intermediate obligations, issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest income from
which, in the opinion of each issuer's Counsel, is exempt from federal income
tax. A Series may invest in other debt obligations, but if it does, at least 80%
of its assets will be invested in the types of securities listed above.
The portfolio of the USA Intermediate Fund will typically have a dollar
weighted average maturity of between three and ten years. The USA Intermediate
Fund may, from time to time, employ certain techniques to shorten or lengthen
the dollar weighted average maturity of the portfolio, including futures
transactions, options on futures and the purchase of debt securities at a
premium or a discount. Although the dollar weighted average maturity of the USA
Intermediate Fund's portfolio will be between three and ten years, the USA
Intermediate Fund may purchase individual securities with any maturity.
The principal risk to which a Series 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. Each Series may invest in both types of bonds.
The USA Fund will normally invest at least 80% of its assets in debt
obligations, as stated above, which are rated by S&P or Moody's at the time of
purchase as being within their top four grades. The fourth grade is considered a
medium grade and has speculative characteristics. The USA Fund may, however,
invest up to 20% of its assets in securities with a rating lower than the top
four and in unrated securities. These securities are speculative and may involve
greater risks and have higher yields. They will only be purchased when the
investment manager considers them particularly attractive and their purchase to
be consistent with the objective of preserving capital. The USA Intermediate
Fund intends to invest at least 90% of its portfolio in debt obligations that
are either rated in the top four grades by Moody's or S&P at the time of
purchase or unrated, but in the opinion of Delaware Management Company, Inc.
(the "Manager"), similar in credit quality to obligations so rated. The fourth
grade is considered medium grade and may have speculative characteristics. The
USA Intermediate Fund may invest up to 10% of its assets in securities that are
rated lower than the top four grades or unrated, but in the Manager's opinion
similar in credit quality to obligations so rated. These securities are
speculative and may involve greater risks and have higher yields. Investing in
debt obligations which are not rated in the top four grades (or which have
credit qualities similar to such rated obligations) entails certain risks,
including the risk of loss of principal, which may be greater than the risks
involved in investment grade obligations, and which should be considered by
investors contemplating an investment in the Series. Such obligations are
sometimes sold by issuers whose earnings at the time of issuance are less than
the projected debt service on the obligations. The Manager will evaluate the
creditworthiness of the issuer and the issuer's ability to meet its obligations
to pay interest and repay principal.
The Insured Fund will normally invest at least 80% of its assets in debt
obligations which are insured by various insurance companies which undertake to
pay to a holder, when due, the interest or principal amount of an obligation if
the interest or principal is not paid by the issuer when due. See Municipal Bond
Insurance.
Each Series may also invest in "when-issued securities" for which the Fund
will maintain a segregated account 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 the transaction. During this period
between the date of
- 2
<PAGE> 86
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 3
commitment and the date of delivery, the Series does not accrue interest on the
investment, but the market value of the bonds could fluctuate. This can result
in a Series having unrealized appreciation or depreciation which could affect
the net asset value of its shares.
Each Series will invest its assets in securities of varying maturities,
without limitation, depending on market conditions. Typically, the remaining
maturity of municipal bonds purchased by the USA Fund and the Insured Fund will
range between five and 30 years. Each Series may also invest in short-term,
tax-free instruments such as tax-exempt commercial paper and general obligation,
revenue and project notes. The Series 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 neither Series intends to invest more
than 5% of its assets in these instruments. Short-term securities will be rated
in the top two grades by a nationally-recognized statistical rating agency. The
Manager will attempt to adjust the maturity structure of the portfolios to
provide a high level of tax-exempt income consistent with preservation of
capital.
Under abnormal conditions, each Series may invest in taxable instruments for
temporary defensive purposes. These would include obligations of the U.S.
Government, its agencies and instrumentalities, commercial paper, certificates
of deposit of domestic banks and other debt instruments. In connection with
defensive portfolio investments, the Fund may invest more than 20% of the assets
of the Insured Fund in uninsured securities which may be lower rated or unrated.
Such securities may involve increased risks or may generate taxable income, and
each Series will only exceed 20% of its assets in such investments for temporary
defensive purposes.
Notwithstanding the above limitations, no Series presently intends to invest
more than 5% of its assets in securities rated below investment grade.
The Fund is registered as an open-end management investment company and each
Series' portfolio of assets is nondiversified. Each Series has the ability to
invest as much as 50% of its assets in as few as two issuers provided that no
single issuer accounts for more than 25% of the portfolio. The remaining 50%
must be diversified so that no more than 5% is invested in the securities of a
single issuer. Because the Series may invest their assets in fewer issuers, the
value of Series shares may fluctuate more rapidly than if the Series were fully
diversified. In the event a Series invests more than 5% of its assets in a
single issuer, it would be affected more than a fully-diversified fund if that
issuer were to encounter difficulties in satisfying its financial obligations.
Except as set forth below, each Series may invest without limitation in U.S.
Government securities or government agency securities backed by the U.S.
Government or its agencies or instrumentalities. Percentage limitations outlined
above are determined at the time an investment is made.
Each Series 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, each Series 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. A Series
will not, however, invest more than 25% of its total assets in bonds issued for
companies in the same industry.
Set forth below are other more specific investment restrictions, some of which
limit the percentage of assets which may be invested in certain types of
securities. While the Fund is permitted, it normally does not borrow money or
invest in repurchase agreements. Up to 20% of each Series' assets may be
invested in securities whose interest is subject to federal income tax. From
time to time, a substantial portion of the assets of a Series may be invested in
municipal bonds insured as to payment of principal and interest by a single
insurance company, which is believed by the Fund to be consistent with its
policies and restrictions.
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 among classifications.
- 3
<PAGE> 87
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 4
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 obligation and rating of
the issue. The imposition of the Series' management fee, as well as other
operating expenses, will have the effect of reducing the yield to investors.
The Tax Reform Act of 1986 (the "Act") limits the amount of new "private
purpose" bonds that each state can issue and subjects interest income from these
bonds to the federal alternative minimum tax. "Private purpose" bonds are issues
whose proceeds are used to finance certain nongovernment activities, and could
include some types of industrial revenue bonds such as privately-owned sports
and convention facilities. The Act also makes the tax-exempt status of certain
bonds depend on the issuer's compliance with specific requirements after the
bonds are issued.
Each Series intends to seek to achieve a high level of tax-exempt income.
However, if a Series invests in newly-issued private purpose bonds, a portion of
that Series' distributions would be subject to the federal alternative minimum
tax.
USA INTERMEDIATE FUND
ADDITIONAL INVESTMENT STRATEGIES
In addition to the investment policies described above, the USA Intermediate
Fund seeks to achieve its objective by pursuing the following investment
strategies:
PORTFOLIO LOAN TRANSACTIONS--The USA Intermediate Fund may loan up to 25% of
its assets to qualified broker/dealers or institutional investors for their use
relating to short sales or other security transactions.
It is the understanding of the Manager that the staff of the Securities and
Exchange Commission permits portfolio lending by registered investment companies
if certain conditions are met. These conditions are as follows: 1) each
transaction must have 100% collateral in the form of cash, U.S. Treasury Bills
and Notes, or irrevocable letters of credit payable by banks acceptable to the
Series from the borrower; 2) this collateral must be valued daily and should the
market value of the loaned securities increase, the borrower must furnish
additional collateral to the Series; 3) the Series must be able to terminate the
loan after notice, at any time; 4) the Series must receive reasonable interest
on any loan, and any dividends, interest or other distributions on the lent
securities, and any increase in the market value of such securities; 5) the
Series may pay reasonable custodian fees in connection with the loan; and 6) the
voting rights on the lent securities may pass to the borrower; however, if the
directors of the Fund know that a material event will occur affecting an
investment loan, they must either terminate the loan in order to vote the proxy
or enter into an alternative arrangement with the borrower to enable the
directors to vote the proxy.
The major risk to which the Series would be exposed on a loan transaction is
the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Series will only enter into loan arrangements
after a review of all pertinent facts by the Manager, under the supervision of
the Board of Directors, including the creditworthiness of the borrowing broker,
dealer or institution and then only if the consideration to be received from
such loans would justify the risk. Creditworthiness will be monitored on an
ongoing basis by the Manager.
REPURCHASE AGREEMENTS--These are instruments under which securities are
purchased from a bank or securities dealer with an agreement by the seller to
repurchase the securities. Under a repurchase agreement, the purchaser acquires
ownership of the security but the seller agrees, at the time of sale, to
repurchase it at a mutually agreed-upon time and price. The USA Intermediate
Fund will take custody of the collateral under repurchase agreements. Repurchase
agreements may be construed to be collateralized loans by the purchaser to the
seller secured by the securities transferred. The resale price is in excess of
the purchase price and reflects an agreed-upon market rate unrelated to the
coupon rate or maturity of the purchased security. Such transactions afford an
opportunity for the Series to invest temporarily available cash on a short-term
basis. The Series' risk is limited to the seller's ability to buy the security
back at the agreed-upon sum at the agreed-upon time, since the repurchase
agreement is secured by the underlying obligation. Should such an issuer
default, the Manager believes that, barring extraordinary circumstances, the
Series will be entitled to sell the underlying securities or otherwise receive
adequate protection for its interest in such securities, although there could be
a delay in recovery. The Series considers the creditworthiness of the bank or
dealer from whom it purchases repurchase agreements. The Series will monitor
such transactions to assure that the value of the underlying securities subject
to repurchase agreements is at least equal to the repurchase price. The
underlying securities will be limited to those described above.
The ratings of S&P, Moody's and other rating services represent their opinion
as to the quality of the money market instruments which they undertake to rate.
It should be emphasized, however, that ratings are general and are not absolute
standards of quality. These ratings are the initial criteria for selection of
portfolio investments, but the Series will further evaluate these securities.
See Appendix A--Description of Ratings.
FUTURES--The USA Intermediate Fund may enter into contracts for the purchase
or sale for future delivery of securities. 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 the Series
enters into a futures transaction, it must deliver to the futures commission
merchant selected by the Series an amount referred to as "initial margin." This
amount is maintained by the futures commission merchant in an account at the
Series' Custodian Bank. Thereafter, a "variation margin" may be paid by the
Series to, or drawn by the Series 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.
In addition, when the Series engages in futures transactions, to the extent
required by the SEC, it will
- 4
<PAGE> 88
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 5
maintain with its custodian, 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 Series with
respect to such futures contracts.
The Series 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,
the Series 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 the Series. If interest rates did increase, the
value of the debt securities in the portfolio would decline, but the value of
the futures contracts to the Series would increase at approximately the same
rate, thereby keeping the net asset value of the Series 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,
the Series 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 the Series could then buy
debt securities on the cash market.
With respect to options on futures contracts, when the Series 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 the Series 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, the Series will retain the full amount of the option
premium which provides a partial hedge against any decline that may have
occurred in the Series' 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,
the Series will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities which the Series
intends to purchase.
If a put or call option the Series has written is exercised, the Series 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, the
Series' 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, the Series will purchase a
put option on a futures contract to hedge the Series' portfolio against the risk
of rising interest rates.
To the extent that interest rates move in an unexpected direction, the Series
may not achieve the anticipated benefits of futures contracts or options on
futures contracts or may realize a loss. For example, if the Series 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, the Series 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 the Series 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. The
Series may be required to sell securities at a time when it may be
disadvantageous to do so.
Further, with respect to options on futures contracts, the Series 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 the USA Intermediate
Fund will purchase in accordance with procedures prescribed by its Board of
Directors to minimize credit risks. Any VRDN
- 5
<PAGE> 89
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 6
must be of high quality as determined by the Manager and subject to review by
the Board of Directors, 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 Series 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 Fund's Board of Directors. If the quality of any
VRDN falls below the quality level required by the Board of Directors and any
applicable rules adopted by the Securities and Exchange Commission, the Series
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 the Fund and its
shareholders.
MUNICIPAL LEASES--As stated in the Series' Prospectus, a portion of the USA
Intermediate Fund's assets may be invested in municipal lease obligations,
primarily through certificates of participation ("COPs"). COPs function much
like installment purchase agreements and are widely used by state and local
governments to finance the purchase of property. The lease format is generally
not subject to constitutional limitations on the issuance of state debt, and
COPs enable a governmental issuer to increase government liabilities beyond
constitutional debt limits. A principal distinguishing feature separating COPs
from municipal debt is the lease, which contains a "nonappropriation" or
"abatement" clause. This clause provides that, although the municipality will
use its best efforts to make lease payments, it may terminate the lease without
penalty if its appropriating body does not allocate the necessary funds. The
Series will invest only in COPs rated within the four highest rating categories
of Moody's, S&P or Fitch Investors Service, Inc., or in unrated COPs believed to
be of comparable quality.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions and fundamental policies which
are applied to each Series except as noted. Fundamental objectives and
restrictions cannot be changed without approval by the holders of a majority of
the outstanding voting securities of a Series, which is the lesser of more than
50% of the outstanding voting securities, or 67% of the voting securities
present at a shareholder meeting if 50% or more of the voting securities are
present in person or represented by proxy of a Series which proposes to change
its fundamental policy. Investment restrictions 4, 6 and 8 listed below apply
only to USA Fund and Insured Fund.
A Series may not under any circumstances:
1. Invest more than 20% of its assets in securities whose interest is subject
to federal income tax.
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 a
Series' assets, asset coverage of at least 300% is required. In the event that
such asset coverage shall at any time fall below 300%, the Series shall, within
three days thereafter (not including Sunday or holidays) or such longer period
as the Securities and Exchange Commission may prescribe by rules and
regulations, reduce the amount of its borrowings to such an extent that the
asset coverage of such borrowings shall be at least 300%. A Series will not
issue senior securities as defined in the Investment Company Act of 1940 (the
"1940 Act"), except for notes to banks. (The issuance of three series of shares
is not deemed to be the issuance of senior securities so long as such series
comply with the appropriate provisions of the 1940 Act.) Investment securities
will not normally be purchased while there is an outstanding borrowing.
3. Sell securities short.
4. Write or purchase put or call options.
5. Underwrite the securities of other issuers, except that a Series 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 a Series' net assets in illiquid assets.
6. Purchase or sell commodities or commodity contracts.
7. Purchase or sell real estate, but this shall not prevent a Series 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.
9. With respect to 50% of the value of its assets, 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 purpose of this
limitation, the Series will regard each state and political subdivision, agency
or instrumentality of a state and each multistate agency of which a 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 are
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 a Series may invest more than 25% of the value of its
total assets in municipal bonds and in obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
The Fund has also adopted an additional restriction applicable only to the
Insured Fund. The Insured Fund will not:
13. Invest more than 20% of its assets in securities (other than U.S.
Government securities, securities of agencies of
- 6
<PAGE> 90
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 7
the U.S. Government and securities backed by the U.S. Government or its agencies
or instrumentalities) which are not covered by insurance guaranteeing the
payment, when due, of interest on and the principal of such securities, except
for defensive purposes.
The Fund also has determined that, from time to time, more than 10% of a
Series' assets may be invested in municipal bonds insured as to 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 percentage resulting from a change in value of net
assets will not result in a violation of the restrictions.
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.
The Series 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 Series' 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 Directors and the
Manager will continue to monitor the liquidity of that security to ensure that
the Series have no more than 10% of their net assets invested in illiquid
securities.
MUNICIPAL BOND INSURANCE
The practice has developed among municipal issuers of having their issues
insured by various companies. At the present time, the Municipal Bond Insurance
Association ("MBIA"), AMBAC Indemnity Corporation ("AMBAC Indemnity") and
Financial Guaranty Insurance Company ("FGIC") provide a substantial portion of
such insurance. Accordingly, at different times, a substantial portion of the
Series' portfolio may consist of municipal bonds of various issuers insured as
to payment of principal and interest when due by a single insurance company. It
is expected that other insurance companies or associations will enter this
field, and a substantial portion of municipal bond issues available for
investment by companies such as the Fund will be insured. In the event of a
default, the insurer is required to make payments of interest and principal when
due to the bondholders. While the insurance may affect the securities' ratings,
the Manager does not look to the creditworthiness of a private insurer. Instead,
the Manager reviews the creditworthiness of the actual issuer and its ability to
pay interest and principal. Insurance on municipal bonds that are purchased by
the Series will generally have been obtained by the bond issuer and attached to
the bonds for their lifetime, although the Series may obtain insurance on bonds
while they are held by the Series.
At the present time, obligations which are subject to such insurance generally
receive a high rating from S&P or Moody's, based upon a combination of the
issuer's creditworthiness and the insurer's obligation under the insurance
policy. While such insurance reduces the risk that principal or interest will
not be paid when due, it is not a protection against market risks arising from
other factors, such as changes in prevailing interest rates. 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 the Series' fundamental
investment policies and restrictions.
Similar insurance is available to the Fund for uninsured obligations, and the
Fund may acquire such obligations and purchase such insurance directly, but only
if that would result in a comparable benefit to the Fund from such a security.
As the bond insurance industry matures, the ownership and capital structures
of the insurers have evolved. Each of the municipal bond insurers has unique
ownership structures, some of which underwent significant changes in 1992.
MBIA moved to a greater percentage of public ownership during 1992 with the
sale of additional equity. MBIA Inc. is currently 88.7% publicly owned, while
the remaining ownership is distributed between Aetna Life & Casualty Company and
Credit Local de France. As of December 31, 1994, MBIA Inc. had qualified
statutory capital of $1,731,026,000; up 12.38% from December 31, 1993. For the
three months ended March 31, 1995, qualified statutory capital amounted to
$1,781,459,000 (unaudited).
FGIC, until 1993 the only bond insurer with one institutional owner,
experienced a slight shift in ownership. In early January 1993, GE Capital, the
parent of FGIC Corp., sold a 1% interest of the company to Sumitomo Marine and
Fire Insurance Company Limited. The sale was undertaken primarily to facilitate
joining business ventures in the future. As of December 31, 1994, FGIC's
qualified statutory capital was approximately $1,221,807,000; up 15.73% from
December 31, 1993. For the three months ended March 31, 1995, qualified
statutory capital amounted to $1,297,977,000 (unaudited).
AMBAC became the only insurer with 100% public ownership, when Citicorp
Financial Guaranty Holdings, Inc. (CFGH) sold its remaining 49.7% equity
interest in AMBAC Inc. during February 1992. As of December 31, 1994, AMBAC's
qualified statutory capital was approximately $1,218,204,000; up 7.93% from
December 31, 1993. For the three months ended March 31, 1995, qualified
statutory capital amounted to $1,237,000,000 (unaudited).
- 7
<PAGE> 91
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 8
PERFORMANCE INFORMATION*
From time to time, each Series may state total return for any Class in
advertisements and other types of literature. Any statements 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, if applicable) periods. The
Fund may also advertise aggregate and average total return information for each
Class over additional periods of time.
The average annual total rate of return for a Class is based on a hypothetical
$1,000 investment that includes capital appreciation and depreciation during the
stated periods. The following formula will be used for the actual computations:
n
P(1+T) = ERV
<TABLE>
<S> <C> <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>
*In the case of Class A Shares, the Limited CDSC applicable to only certain
redemptions of those shares will not be deducted from any computation of total
return. See the Prospectus for the Fund Classes for a description of the
Limited CDSC and the limited instances in which it applies. All references to
contingent deferred sales charges or a CDSC in this Performance Information
Section will apply to Class B Shares or Class C Shares.
Aggregate or cumulative total return is calculated in a similar manner, except
that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made 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, the Series may present total return information that does
not reflect the deduction of the maximum front-end sales charge or any
applicable CDSC.
The performance, as shown below, is the average annual total return quotations
of the Class A Shares of the USA Fund and Insured Fund for the one-, three-,
five- and ten-year periods ended August 31, 1995 and for the life of these
Classes, and for the one-year period ended August 31, 1995 and for the life of
the Class A Shares of the USA Intermediate Fund, computed as described above.
The average annual total return for Class A Shares at offer reflects the maximum
front-end sales charges paid on the purchase of shares. The average annual total
return for Class A Shares at net asset value (NAV) does not reflect the payment
of any front-end sales charge. The average annual total return is also shown
below for Class B Shares of each Series for the one-year period ended August 31,
1995 and for the life of these Classes. The average annual return for Class B
Shares including deferred sales charge reflects the deduction of the applicable
CDSC that would be paid if the shares were redeemed at August 31, 1995. The
average annual total return for Class B Shares excluding deferred sales charge
assumes the shares were not redeemed at August 31, 1995 and therefore does not
reflect the deduction of a CDSC. Securities prices fluctuated during the periods
covered and past results should not be considered as representative of future
performance.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
USA FUND--CLASS A SHARES
CLASS A SHARES CLASS A SHARES
(AT OFFER) (AT NAV)
<S> <C> <C>
1 year ended 8/31/95 1.68% 6.74%
3 years ended 8/31/95 4.85% 6.55%
5 years ended 8/31/95 7.61% 8.65%
10 years ended 8/31/95 8.88% 9.41%
Period 1/11/84(1) through
8/31/95 9.69% 10.16%
</TABLE>
<TABLE>
<CAPTION>
USA FUND--CLASS B SHARES
CLASS B SHARES CLASS B SHARES
(INCLUDING (EXCLUDING
DEFERRED DEFERRED
SALES CHARGE) SALES CHARGE)
<S> <C> <C>
1 year ended 8/31/95 1.88% 5.88%
Period 5/2/94(1) through 8/31/95 2.55% 5.51%
</TABLE>
<TABLE>
<CAPTION>
INSURED FUND--CLASS A SHARES
CLASS A SHARES CLASS A SHARES
(AT OFFER) (AT NAV)
<S> <C> <C>
1 year ended 8/31/95 1.28% 6.33%
3 years ended 8/31/95 3.70% 5.38%
5 years ended 8/31/95 6.45% 7.49%
10 years ended 8/31/95 7.89% 8.41%
Period 3/25/85(1) through
8/31/95 7.86% 8.37%
</TABLE>
<TABLE>
<CAPTION>
INSURED FUND--CLASS B SHARES
CLASS B SHARES CLASS B SHARES
(INCLUDING (EXCLUDING
DEFERRED DEFERRED
SALES CHARGE) SALES CHARGE)
<S> <C> <C>
1 year ended 8/31/95 1.47% 5.47%
Period 5/2/94(1) through 8/31/95 2.60% 5.56%
</TABLE>
<TABLE>
<CAPTION>
USA INTERMEDIATE FUND--
CLASS A SHARES(2)
CLASS A SHARES CLASS A SHARES
(AT OFFER) (AT NAV)
<S> <C> <C>
1 year ended 8/31/95 3.23% 6.43%
Period 1/7/93(1) through 8/31/95 5.64% 6.87%
</TABLE>
- 8
<PAGE> 92
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 9
<TABLE>
<CAPTION>
USA INTERMEDIATE FUND--
CLASS B SHARES(2)
CLASS B SHARES CLASS B SHARES
(INCLUDING (EXCLUDING
DEFERRED DEFERRED
SALES CHARGE) SALES CHARGE)
<S> <C> <C>
1 year ended 8/31/95 3.53% 5.53%
Period 5/2/94(1) through 8/31/95 4.44% 5.92%
</TABLE>
(1)Date of initial public offering.
(2)The Manager elected to waive voluntarily the portion of its annual
compensation under its Investment Management Agreement with the USA
Intermediate Fund to limit operating expenses of the Series to .25%
(including 12b-1 expenses). That waiver has been modified effective May 2,
1994 to limit operating expenses to .10% exclusive of 12b-1 expenses, from
the commencement of the public offering of the Series through June 30, 1996.
In the absence of such voluntary waiver, performance would have been
affected negatively.
Information regarding the performance of Class C Shares is not shown because
such shares were not offered to the public prior to the date of this Part B.
As stated in the Series' Prospectuses, each Series may also quote their
respective Classes' current yield 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:
<TABLE>
<S> <C>
a -- b
------ 6
YIELD = 2[ (cd + 1) - 1]
</TABLE>
<TABLE>
<S> <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>
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 the Class A Shares of the USA Fund, the Insured Fund and the USA
Intermediate Fund as of August 31, 1995 using this formula were 4.99%, 4.64% and
4.78%, respectively. The yields of the Class B Shares of the USA Fund, the
Insured Fund and the USA Intermediate Fund as of August 31, 1995 were 4.41%,
4.05% and 4.05%, respectively. The yields of each Class of the USA Intermediate
Fund reflect the voluntary fee waiver undertaken by the Manager described above.
Yield calculations assume the maximum front-end sales charge, if any, and do not
reflect the deduction of any contingent deferred sales charge. Actual yield on
Class A Shares may be affected by variations in front-end sales charges on
investments. Information regarding the performance of Class C Shares is not
shown because such shares were not offered to the public prior to the date of
this Part B.
The Fund may also publish a tax-equivalent yield for 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 the Class' yield. For the
30-day period ended August 31, 1995, the tax-equivalent yields of the Class A
Shares and the Class B Shares of the USA Fund were 7.23% and 6.39%,
respectively, of the Class A Shares and the Class B Shares of the Insured Fund
were 6.72% and 5.87%, respectively, and of the Class A Shares and Class B Shares
of the USA Intermediate Fund were 6.93% and 5.87%, respectively, assuming a
federal income tax rate of 31%. These yields were computed by dividing that
portion of a Class' yield which is tax-exempt by one minus a stated income tax
rate (in this case, a federal income tax rate of 31%) and adding the product to
that portion, if any, of the yield that is not tax-exempt. In addition, a Series
may advertise a tax-equivalent yield assuming other income tax rates, when
applicable.
Investors should note that the income earned and dividends paid by the Series
will vary with the fluctuation of interest rates and performance of the
portfolio. The net asset value of the Fund may change. Unlike money market
funds, the Series invests in longer-term securities that fluctuate in value and
do so in a manner inversely correlated with changing interest rates. The Series'
net asset values will tend to rise when interest rates fall. Conversely, the
Series' net asset values will tend to fall as interest rates rise. Normally,
fluctuations in interest rates have a greater effect on the prices of
longer-term bonds. The value of the securities held in the Series will vary from
day to day and investors should consider the volatility of the Series' net asset
values as well as the yield before making a decision to invest.
Since the Series invest for the long term, their average effective weighted
average portfolio maturity at the end of the fiscal year was 22 years for the
USA Fund, 24 years for the Insured Fund and 7 years for the USA Intermediate
Fund.
See Appendix B for additional yield information.
From time to time, a Series may also quote for each Class an actual total
return and/or yield performance in advertising and other types of literature
compared to indices or averages of alternative financial products available to
prospective investors. For example, the performance comparisons may include the
average return of various bank instruments, some of which may carry certain
return guarantees offered by leading banks and thrifts as monitored by Bank Rate
Monitor.
Comparative information on the Consumer Price Index may also be included. The
Consumer Price Index, as prepared by the U.S. Bureau of Labor Statistics, is the
most commonly used measure of inflation. It indicates the cost fluctuations of a
representative group of consumer goods. It does not represent a return from an
investment.
A Series may also promote a Class' total return and/or yield performance and
use comparative performance information computed by and available from certain
industry and
- 9
<PAGE> 93
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 10
general market research and publications, such as Lipper Analytical Services,
Inc.
Statistical and performance information and various indices compiled and
maintained by organizations such as the following may also be used in preparing
exhibits comparing certain industry trends and competitive mutual fund
performance to comparable Fund activity and performance and in illustrating
general financial planning principles. From time to time, certain mutual fund
performance ranking information, calculated and provided by these organizations,
may also be used in the promotion of sales of the Series. Any indices used are
not managed for any investment goal.
CDA Technologies, Inc., Lipper Analytical Services, Inc. and Morningstar, Inc.
are performance evaluation services that maintain statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds.
Ibbotson Associates, Inc. is a consulting firm that provides a variety of
historical data including total return, capital appreciation and income on the
stock market as well as other investment asset classes, and inflation. With
their permission, this information will be used primarily for comparative
purposes and to illustrate general financial planning principles.
Interactive Data Corporation is a statistical access service that maintains a
database of various international industry indicators, such as historical and
current price/earning information, individual equity and fixed income price
and return information.
Compustat Industrial Databases, a service of Standard & Poor's, may also be
used in preparing performance and historical stock and bond market exhibits.
This firm maintains fundamental databases that provide financial, statistical
and market information covering more than 7,000 industrial and non-industrial
companies.
Salomon Brothers and Lehman Brothers are statistical research firms that
maintain databases of international market, bond market, corporate and
government-issued securities of various maturities. This information, as well
as unmanaged indices compiled and maintained by these firms, will be used in
preparing comparative illustrations.
Current interest rate and yield information on government debt obligations of
various durations, as reported weekly by the Federal Reserve (Bulletin H.15),
may also be used. Also, current rate information on municipal debt obligations
of various durations, as reported daily by the Bond Buyer, may also be used. The
Bond Buyer is published daily and is an industry-accepted source for current
municipal bond market information.
The total return performance for 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 contingent deferred sales charge, if any, paid on the
illustrated investment amount, annualized. The results will not reflect any
income taxes, if applicable, payable by shareholders on the reinvested
distributions included in the calculations.
The following table, for purposes of illustration only, reflects the
cumulative total return performance of the Class A Shares of the USA Fund and
Insured Fund for the three-, six- and nine-month periods ended August 31, 1995,
for the one-, three-, five- and ten-year periods ended August 31, 1995 and for
the life of these Classes, and for the three-, six- and nine-month periods ended
August 31, 1995, the one-year period ended August 31, 1995 and for the life of
the Class A Shares and Class B Shares of the USA Intermediate Fund and the Class
B Shares of the USA Fund and Insured Fund. For this purpose, the calculations
assume the reinvestment of any realized securities profits distributions and
income dividends paid during the period. Comparative information on the Consumer
Price Index is also included. Information regarding the performance of Class C
Shares is not shown because such shares were not offered to the public prior to
the date of this Part B.
The performance of Class A Shares, as shown below, reflects maximum front-end
sales charges. The performance of Class B Shares is calculated both with the
applicable CDSC included and excluded. None of the calculations reflect any
income taxes payable by shareholders on the reinvested distributions included in
the calculations. The performance of Class B Shares is calculated both with the
applicable CDSC included and excluded. The net asset values fluctuate so shares,
when redeemed, may be worth more or less than the original investment, and past
performance should not be considered as representative of future results.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
USA FUND--CLASS A SHARES
CLASS A SHARES CONSUMER
(AT OFFER) PRICE INDEX(2)
<S> <C> <C>
3 months ended 8/31/95 (3.64%) 0.46%
6 months ended 8/31/95 (0.32%) 1.33%
9 months ended 8/31/95 5.13% 2.14%
1 year ended 8/31/95 1.68% 2.62%
3 years ended 8/31/95 15.26% 8.52%
5 years ended 8/31/95 44.28% 16.19%
10 years ended 8/31/95 134.14% 41.59%
Period 1/11/84(1)
through 8/31/95 193.51% 45.18%
</TABLE>
<TABLE>
<CAPTION>
USA FUND--CLASS B SHARES
CLASS B SHARES CLASS B SHARES
(INCLUDING (EXCLUDING CONSUMER
DEFERRED DEFERRED PRICE
SALES CHARGE) SALES CHARGE) INDEX(2)
<S> <C> <C> <C>
3 months ended 8/31/95 (3.06%) 0.92% 0.46%
6 months ended 8/31/95 0.20% 4.20% 1.33%
9 months ended 8/31/95 5.69% 9.69% 2.14%
1 year ended 8/31/95 1.88% 5.88% 2.62%
Period 5/2/94(1)
through 8/31/95 3.42% 7.42% 3.73%
</TABLE>
- 10
<PAGE> 94
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 11
<TABLE>
<CAPTION>
INSURED FUND--CLASS A SHARES
CLASS A SHARES CONSUMER
(AT OFFER) PRICE INDEX(2)
<S> <C> <C>
3 months ended 8/31/95 (3.79%) 0.46%
6 months ended 8/31/95 (0.73%) 1.33%
9 months ended 8/31/95 4.77% 2.14%
1 year ended 8/31/95 1.28% 2.62%
3 years ended 8/31/95 11.51% 8.52%
5 years ended 8/31/95 36.66% 16.19%
10 years ended 8/31/95 113.62% 41.59%
Period 3/25/85(1)
through 8/31/95 120.34% 43.67%
</TABLE>
<TABLE>
<CAPTION>
INSURED FUND--CLASS B SHARES
CLASS B SHARES CLASS B SHARES
(INCLUDING (EXCLUDING CONSUMER
DEFERRED DEFERRED PRICE
SALES CHARGE) SALES CHARGE) INDEX(2)
<S> <C> <C> <C>
3 months ended 8/31/95 (3.21%) 0.77% 0.46%
6 months ended 8/31/95 (0.25%) 3.75% 1.33%
9 months ended 8/31/95 5.29% 9.29% 2.14%
1 year ended 8/31/95 1.47% 5.47% 2.62%
Period 5/2/94(1)
through 8/31/95 3.49% 7.49% 3.73%
</TABLE>
<TABLE>
<CAPTION>
USA INTERMEDIATE FUND--CLASS A SHARES(3)
CLASS A SHARES CONSUMER
(AT OFFER) PRICE INDEX(2)
<S> <C> <C>
3 months ended 8/31/95 (1.03%) 0.46%
6 months ended 8/31/95 1.76% 1.33%
9 months ended 8/31/95 6.90% 2.14%
1 year ended 8/31/95 3.23% 2.62%
Period 1/7/93(1)
to 8/31/95 15.65% 7.75%
</TABLE>
<TABLE>
<CAPTION>
USA INTERMEDIATE FUND--CLASS B SHARES(3)
CLASS B SHARES CLASS B SHARES
(INCLUDING (EXCLUDING CONSUMER
DEFERRED DEFERRED PRICE
SALES CHARGE) SALES CHARGE) INDEX(2)
<S> <C> <C> <C>
3 months ended 8/31/95 (0.18%) 1.82% 0.46%
6 months ended 8/31/95 2.51% 4.51% 1.33%
9 months ended 8/31/95 7.46% 9.46% 2.14%
1 year ended 8/31/95 3.53% 5.53% 2.62%
Period 5/2/94(1)
through 8/31/95 5.97% 7.97% 3.73%
</TABLE>
(1)Date of initial public offering.
(2)Source--U.S. Department of Labor.
(3)The Manager elected to waive voluntarily the portion of its annual
compensation under its Investment Management Agreement with the USA
Intermediate Fund to limit operating expenses of the Series to .25%
(including 12b-1 expenses). That waiver was modified effective May 2, 1994
to limit operating expenses to .10%, exclusive of 12b-1 expenses, from the
commencement of the public offering of the Series through June 30, 1996. In
the absence of such voluntary waiver, performance would have been affected
negatively.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund and other mutual funds in the Delaware
Group, will provide general information about investment alternatives and
scenarios that will allow investors to assess their personal goals. This
information will include general material about investing as well as materials
reinforcing various industry-accepted principles of prudent and responsible
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 Fund's, and other Delaware Group funds',
investment disciplines employed in seeking their objectives. The Distributor may
also from time to time cite general or specific information about the
institutional clients of the Manager, including the number of such clients
serviced by the Manager.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Series shares,
your investment is given yet another opportunity to grow. It's called the Power
of Compounding and the following chart illustrates just how powerful it can be.
COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a $10,000 investment
compounded monthly tax-free for 10 years:
<TABLE>
<CAPTION>
4% Rate of Return 6% Rate of Return 8% rate of Return
----------------- ----------------- -----------------
<S> <C> <C> <C>
12-'85 $10,407 $10,617 $10,830
12-'86 $10,831 $11,272 $11,729
12-'87 $11,273 $11,967 $12,702
12-'88 $11,732 $12,705 $13,757
12-'89 $12,210 $13,488 $14,898
12-'90 $12,707 $14,320 $16,135
12-'91 $13,225 $15,203 $17,474
12-'92 $13,764 $16,141 $18,924
12-'93 $14,325 $17,137 $20,495
12-'94 $14,908 $18,194 $22,196
</TABLE>
These figures are calculated assuming a fixed constant investment return and
assume no fluctuation in the value of principal. These figures, which do not
reflect payment of any sales charges, are not intended to be a projection of
investment results and do not reflect the actual performance results of any of
the Classes.
- 11
<PAGE> 95
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 12
TRADING PRACTICES AND BROKERAGE
Banks, brokers or dealers are selected to execute transactions on behalf of
the Series 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 banks, brokers or dealers execute transactions
at best price and execution. Best price and execution refers to many factors,
including the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. In nearly all instances, trades are made on a
net basis where a Series either buys the securities directly from the dealer or
sells them to the dealer. In these instances, there is no direct commission
charged but there is a spread (the difference between the buy and sell price)
which is the equivalent of a commission. When a commission is paid, the Fund
pays reasonably competitive brokerage commission rates based upon the
professional knowledge of its trading department as to rates paid and charged
for similar transactions throughout the securities industry. In some instances,
a Series pays a minimal share transaction cost when the transaction presents no
difficulty.
During the fiscal years ended August 31, 1993, 1994 and 1995, no brokerage
commissions were paid by the Series.
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.
During the fiscal year ended August 31, 1995, there were no portfolio
transactions of the Fund resulting in brokerage commissions directed to brokers
for brokerage and research services.
As provided in the Securities Exchange Act of 1934 and the Investment
Management Agreement for each Series, higher commissions are permitted to be
paid to broker/ dealers who provide brokerage and research services than to
broker/dealers who do not provide such services if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the 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 the Fund and to other funds in the Delaware
Group. Subject to best price and execution, commissions allocated to brokers
providing such pricing services may or may not be generated by the funds
receiving the pricing service.
The Manager may place a combined order for two or more accounts or funds
engaged in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in a
manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and the Board of
Directors that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Manager may place orders with broker/dealers that have agreed to
defray certain Series expenses such as custodian fees, and may, at the request
of the Distributor, give consideration to sales of shares of the Series as a
factor in the selection of brokers and dealers to execute Series portfolio
transactions.
PORTFOLIO TURNOVER
The Fund anticipates that each Series' portfolio turnover rate will generally
be less than 100%. However, the Fund will not attempt to achieve or be limited
to a predetermined rate of portfolio turnover for a Series, such a turnover
always being incidental to transactions undertaken
- 12
<PAGE> 96
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 13
with a view to achieving each Series' investment objective in relation to
anticipated movements in the general level of interest rates. In investing for
liberal current income, a Series may hold securities for any period of time,
subject to complying with the Internal Revenue Code and the 1940 Act, when
changes in circumstances or conditions make such a move desirable in light of
the investment objective. To that extent, the Fund may realize gains or losses.
See Taxes. The turnover rate also may be affected by cash requirements for
redemptions and repurchases of Series' shares.
The portfolio turnover rate of each Series 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 Series during the particular fiscal year, exclusive of securities whose
maturities at the time of acquisition are one year or less.
For the fiscal years ended August 31, 1994 and 1995, the portfolio turnover
rates for the USA Fund were 10% and 27%, respectively, for the Insured Fund were
56% and 68%, respectively, and for the USA Intermediate Fund were 81% and 63%.
PURCHASING SHARES
The Distributor serves as the national distributor for the Series' shares and
has agreed to use its best efforts to sell shares of each Series of the Fund.
See the Prospectuses for additional information on how to invest. Shares of each
Series are offered on a continuous basis and may be purchased through authorized
investment dealers or directly by contacting the Fund or its agent.
The minimum initial investment generally is $1,000 for each Class of each
Series. Subsequent purchases generally must be at least $100. The initial and
subsequent investment minimums for Class A Shares will be waived for purchases
by officers, directors and employees of any Delaware Group fund, the Manager or
any of the Manager's affiliates if the purchases are made pursuant to a payroll
deduction program. Accounts opened under the Delaware Group Asset Planner
service are subject to a minimum initial investment of $2,000 per Asset Planner
Strategy selected.
There is a maximum purchase limitation of $250,000 on each purchase of Class B
Shares; for Class C Shares, each purchase must be in an amount that is less than
$1,000,000. The Fund will reject any order for purchase of more than $250,000 of
Class B Shares and $1,000,000 or more for 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 of Class A Shares, which are
subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and generally are not subject to a CDSC.
Selling dealers have the responsibility of transmitting orders promptly. The
Fund reserves the right to reject any order for the purchase of a Series' shares
if in the opinion of management such rejection is in the Series' best interest.
The NASD has adopted Rules of Fair Practice relating to investment company
sales charges. The Fund and the Distributor intend to operate in compliance with
these rules.
Class A Shares of the USA Fund and the Insured Fund are purchased at the
offering price which reflects a maximum front-end sales charge of 4.75%; lower
sales charges apply for larger purchases. Class A Shares of the USA Intermediate
Fund are purchased at the offering price which reflects a maximum front-end
sales charge of 3.00%. See the table below. Class A Shares are also subject to
annual 12b-1 Plan expenses. See Determining Offering Price and Net Asset Value
and Plans Under Rule 12b-1.
Class B Shares of the USA Fund and the Insured Fund are purchased at net asset
value and are subject to a CDSC of: (i) 4% if shares are redeemed within two
years of purchase; (ii) 3% if shares are redeemed during the third or fourth
year following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; and (iv) 1% if shares are redeemed during the sixth year
following purchase. Class B Shares of the USA Fund and Insured Fund are also
subject to annual 12b-1 Plan expenses which are higher than those to which Class
A Shares are subject and are assessed against Class B Shares for approximately
eight years after purchase. Class B Shares of the USA Intermediate Fund are
purchased at net asset value and are subject to a CDSC of: (i) 2% if shares are
redeemed within two years of purchase; and (ii) 1% if shares are redeemed during
the third year following purchase. Such shares are also subject to annual 12b-1
Plan expenses which are higher than those to which Class A Shares are subject
and are assessed against the Class B Shares for approximately five years after
purchase.
Class C Shares of each Series are purchased at net asset value and are subject
to a CDSC of 1% if shares are redeemed within twelve months following purchase.
Class C Shares are also subject to annual 12b-1 Plan expenses for the life of
the investment which are equal to those to which Class B Shares are subject.
See Automatic Conversion of Class B Shares under Buying Shares in the Classes'
Prospectuses and Determining Offering Price and Net Asset Value and Plans Under
Rule 12b-1 in this Part B.
Certificates representing shares purchased are not
ordinarily issued unless a shareholder submits a specific request with respect
to Class A Shares. Certificates are not issued in the case of Class B Shares or
Class C Shares. However, purchases not involving the issuance of certificates
are confirmed to the investor and credited to the shareholder's account on the
books maintained by Delaware Service Company, Inc. (the "Transfer Agent"). The
investor will have the same rights of ownership with respect to such shares as
if certificates had been issued. An investor that is permitted to obtain a
certificate may receive a certificate representing shares purchased by sending a
letter to the Transfer Agent requesting the certificate. No charge is made for
any certificate issued. Investors who hold certificates representing any of
their shares may only redeem those shares by written request. The investor's
certificate(s) must accompany such request.
- 13
<PAGE> 97
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 14
ALTERNATIVE PURCHASE ARRANGEMENTS
The alternative purchase arrangements of Class A, Class B and Class C Shares
permit investors to choose the method of purchasing shares that is most suitable
for his or her needs given the amount of their purchase, the length of time they
expect to hold their shares and other relevant circumstances. Investors should
determine whether, given their particular circumstances, it is more advantageous
to purchase Class A Shares and incur a front-end sales charge and annual 12b-1
Plan expenses of up to a maximum of .30% of the average daily net assets of
Class A Shares, or to purchase either Class B Shares or Class C Shares and have
the entire initial purchase amount invested in the Series with the investment
thereafter subject to a CDSC and annual 12b-1 expenses. Class B Shares of the
USA Fund and Insured Fund are subject to a CDSC if the shares are redeemed
within six years of purchase. Class B Shares of the USA Intermediate Fund are
subject to a CDSC if the shares are redeemed within three years of purchase.
Class C Shares of each Series are subject to a CDSC if the shares are redeemed
within twelve months of purchase. Class B and Class C Shares are each subject to
annual 12b-1 Plan expenses of 1% (.25% of which are service fees to be paid by
the Fund to the Distributor, dealers and others, for providing personal service
and/or maintaining shareholder accounts) of average daily net assets of the
respective Class. Class B Shares of the USA Fund and Insured Fund will
automatically convert to Class A Shares of the respective Series at the end of
approximately eight years after purchase and Class B Shares of the USA
Intermediate Fund will automatically convert to the Class A Shares of this
Series at the end of approximately five years after purchase and, thereafter, be
subject to annual 12b-1 Plan expenses of up to a maximum of .30% of average
daily net assets of such shares. Unlike Class B Shares, Class C Shares do not
convert to another class.
CLASS A SHARES
Purchases of $100,000 or more of Class A Shares at the offering price carry
reduced front-end sales charges as shown in the accompanying table, and may
include a series of purchases over a 13-month period under a Letter of Intention
signed by the purchaser. See Special Purchase Features--Class A Shares, below
for more information on ways in which investors can avail themselves of reduced
front-end sales charges and other purchase features.
Class A Shares
USA Fund and Insured Fund
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Front-End Sales Dealer's
Charge as % of Concession***
Offering Amount as % of
Amount of Purchase Price Invested** Offering Price
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
USA Insured
Fund Fund
Less than $100,000 4.75% 4.97% 4.98% 4.00%
$100,000 but under $250,000 3.75 3.89 3.89 3.00
$250,000 but under $500,000 2.50 2.57 2.53 2.00
$500,000 but under $1,000,000* 2.00 2.07 2.08 1.60
</TABLE>
Class A Shares
USA Intermediate Fund
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Front-End Sales Dealer's
Charge as % of Concession***
Offering Amount as % of
Amount of Purchase Price Invested** Offering Price
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 3.00% 3.08% 2.50%
$100,000 but under $250,000 2.50 2.59 2.00
$250,000 but under $500,000 2.00 2.02 1.60
$500,000 but under $1,000,000* 1.50 1.54 1.20
</TABLE>
*There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% contingent
deferred sales charge may apply upon redemption of such shares. The
contingent deferred sales charge ("Limited CDSC") that may be applicable
arises only in the case of certain net asset value purchases which have
triggered the payment of a dealer's commission.
**Based on the net asset value per share of the Class A Shares as of the end of
the Fund's most recent fiscal year.
***Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- ----------------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify for the
reduced front-end sales charge on the basis of previous or current purchases.
The reduced front-end sales charge will be granted upon confirmation of the
shareholder's holdings by the Fund. Such reduced front-end sales charges are not
retroactive.
From time to time, upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the Distributor
may reallow to dealers up to the full amount of the front-end sales charge shown
above. Dealers who receive 90% or more of the sales charge may be deemed to be
underwriters under the 1933 Act.
- ----------------------------------------------------------------
Certain dealers who enter into an agreement to provide extra training and
information on Delaware Group products and services and who increase sales of
Delaware Group funds may receive an additional concession of up to .15% of the
offering price in connection with the sales of Class A Shares. Such dealers must
meet certain requirements in terms of organization and distribution capabilities
and their ability to increase sales. The Distributor should be contacted for
further information on these requirements as well as the basis and circumstances
upon which the additional concession will be paid. Participating dealers may be
deemed to have additional responsibilities under the securities laws.
DEALER'S COMMISSION
For initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through whom
such purchases are effected in accordance with the following schedules:
USA FUND AND INSURED FUND
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE DEALER'S COMMISSION
- --------------------------------- -------------------
(as a percentage of
amount purchased)
<S> <C>
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
</TABLE>
- 14
<PAGE> 98
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 15
USA INTERMEDIATE FUND
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE DEALER'S COMMISSION
- --------------------------------- -------------------
(as a percentage of
amount purchased)
<S> <C>
Up to $3 million .60%
Next $2 million up to $5 million .40
Amount over $5 million .20
</TABLE>
In determining a financial adviser's eligibility for the dealer's commission,
purchases of Class A Shares of other Delaware Group funds as to which a Limited
CDSC (see Redemption and Repurchase) applies may be aggregated with those of
Class A Shares of the Series. Financial advisers also may be eligible for a
dealer's commission in connection with certain purchases made under a Letter of
Intention or pursuant to an investor's Right of Accumulation. Financial advisers
should contact the Distributor concerning the applicability and calculation of
the dealer's commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for payment of
the dealer's commission, unless such exchange is from a Delaware Group fund with
assets as to which a dealer's commission or similar payment has not been
previously paid. The schedule and program for payment of the dealer's commission
are subject to change or termination at any time by the Distributor in its
discretion.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES AND CLASS C SHARES
Class B and Class C Shares are purchased without the imposition of a front-end
sales charge. Class B Shares redeemed within prescribed periods after purchase
may be subject to a CDSC imposed at the rates and within the time periods set
forth below, and Class C Shares redeemed within twelve months of purchase may be
subject to a CDSC of 1%. CDSC fees are charged as a percentage of the dollar
amount subject to the CDSC. The charge will be assessed on an amount equal to
the lesser of the net asset value at the time of purchase of shares being
redeemed or the net asset value of those shares at the time of redemption. No
CDSC will be imposed on increases in net asset value above the initial purchase
price. In addition, no CDSC will be assessed on redemption of shares received
through the reinvestment of dividends or capital gains distributions. See the
Prospectuses for the respective Classes under the heading Redemption and
Exchange--Waiver of CDSC--Class B and Class C Shares for a list of the instances
in which the CDSC is waived.
The following table sets forth the rates of the CDSC for Class B Shares of the
USA Fund and the Insured Fund:
USA FUND AND INSURED FUND
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
(AS A PERCENTAGE OF
YEAR AFTER DOLLAR AMOUNT
PURCHASE MADE SUBJECT TO CHARGE)
- ----------------- -------------------
<S> <C>
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
</TABLE>
During the seventh year after purchase, and thereafter, until converted
automatically into Class A Shares of the corresponding Series, Class B Shares of
the USA Fund and Insured Fund will still be subject to the annual 12b-1 Plan
expenses of up to 1% of the average daily net assets of the relevant Class B
Shares. At the end of approximately eight years after purchase, the investor's
Class B Shares of the USA Fund and the Insured Fund will be automatically
converted into Class A Shares of that Series. See Automatic Conversion of Class
B Shares under Buying Shares in the Classes' Prospectus. Such conversion will
constitute a tax-free exchange for federal income tax purposes. See Taxes in the
Prospectus for the Classes.
The following table sets forth the rates of the CDSC for the Class B Shares of
the USA Intermediate Fund:
USA INTERMEDIATE FUND
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
(AS A PERCENTAGE OF
YEAR AFTER DOLLAR AMOUNT
PURCHASE MADE SUBJECT TO CHARGE)
- ----------------- -------------------
<S> <C>
0-2 2%
3 1%
4 and thereafter None
</TABLE>
During the fourth year after purchase, and thereafter, until converted
automatically into Class A Shares of the USA Intermediate Fund, Class B Shares
of this Series will still be subject to annual 12b-1 Plan expenses of up to 1%
of the average daily net assets of those shares. At the end of approximately
five years after purchase, the investor's Class B Shares will be automatically
converted into Class A Shares of the USA Intermediate Fund. See Automatic
Conversion of Class B Shares under Buying Shares in the Prospectus for the USA
Intermediate Fund. Such conversion will constitute a tax-free exchange for
federal income tax purposes. See Taxes in the Prospectus for the USA
Intermediate Fund.
PLANS UNDER RULE 12B-1
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a separate
plan for each of the Class A Shares, the Class B Shares and the Class C Shares
of each Series (the "Plans"). Each Plan permits the Series to pay for certain
distribution, promotional and related expenses involved in the marketing of only
the Class to which the Plan applies.
The Plans permit the Series, pursuant to the Distribution Agreements, to pay
out of the assets of the respective 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 the shares of such classes. These expenses
include, among other things, preparing and distributing advertisements, sales
literature and prospectuses and reports used for sales purposes, compensating
sales and marketing personnel, and paying distribution and maintenance fees to
securities brokers and dealers who enter into agreements with the Distributor.
The Plan expenses relating to the Class B and Class C Shares are also used to
pay the
- 15
<PAGE> 99
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 16
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, the Series may make payments out of the assets of the respective
Class A, Class B and Class C Shares directly to other unaffiliated parties, such
as banks, who either aid in the distribution of shares of, or provide services
to, such Classes.
The maximum aggregate fee payable by the Series under the Plans, and each
Series' Distribution Agreement, is on an annual basis, up to .30% of average
daily net assets of the Class A Shares of the USA Fund and Insured Fund for the
year, up to .30% (currently no more than .15%) of average daily net assets of
the Class A Shares of the USA Intermediate Fund, and up to 1% (.25% of which are
service fees to be paid by the Fund to the Distributor, dealers or 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 Fund's Board of Directors may reduce these amounts at any time. The
Distributor has agreed to waive these distribution fees to the extent such fee
for any day exceeds the net investment income realized by the Classes for such
day.
Effective June 1, 1992, the Board of Directors has determined that the annual
fee, payable on a monthly basis, under the separate Plans relating to the Class
A Shares of the USA Fund and the Insured Fund, will be equal to the sum of: (i)
the amount obtained by multiplying .30% by the average daily net assets
represented by the Class A Shares of the Series that were acquired by
shareholders on or after June 1, 1992; and (ii) the amount obtained by
multiplying .10% by the average daily net assets represented by the Class A
Shares of the Series that were acquired before June 1, 1992. While this is the
method for calculating the 12b-1 expenses to be paid by the Class A Shares of
the USA Fund and the Insured Fund, the fee is a Class A Shares' expense so that
all shareholders of the Class A Shares of each such Series regardless of when
they purchased their shares will bear 12b-1 expenses at the same rate. As Class
A Shares of such Series are sold on or after June 1, 1992, the initial rate of
at least .10% will increase over time. Thus, as the proportion of Class A Shares
purchased on or after June 1, 1992 to Class A Shares outstanding prior to June
1, 1992 increases, the expenses attributable to payments under the Plans will
also increase (but will not exceed .30% of average daily net assets). While this
describes the current formula for calculating the fees which will be payable
under the Plans with respect to the Class A Shares of the USA Fund and Insured
Fund, such Plans permit the Series to pay a full .30% on all assets at any time.
On September 17, 1992, the Board of Directors set the fee for the Class A
Shares of the USA Intermediate Fund at .15% of average daily net assets.
All of the distribution expenses incurred by the
Distributor and others, such as broker/dealers, in excess of the amount paid on
behalf of Class A, Class B and Class C Shares would be borne by such persons
without any reimbursement from such classes. Subject to seeking best price and
execution, the Fund 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 Agreements, as amended, have been approved by
the Board of Directors of the Fund, including a majority of the directors who
are not "interested persons" (as defined in the 1940 Act) of the Fund 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
Agreements. Continuation of the Plans and the Distribution Agreements, as
amended, must be approved annually by the Board of Directors in the same manner
as specified above.
Each year, the directors 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 Class. The Plans and the Distribution Agreements, as amended, may be
terminated with respect to a class at any time without penalty by a majority of
those directors who are not "interested persons" or by a majority vote of the
relevant Class' outstanding voting securities. Any amendment materially
increasing the 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 directors who are not "interested persons." With
respect to each 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 the respective Class B Shares. Also, any other
material amendment to the Plans must be approved by a majority vote of the
directors including a majority of the noninterested directors of the Fund having
no interest in the Plans. In addition, in order for the Plans to remain
effective, the selection and nomination of directors who are not "interested
persons" of the Fund must be effected by the directors 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 Directors for their review.
For the fiscal year ended August 31, 1995, payments from the Class A Shares of
the USA Fund, Insured Fund and the USA Intermediate Fund pursuant to their
respective Plans amounted to $1,344,379, $157,749 and $32,721, respectively.
Such amounts were used for the following purposes for the Tax-Free USA Fund A
Class: Advertising--$1,191; Annual and Semi-Annual Reports--$26,320; Broker
Trails--$1,099,853; Commissions to Wholesalers--$101,202; Promotional-Broker
Meetings--$36,664; Promotional-Other--$16,861; Prospectus Printing--$512;
Telephone Expenses--$8,772; Wholesaler Expenses--$53,004. Such amounts were used
for the
- 16
<PAGE> 100
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 17
following purposes for the Tax-Free Insured Fund A Class: Annual and
Semi-Annual-Annual Reports--$6,652; Broker Trails--$127,029; Commissions to
Wholesalers--$7,983; Dealer Service Expenses--$2,545; Promotional-Broker
Meetings--$4,062; Promotional-Other--$5,105; Prospectus Printing--$512;
Telephone Expenses--$961; Wholesaler Expenses--$2,900. Such amounts were used
for the following purposes for the Tax-Free Fund USA Intermediate Fund A Class:
Annual and Semi-Annual-Annual Reports--$65; Broker Trails--$30,109; Commissions
to Wholesalers--$1,530; Promotional-Broker Meetings--$472; Promotional-
Other--$545.
For the fiscal year ended August 31, 1995, payments from the Class B Shares of
the USA Fund, Insured Fund and USA Intermediate Fund pursuant to their
respective Plans amounted to $99,501, $15,991 and $6,793, respectively. Such
amounts were used for the following purposes for the Tax-Free USA Fund B Class:
Broker Sales Charges--$34,132; Broker Trails--$24,752; Commissions to
Wholesalers--$4,423; Interest on Broker Sales Charges--$35,520;
Promotional-Broker Meetings--$536; Telephone Expenses--$103; Wholesaler Expenses
$35. Such amounts were used for the following purposes for the
Tax-Free Insured Fund B Class: Broker Sales Charges--$5,628; Broker
Trails--$3,768; Commissions to Wholesalers--$883; Interest on Broker Sales
Charges--$5,565; Promotional-Broker Meetings--$98; Telephone Expenses--$36;
Wholesaler Expenses--$13. Such amounts were used for the following purposes for
the Tax-Free Fund USA Intermediate Fund B Class: Broker Sales Charges--$3,360;
Broker Trails--$818; Commissions to Wholesalers--$729; Interest on Broker Sales
Charges--$1,394; Promotional- Broker Meetings--$39; Telephone Expenses--$29;
Wholesaler Expenses--$424.
The staff of the Securities and Exchange Commission ("SEC") has proposed
amendments to Rule 12b-1 and other related regulations that could impact Rule
12b-1 Distribution Plans. The Fund intends to amend the Plans, if necessary, to
comply with any new rules or regulations the SEC may adopt with respect to Rule
12b-1.
OTHER PAYMENTS TO DEALERS--CLASS A, CLASS B AND
CLASS C SHARES
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits as set
by the Distributor, may receive from the Distributor an additional payment of up
to .25% of the dollar amount of such sales. The Distributor may also provide
additional promotional incentives or payments to dealers that sell shares of the
Delaware Group of funds. In some instances, these incentives or payments may be
offered only to certain dealers who maintain, have sold or may sell certain
amounts of shares.
Payments to dealers made in connection with seminars, conferences or contests
relating to the promotion of fund shares may be in an amount up to 100% of the
expenses incurred or awards made. The Distributor may also pay a portion of the
expense of preapproved dealer advertisements promoting the sale of Delaware
Group fund shares.
SPECIAL PURCHASE FEATURES--CLASS A SHARES
BUYING AT NET ASSET VALUE
Class A Shares may be reinvested without a front-end sales charge under the
Dividend Reinvestment Plan and, under certain circumstances, the 12-Month
Reinvestment Privilege and the Exchange Privilege.
Current and former officers, directors and employees of the Fund, any other
fund in the Delaware Group, the Manager or any of the Manager's current
affiliates and those that may in the future be created, legal counsel to the
funds and registered representatives, and employees of broker/dealers who have
entered into Dealer's Agreements with the Distributor may purchase Class A
Shares and shares of any of the funds in the Delaware Group, including any fund
that may be created at net asset value. Spouses, parents, brothers, sisters and
children (regardless of age) of such persons at their direction, and any
employee benefit plan established by any of the foregoing funds, corporations,
counsel or broker/dealers may also purchase shares at net asset value. Purchases
of Class A Shares may also be made by clients of registered representatives of
an authorized investment dealer at net asset value within six months of a change
of the registered representative's employment, if the purchase is funded by
proceeds from an investment where a front-end sales charge has been assessed and
the redemption of the investment did not result in the imposition of a
contingent deferred sales charge or other redemption charges. Purchases of Class
A Shares also may be made at net asset value by bank employees who provide
services in connection with agreements between the bank and unaffiliated brokers
or dealers concerning sales of Class A Shares. Officers, directors and key
employees of institutional clients of the Manager or any of its affiliates may
purchase Class A Shares at net asset value. Moreover, purchases may be effected
at net asset value for the benefit of the clients of brokers, dealers and
registered investment advisers affiliated with a broker or dealer, if such
broker, dealer or investment adviser has entered into an agreement with the
Distributor providing specifically for the purchase of Class A Shares in
connection with special investment products, such as wrap accounts or similar
fee based programs. Such purchasers are required to sign a letter stating that
the purchase is for investment only and that the securities may not be resold
except to the issuer. Such purchasers may also be required to sign or deliver
such other documents as the Fund may reasonably require to establish eligibility
for purchase at net asset value. The Fund must be notified in advance that the
trade qualifies for purchase at net asset value.
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 by any such
purchaser previously enumerated within a 13-month period pursuant to a written
Letter of Intention provided by the Distributor and signed by the purchaser, and
not legally binding on the signer or the Fund, 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
- 17
<PAGE> 101
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 18
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 the Series and of any class of any of the other mutual
funds in the Delaware Group (except shares of any Delaware Group fund which do
not carry a front-end sales charge, CDSC or Limited CDSC, other than shares of
Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Group fund which carried a front-end sales charge, CDSC
or Limited CDSC) previously purchased and still held as of the date of their
Letter of Intention toward the completion of such Letter. For purposes of
satisfying an investor's obligation under a Letter of Intention, Class B Shares
and Class C Shares of the Series and the corresponding classes of shares of
other Delaware Group funds which offer such shares may be aggregated with Class
A Shares of the Series and the corresponding class of shares of the other
Delaware Group funds.
COMBINED PURCHASES PRIVILEGE
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of the Class A Shares, Class B Shares and/or
Class C Shares of the Series, as well as any other class of any of the other
Delaware Group funds (except shares of any Delaware Group fund which do not
carry a front-end sales charge, CDSC or Limited CDSC, other than shares of
Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Group fund which carried a front-end sales charge, CDSC
or Limited CDSC).
The privilege also extends to all purchases made at one time by an individual;
or an individual, his or her spouse and their children under the age 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 Series, as well as
shares of any other class of any of the other Delaware Group funds which offer
such classes (except shares of any Delaware Group fund which do not carry a
front-end sales charge, CDSC or Limited CDSC, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
a Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC). Using the Class A Shares of the USA Fund and the Insured Fund as an
example, if any such purchaser has previously purchased and still holds Class A
Shares of the USA Fund or the Insured Fund 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 of the USA Fund or the Insured Fund, the charge applicable to the $60,000
purchase would be 3.75%. For the purpose of this calculation, the shares
presently held shall be valued at the public offering price that would have been
in effect were the shares purchased simultaneously with the current purchase.
Investors should refer to the table of sales charges for Class A Shares to
determine the applicability of the Right of Accumulation to their particular
circumstances.
12-MONTH REINVESTMENT PRIVILEGE
Holders of Class A Shares who redeem such shares have one year from the date
of redemption to reinvest all or part of their redemption proceeds in Class A
Shares of a Series or in Class A Shares of any of the other funds in the
Delaware Group, subject to applicable eligibility and minimum purchase
requirements, in states where shares of such other funds may be sold, at net
asset value without the payment of a front-end sales charge. This privilege does
not extend to Class A Shares where the redemption of the shares triggered the
payment of a Limited CDSC. Persons investing redemption proceeds from direct
investments in mutual funds in the Delaware Group offered without a front-end
sales charge, will be required to pay the applicable sales charge when
purchasing Class A Shares. The reinvestment privilege does not extend to a
redemption of either Class B Shares or Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any amount
necessary to purchase a full share). The reinvestment will be made at the net
asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account, will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is proposed to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Investors should consult their financial advisers or the Transfer Agent, which
also serves as the Fund's shareholder servicing agent, about the applicability
of the Limited
- 18
<PAGE> 102
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 19
CDSC (see Contingent Deferred Sales Charge for Certain Purchases of Class A
Shares Made at Net Asset Value under Redemption and Exchange in the Series'
Prospectuses) 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 of that Series
in effect on the reinvestment 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 monthly. 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 the respective Class. Such purchases, which must meet
the minimum subsequent purchase requirements set forth in the Prospectus and
this Part B, are made for Class A Shares at the public offering price, and for
Class B 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.
REINVESTMENT OF DIVIDENDS IN OTHER
DELAWARE GROUP FUNDS
Subject to applicable eligibility and minimum initial purchase requirements,
and the limitations set forth below, holders of Class A, Class B and Class C
Shares may automatically reinvest dividends and/or distributions from the Series
in any of the other mutual funds in the Delaware Group, including the Series, in
states where their shares may be sold. Such investments will be made at net
asset value per share at the close of business on the reinvestment date without
any front-end sales charge or service fee. Nor will such investments be subject
to a CDSC or Limited CDSC. The shareholder must notify the Transfer Agent in
writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
a fund in which the investor does not then have an account will be treated like
all other initial purchases of a fund's shares. Consequently, an investor should
obtain and read carefully the prospectus for the fund in which the investment is
proposed to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses.
Subject to the following limitations, dividends and/or distributions from
other funds in the Delaware Group may be invested in the Series at net asset
value, provided an account has been established. Dividends from Class A Shares
may not be directed to Class B Shares or Class C Shares of another fund in the
Delaware Group, including the Series. Dividends from Class B Shares may only be
directed to Class B Shares of another fund in the Delaware Group, including the
Series, that offers such class of shares. Dividends from Class C Shares may only
be directed to Class C Shares of another fund in the Delaware Group that offers
such class of shares. See Class B Funds and Class C Funds under Buying Shares in
the Classes' Prospectuses for the funds in the Delaware Group that are eligible
for investment by holders of Series shares.
INVESTING BY ELECTRONIC FUND TRANSFER
Direct Deposit Purchase Plan--Investors may arrange for the Series to accept
for investment in Class A, Class B or Class C Shares, through an agent bank,
preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates lost, stolen and delayed
checks.
Automatic Investing Plan--Shareholders of Class A, Class B and Class C Shares
may make automatic investments by authorizing, in advance, monthly payments
directly from their checking account for deposit into their Series account. This
type of investment will be handled in either of the two ways noted below. (1) If
the shareholder's bank is a member of the National Automated Clearing House
Association ("NACHA"), the amount of the investment will be electronically
deducted from his or her account by Electronic Fund Transfer ("EFT"). The
shareholder's checking account will reflect a debit each month at a specified
date, although no check is required to initiate the transaction. (2) If the
shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
* * *
Investments under the Direct Deposit Purchase Plan and the Automatic Investing
Plan must be for $25 or more for Class A Shares and $100 or more for Class B and
Class C Shares. An investor wishing to take advantage of either service must
complete an authorization form. Either service can be discontinued by the
shareholder at any time without penalty by giving written notice.
Payments to a Series 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
- 19
<PAGE> 103
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 20
reclamation, the Series 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 Series.
DIRECT DEPOSIT PURCHASES BY MAIL
Shareholders may authorize a third party, such as a bank or employer, to make
investments directly to their Series accounts. The Series 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 Fund for proper
instructions.
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering price next
calculated by each Series to be acquired after receipt of the order by the Fund
or its agent. Orders for purchases of Class B Shares and Class C Shares of each
Series are effected at the net asset value per share next calculated by the
Series to be acquired after receipt of the order by the Fund or its agent.
Selling dealers have the responsibility of transmitting orders promptly.
The offering price of Class A Shares consists of the net asset value per
share, plus any applicable front-end sales charges. Offering price and net asset
value are computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m, Eastern time) on days when the Exchange is open.
The New York Stock Exchange is scheduled to be open Monday through Friday
throughout the year except for New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. When the
New York Stock Exchange is closed, the Fund will generally be closed, pricing
calculations will not be made and purchase and redemption orders will not be
processed.
An example showing how to calculate the net asset value per share and, in the
case of the Class A Shares, the offering price per share, is included in the
Series' financial statements which are incorporated by reference into this Part
B.
Each Series' net asset value per share is computed by adding the value of all
securities and other assets in the portfolio of that Series, deducting any
liabilities of the Series and dividing by the number of Series shares
outstanding. In determining a Series' total net assets, portfolio securities are
valued at fair value, using methods determined in good faith by the Board of
Directors. This method utilizes the services of an independent pricing
organization which employs a combination of methods including, among others, the
obtaining of market valuations from dealers who make markets and deal in such
securities, and by comparing valuations with those of other comparable
securities in a matrix of such securities. A pricing service's activities and
results are reviewed by the officers of the Fund. In addition, money market
instruments having a maturity of less than 60 days are valued at amortized cost.
Expenses and fees of each Series are accrued daily.
Each Class of a Series will bear, pro-rata, all of the common expenses of the
relevant Series. The net asset values of all outstanding shares of each Class of
each Series will be computed on a pro-rata basis for each outstanding share
based on the proportionate participation in such Series represented by the value
of shares of that Class. All income earned and expenses incurred by a Series
will be borne on a pro-rata basis by each outstanding share of a Class, based on
each Class' percentage in such Series represented by the value of shares of such
Classes, except that the Class A, Class B and Class C Shares alone will bear the
12b-1 Plan expenses payable under their respective Plans. Due to the specific
distribution expenses and other costs that would be allocable to each Class, the
dividends paid to each Class of a Series may vary. However, the net asset value
per share of each Class of a Series is expected to be equivalent.
REDEMPTION AND REPURCHASE
Any shareholder may require the Fund to redeem Series shares by sending a
WRITTEN REQUEST, signed by the record owner or owners exactly as the shares are
registered, to the Fund, 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. The Fund does not issue
certificates for Class A Shares unless a shareholder specifically requests them.
The Fund does not issue certificates for Class B Shares or Class C Shares. If
stock certificates have been issued for shares being redeemed, they must
accompany the written request. For redemptions of $50,000 or less paid to the
shareholder at the address of record, the Fund requires a request signed by all
owners of the shares or the investment dealer or record, but does not require
signature guarantees. When the redemption is for more than $50,000, or if
payment is made to someone else or to another address, signatures of all record
owners and a signature guarantee are required. Each signature guarantee must be
supplied by an eligible guarantor institution. The Fund reserves the right to
reject a signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may request further documentation from corporations,
retirement plans, executors, administrators, trustees or guardians.
In addition to redemption of Series shares by the Fund, the Distributor,
acting as agent of the Fund, offers to repurchase Series 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 Fund or its agent less any applicable CDSC or Limited CDSC. This is computed
and effective at the time the offering price and net asset value are determined.
See Determining Offering Price and Net Asset
- 20
<PAGE> 104
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 21
Value. The Fund and the Distributor end their business day at 5 p.m., Eastern
time. This offer is discretionary and may be completely withdrawn without
further notice by the Distributor.
Orders for the repurchase of shares which are submitted to the Distributor
prior to the close of its business day will be executed at the net asset value
per share computed that day (subject to any applicable CDSC or Limited CDSC), if
the repurchase order was received by the broker/dealer from the shareholder
prior to the time the offering price and net asset value are determined on such
day. The selling dealer has the responsibility of transmitting orders to the
Distributor promptly. Such repurchase is then settled as an ordinary transaction
with the broker/dealer (who may make a charge to the shareholder for this
service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may result
in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge for
Certain Purchases of Class A Shares Made at Net Asset Value under Redemption and
Exchange in the Series' Prospectuses relating to such shares. Class B Shares of
the USA Fund and Insured Fund 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 of the USA Intermediate Fund are
subject to a CDSC of 2% during the first two years of purchase and 1% during the
third year of purchase. Class C Shares of each Series are subject to a CDSC of
1% if shares are redeemed within twelve months following purchase. See
Contingent Deferred Sales Charge under Buying Shares in the Prospectus of the
relevant Series relating to such shares. Except for the applicable CDSC or
Limited CDSC and, with respect to the expedited payment by wire, for which there
is currently a $7.50 bank wiring cost, there is no fee charged for redemptions
or repurchases, but such fees could be charged at any time in the future.
Payment for shares redeemed will ordinarily be mailed the next business day,
but in no case later than seven days, after receipt of a redemption request in
good order.
If a shareholder who recently purchased shares by check seeks to redeem all or
a portion of those shares in a written request, the Fund will honor the
redemption request but will not mail the proceeds until it is reasonably
satisfied of the collection of the investment check. This potential delay can be
avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund will automatically redeem from the shareholder's account the Series shares
purchased by the check plus any dividends earned thereon. Shareholders may be
responsible for any losses to the Series or to the Distributor.
In case of a suspension of the determination of the net asset value because
the New York Stock Exchange is closed for other than weekends or holidays, or
trading thereon is restricted or an emergency exists as a result of which
disposal by a Series of securities owned by it is not reasonably practical, or
it is not reasonably practical for a Series fairly to value its assets, or in
the event that the Securities and Exchange Commission has provided for such
suspension for the protection of shareholders, a Series may postpone payment or
suspend the right of redemption or repurchase. In such case, a 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 in either 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 sales by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, the Fund has
elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which the
Fund is obligated to redeem Series shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Series during any 90-day period for
any one shareholder.
The value of the Series' investments is subject to changing market prices.
Thus, a shareholder reselling shares to a Series may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
SMALL ACCOUNTS
Before the Fund involuntarily redeems shares from an account that, under the
circumstances listed in the relevant Prospectus, has remained below the minimum
amounts required by the Series' Prospectuses and sends the proceeds to the
shareholder, the shareholder will be notified in writing that the value of the
shares in the account is less than the minimum required and will be allowed 60
days from the date of notice to make an additional investment to meet the
required minimum. See The Conditions of Your Purchase under Buying Shares in the
Series' Prospectuses. Any redemption in an inactive account established with a
minimum investment may trigger mandatory redemption. No CDSC or Limited CDSC
will apply to the redemptions described in this paragraph.
* * *
The Fund has available certain redemption privileges, as described below. The
Fund reserves the right to suspend or terminate these expedited payment
procedures upon 60 days' written notice to shareholders.
EXPEDITED TELEPHONE REDEMPTIONS
Shareholders or their investment dealers of record wishing to redeem an amount
of Series shares of $50,000 or less for which certificates have not been issued
may call the Fund at 800-523-1918 (in Philadelphia, 215-988-1241) prior to the
time the offering price and net asset value are determined, as noted above, and
have the proceeds mailed to them at the record address. Checks payable to the
shareholder(s) of record will normally be mailed the next business day, but no
later than seven days, after the receipt
- 21
<PAGE> 105
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 22
of the redemption request. This option is only available to individual, joint
and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check by calling the Fund, as described
above. An authorization form must have been completed by the shareholder and
filed with the Fund before the request is received.
Payment will be made by wire or check to the bank account designated on the
authorization form as follows:
1. PAYMENT BY WIRE: Request that Federal Funds be wired to the bank account
designated on the authorization form. Redemption proceeds will normally be wired
on the next business day following receipt of the redemption request. There is a
$7.50 wiring fee (subject to change) charged by CoreStates Bank, N.A. which will
be deducted from the withdrawal proceeds each time the shareholder requests a
redemption. If the proceeds are wired to the shareholder's account at a bank
which is not a member of the Federal Reserve System, there could be a delay in
the crediting of the funds to the shareholder's bank account.
2. PAYMENT BY CHECK: Request a check be mailed to the bank account designated
on the authorization form. Redemption proceeds will normally be mailed the next
business day, but no later than seven days, after the date of the telephone
request. This procedure will take longer than the Payment by Wire option (1
above) because of the extra time necessary for the mailing and clearing of the
check after the bank receives it.
REDEMPTION REQUIREMENTS: In order to change the name of the bank and the
account number it will be necessary to send a written request to the Series and
a signature guarantee may be required. Each signature guarantee must be supplied
by an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. To reduce the shareholder's risk of attempted fraudulent use
of the telephone redemption procedure, payment will be made only to the bank
account designated on the authorization form.
The Fund will not honor telephone redemptions for Series shares recently
purchased by check unless it is reasonably satisfied that the purchase check has
cleared.
If expedited payment under these procedures could adversely affect the Series,
the Fund may take up to seven days to pay the shareholder.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Series shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the 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, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by
shareholders are generally tape recorded. A written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders of Class A, Class B and Class C Shares who own or purchase $5,000
or more of shares at the offering price or net asset value, as applicable, for
which certificates have not been issued may establish a Systematic Withdrawal
Plan for monthly withdrawals of $25 or more, or quarterly withdrawals of $75 or
more, although the Fund does not recommend any specific amount of withdrawal.
Shares purchased with the initial investment and through reinvestment of cash
dividends and realized securities profits distributions will be credited to the
shareholder's account and sufficient full and fractional shares will be redeemed
at the net asset value calculated on the third business day preceding the
mailing date.
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
Class A Shares of the paying Series at net asset value. This plan is not
recommended for all investors and should be started only after careful
consideration of its operation and effect upon the investor's savings and
investment program. To the extent that withdrawal payments from the plan exceed
any dividends and/or realized securities profits distributions paid on shares
held under the plan, the withdrawal payments will represent a return of capital
and the share balance may in time be depleted, particularly in a declining
market.
The sale of shares for withdrawal payments constitutes a taxable event and a
shareholder may incur a capital gain or loss for federal income tax purposes.
This gain or loss may be long-term or short-term depending on the holding period
for the specific shares liquidated.
Withdrawals under this plan by the shareholders of Class A Shares, or any
similar plan of any other investment company charging a front-end sales charge,
made concurrently with the purchase of Class A Shares or the shares of any other
investment company will ordinarily be disadvantageous to the shareholder because
of the payment of duplicative sales charges. Shareholders should not purchase
Class A Shares while participating in a Systematic Withdrawal Plan and a
periodic investment program in a fund managed by the Manager must be terminated
before a Systematic Withdrawal Plan can take effect, except if the shareholder
is a participant in one of our Retirement Plans or is investing in Delaware
Group funds which do not carry a sales charge. Also, redemptions of Class A
Shares pursuant to a Systematic Withdrawal Plan may be subject to a Limited CDSC
if the purchase was made at net asset value and a dealer's commission has been
paid on that purchase. Redemptions of Class B Shares or Class C Shares pursuant
to a Systematic Withdrawal Plan may be subject to a CDSC, unless the annual
amount selected to be withdrawn is less than 12% of the account balance on the
date that the Systematic Withdrawal Plan was established. See Waiver
- 22
<PAGE> 106
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 23
of CDSC - Class B and Class C Shares and Waiver of Limited CDSC - Class A Shares
under Redemption and Exchange in the Prospectuses for the Classes.
An investor wishing to start a Systematic Withdrawal Plan must complete an
authorization form. If the recipient of Systematic Withdrawal Plan payments is
other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The 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.
WEALTH BUILDER OPTION
Shareholders of the Series may elect to invest in one or more of the other
mutual funds in the Delaware Group through our Wealth Builder Option. Under this
automatic exchange program, shareholders can authorize regular monthly
investments (minimum of $100 per fund) to be liquidated from their account and
invested automatically into other mutual funds in the Delaware Group, subject to
the conditions and limitations set forth in the Prospectuses relating to the
Classes. See Wealth Builder Option and Redemption and Exchange in the
Prospectuses relating to the Classes.
The investment will be made on the 20th day of each month (or, if the fund
selected is not open that day, the next business day) at the public offering
price or net asset value, as applicable, of the fund selected on the date of
investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure profits
or protect against losses in a declining market. The price of the fund into
which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges.
Shareholders can also use the Wealth Builder Option to invest in a Series
through regular liquidations of shares in their accounts in other mutual funds
in the Delaware Group, subject to the conditions and limitations described in
the Prospectuses of the Classes. Shareholders can terminate their participation
at any time by written notice to the Fund.
DIVIDENDS AND REALIZED
DISTRIBUTIONS
The Fund declares a dividend to shareholders of each Series of that Series'
net investment income on a daily basis. Dividends are declared each day the Fund
is open and cash dividends 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. In determining daily
dividends, the amount of net investment income for each Series will be
determined at the time the offering price and net asset value are determined
(see Determining Offering Price and Net Asset Value) and shall include
investment income accrued by the respective Series, less the estimated expenses
of that Series incurred since the last determination of net asset value. Gross
investment income consists principally of interest accrued and, where
applicable, net pro-rata amortization of premiums and discounts since the last
determination. The dividend declared, as noted above, will be deducted
immediately before the net asset value calculation is made. Net investment
income earned on days when the Fund is not open will be declared as a dividend
on the next business day.
Purchases of Series shares by wire begin earning dividends when converted into
Federal Funds and available for investment, normally the next business day after
receipt. However, if the Fund is given prior notice of Federal Funds wire and an
acceptable written guarantee of timely receipt from an investor satisfying the
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 the
Fund. The 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.
Each Class will share proportionately in the investment income and expenses of
its respective Series, except that Class A Shares, Class B Shares and Class C
Shares alone will incur distribution fees under their respective 12b-1 Plans.
Dividends are automatically reinvested in additional shares of the paying
Series at net asset value, 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
- 23
<PAGE> 107
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 24
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 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 Fund will mail a quarterly statement showing a Class' dividends paid
and all the transactions made during the period.
During the fiscal year ended August 31, 1995, dividends totaling $0.746,
$0.639 and $0.550 per share of the Class A Shares of the USA Fund, Insured Fund
and USA Intermediate Fund, respectively, were paid from net investment income.
During the same period, dividends totaling $0.649, $0.550 and $0.460 per share
of the Class B Shares of the USA Fund, Insured Fund and USA Intermediate Fund,
respectively, were paid from net investment income.
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 Series may deduct from a shareholder's account the costs of
the Series' effort to locate a shareholder if a shareholder's mail is returned
by the Post Office or the Series 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.
The Fund anticipates that most of each Series' dividends paid to shareholders
will be exempt from federal income taxes. For the fiscal year ended August 31,
1995, the Fund's dividends were exempt from federal income tax. Information
concerning the tax status of dividends and distributions will be mailed to
shareholders annually.
TAXES
FEDERAL INCOME TAX ASPECTS
Each Series has qualified, and intends to continue to qualify, as a regulated
investment company as defined under Subchapter M of the Internal Revenue Code of
1986, as amended, so as not to be liable for federal income tax to the extent
its earnings are distributed. The term "regulated investment company" does not
imply the supervision of management or investment practices by any government
agency. Each Series of the Fund is treated as a single tax entity, and any
capital gains and losses for each Series are calculated separately. The Fund has
no fixed policy with regard to distributions of realized securities profits when
such realized securities profits may be offset by capital losses carried
forward. Currently, however, the Fund intends to offset realized securities
profits to the extent of capital losses carried forward, if any.
For the fiscal year ended August 31, 1995, the USA Intermediate Fund had a
capital loss of $623,654. At August 31, 1995, the USA Intermediate Fund had a
capital loss carryforward of $1,066,941 which expires as follows:
2002--$443,287 and 2003--$623,654.
Distributions by the Fund representing net interest received on municipal
bonds are considered tax-exempt income and are not includable by shareholders
in gross income for federal income tax purposes. 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. Distributions by the Fund representing net
interest income received by the Series from certain temporary investments (such
as certificates of deposit, commercial paper and obligations of the U.S.
Government, its agencies and instrumentalities), accretion of market discount
on tax-exempt bonds purchased by the Series after April 30, 1993 and net
short-term capital gains realized by the Series, if any, will be taxable to
shareholders as ordinary income and will not qualify for the deduction for
dividends received by corporations. Distributions from long-term capital gains
realized by the Series, 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 gains 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. 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 of
the Series may incur a tax liability for federal, state and local taxes upon
the sale or redemption of shares of the Series. The Fund has been advised by
counsel that if, under present tax laws, any amounts are paid to the Insured
Fund in lieu of interest on tax-exempt bonds pursuant to the various insurance
on the portfolio securities, they will be treated as tax-exempt income when
distributed to shareholders.
Section 265 of the Internal Revenue Code provides that interest paid on
indebtedness incurred or continued to purchase or carry obligations the interest
on which is tax-exempt, and certain expenses associated with tax-exempt income,
are not deductible. It is probable that interest on indebtedness incurred or
continued to purchase or carry shares of the Series is not deductible.
The Series 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 Internal Revenue
Code. Persons who are or may be considered "substantial users" should consult
their tax advisers in this matter before purchasing shares of the Series.
The Fund intends to use the "average annual" method of allocation in the event
a Series realizes any taxable interest income. Under this approach, the
percentage of interest income earned that is deemed to be taxable in any year
will be the same for each shareholder who held shares of the Series at any time
during the year.
- 24
<PAGE> 108
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 25
Shareholders will be informed annually of the amount and nature of income and
capital gains. For fiscal year 1995, all of the Fund's dividends from net income
were exempt from federal income tax.
When the USA Intermediate Fund writes a call or put option, an amount equal to
the premium received by it is included in the Series' Statement of Assets and
Liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently "marked to market" to reflect the current market value
of the option written. If an option which the Series has written either expires
on its stipulated expiration date, or if the Series enters into a closing
purchase transaction, the Series realizes a gain (or loss if the cost of the
closing transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. Any such gain or loss is a
short-term capital gain or loss for federal income tax purposes. If a call
option which the Series has written is exercised, the Series realizes a capital
gain or loss (long-term or short-term, depending on the holding period of the
underlying security) from the sale of the underlying security and the proceeds
from such sale are increased by the premium originally received. If a put option
which the Series has written is exercised, the amount of the premium originally
received will reduce the cost of the security which the Series purchases upon
exercise of the option.
The premium paid by the USA Intermediate Fund for the purchase of a put option
is recorded in the section of the Series' Statement of Assets and Liabilities as
an investment and subsequently adjusted daily to the current market value of the
option. For example, if the current market value of the option exceeds the
premium paid, the excess would be unrealized appreciation and, conversely, if
the premium exceeds the current market value, such excess would be unrealized
depreciation. If a put option which the Series has purchased expires on the
stipulated expiration date, the Series realizes a capital loss for federal
income tax purposes in the amount of the cost of the option. If the Series sells
the put option, it realizes a capital gain or loss, depending on whether the
proceeds from the sale are greater or less than the cost of the option. If the
Series exercises a put option, it realizes a capital gain or loss (long-term or
short-term, depending on the holding period of the underlying security) from the
sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. However, since the purchase of a put
option is treated as a short sale for federal income tax purposes, the holding
period of the underlying security will be affected by such a purchase.
The Internal Revenue Code includes special rules applicable to listed options
which the USA Intermediate Fund may write, purchase or sell. Such options are
classified as Section 1256 contracts under the Code. The character of gain or
loss under a Section 1256 contract is generally treated as 60% long-term gain or
loss and 40% short-term gain or loss. When held by the Series at the end of a
fiscal year, these options are required to be treated as sold at market value on
the last day of the fiscal year for federal income tax purposes ("marked to
market").
Over-the-counter options are not classified as Section 1256 contracts and are
not subject to the 60/40 gain or loss treatment or the "marked to market" rule.
Any gains or losses recognized by the USA Intermediate Fund from
over-the-counter option transactions generally constitute short-term capital
gains or losses.
The initial margin deposits made when entering into futures contracts are
recognized as assets due from the broker. During the period the futures contract
is open, changes in the value of the contract will be reflected at the end of
each day.
Futures contracts held by the USA Intermediate Fund at the end of each fiscal
year will be required to be "marked to market" for federal income tax purposes.
Any unrealized gain or loss on futures contracts will therefore be recognized
and deemed to consist of 60% long-term capital gain or loss and 40% short-term
capital gain or loss. Therefore adjustments are made to the tax basis in the
futures contract to reflect the gain or loss recognized at year end.
The Fund must meet several requirements to maintain its status as a regulated
investment company. Among these requirements are that at least 90% of its
investment company taxable income be derived from dividends, interest, payment
with respect to securities loans and gains from the sale or disposition of
securities; that at the close of each quarter of its taxable year at least 50%
of the value of its assets consist of cash and cash items, government
securities, securities of other regulated investment companies and, subject to
certain diversification requirements, other securities; and that less than 30%
of its gross income be derived from sales of securities held for less than three
months.
The Internal Revenue Service has ruled publicly that an Exchange-traded call
option is a security for purposes of the 50% of assets tests and that its issuer
is the issuer of the underlying security, not the writer of the option, for
purposes of the diversification requirements.
The requirement that not more than 30% of the Fund's gross income be derived
from gains from the sale or other disposition of securities held for less than
three months may restrict the USA Intermediate Fund in its ability to write
covered call options on securities which it has held less than three months, to
write options which expire in less than three months, to sell securities which
have been held less than three months, and to effect closing purchase
transactions with respect to options which have been written less than three
months prior to such transactions. Consequently, in order to avoid realizing a
gain within the three-month period, the USA Intermediate Fund may be required to
defer the closing out of a contract beyond the time when it might otherwise be
advantageous to do so. The Series may also be restricted in the sale of
purchased put options and the purchase of put options for the purpose of hedging
underlying securities because of the application of the short sale holding
period rules with respect to such underlying securities.
- 25
<PAGE> 109
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 26
STATE AND LOCAL TAXES
The exemption of distributions for federal income tax purposes may not result
in similar exemptions under the laws of a particular state or local taxing
authority. It is recommended that shareholders consult their tax advisers in
this regard. The Fund will report annually for each Series the percentage of
interest income earned on municipal obligations on a state-by-state basis during
the preceding calendar year.
PENNSYLVANIA PERSONAL PROPERTY TAX
Shares of the Series will be exempt from Pennsylvania county personal property
tax.
INVESTMENT MANAGEMENT
AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103, furnishes
investment management services to each Series of the Fund, subject to the
supervision and direction of the Fund's Board of Directors.
The Manager and its predecessors have been managing the funds in the Delaware
Group since 1938. The aggregate assets of these funds on August 31, 1995 were
approximately $10,068,867,000. Investment advisory services are also provided to
institutional accounts with assets on August 31, 1995 of approximately
$17,506,688,000.
The Investment Management Agreements for the Series are dated April 3, 1995
and were approved by shareholders on March 29, 1995.
The Agreements have an initial term of two years and may be renewed each year
only so long as such renewal and continuance are specifically approved at least
annually by the Board of Directors or by vote of a majority of the outstanding
voting securities of the affected Series, and only if the terms and the renewal
thereof have been approved by vote of a majority of the directors of the Fund
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. Each
Agreement is terminable without penalty on 60 days' notice by the directors of
the Fund or by the Manager. An Agreement will terminate automatically in the
event of its assignment.
The annual compensation paid by each Series for investment management services
under its Investment Management Agreement is equal to: for the USA Fund, .60%
on the first $500 million of its average daily net assets, .575% on the next
$250 million and .55% on the average daily net assets in excess of $750
million; for the USA Intermediate Fund, .50% of its average daily net assets;
and for the Insured Fund, .60% of its average daily net assets, less a
proportionate share of all directors' fees paid to the unaffiliated directors
by each Series of the Fund.
On August 31, 1995, the total net assets of the Fund were $886,893,853, broken
down as follows: USA Fund-- $776,249,353; USA Intermediate Fund--$21,440,769;
Insured Fund--$89,203,731. The Manager makes and implements all investment
decisions on behalf of the Fund. The Manager pays the Fund's rent and the
salaries of all directors, officers and employees of the Fund who are affiliated
with both the Manager and the Fund. The Fund pays all of its other expenses. For
the fiscal years ended August 31, 1993, 1994 and 1995, investment management
fees paid by the USA Fund were $4,306,649, $4,448,874 and $4,388,886,
respectively. Investment management fees paid by the Insured Fund for the fiscal
years ended August 31, 1993, 1994 and 1995 amounted to $530,627, $558,029 and
$523,070, respectively. For the period January 7, 1993 (date of initial public
offering) to August 31, 1993, the investment management fee that would have been
payable by the USA Intermediate Fund amounted to $17,157 but no amount was paid
by this Series due to the waiver described below. For the fiscal years ended
August 31, 1994 and 1995, investment management fees that would have been
payable by the USA Intermediate Fund amounted to $110,990 and $104,724,
respectively, but no amount was paid by this Series for 1994 or for 1995 due to
the waiver.
Except for those expenses borne by the Manager under the Investment Management
Agreements and the Distributor under the Distribution Agreements, the Fund is
responsible for all of its own expenses. Among others, these include the
investment management fees; transfer and dividend disbursing agent fees and
costs; custodian expenses; federal and state securities registration fees; proxy
costs; and the costs of preparing prospectuses and reports sent to shareholders.
For the fiscal year ended August 31, 1995, the ratios of expenses to average
daily net assets of the Class A Shares of the USA Fund, Insured Fund and
USA Intermediate Fund were 0.92%, 0.98% and 0.25%, respectively. The ratios of
expenses to average daily net assets of the Class B Shares of the USA Fund,
Insured Fund and USA Intermediate Fund were 1.74%, 1.80% and 1.10%,
respectively. The ratios for each of the Classes reflect the impact of the
respective 12b-1 Plans. In addition, the ratios for the Class A Shares and the
Class B Shares of the USA Intermediate Fund reflect the waiver of fees described
below. The Fund anticipates that the ratio of expenses to average daily net
assets of Class C Shares will be identical to that of the respective Class B
Shares.
In connection with the USA Intermediate Fund, the Manager elected voluntarily
to waive that portion, if any, of the annual management fees payable by this
Series and to reimburse the Series to the extent necessary to ensure that the
Total Operating Expenses of the Class A Shares of this Series, including 12b-1
expenses, did not exceed .25% during the period from the commencement of the
public offering of the Series through June 30, 1993. This waiver was extended
through June 30, 1994, but modified effective May 2, 1994 through June 30, 1996
to provide that operating expenses of the Class A Shares would not exceed .10%,
excluding the 12b-1 expenses attributable to that Class. The Manager similarly,
elected to waive its fees to limit operating expenses of the Class B Shares to
.10%, excluding 12b-1 fees attributable to the Class B Shares for the period May
2, 1994 through June 30, 1996.
By California regulation, the Manager is required to waive certain fees and
reimburse the Fund for certain
- 26
<PAGE> 110
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 27
expenses to the extent that the Fund's annual operating
expenses, exclusive of taxes, interest, brokerage commissions and extraordinary
expenses, exceed 2 1/2% of its first $30 million of average daily net assets, 2%
of the next $70 million of average daily assets and 1 1/2% of any additional
average daily net assets. Such undertaking is computed separately for each
Series. For the fiscal year ended August 31, 1995, no such reimbursement was
necessary or paid for any Series.
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 of Series shares
under separate Distribution Agreements dated April 3, 1995, as amended on
November 29, 1995. The Distributor is an affiliate of the Manager and bears all
of the costs of promotion and distribution, except for payments by a Series on
behalf of its respective Class A Shares, Class B Shares and Class C Shares under
the 12b-1 Plans. Prior to January 3, 1995, Delaware Distributors, Inc. ("DDI")
served as the national distributor of the Series' shares. On that date, Delaware
Distributors, L.P., a newly formed limited partnership, succeeded to the
business of DDI. All officers and employees of DDI became officers and employees
of Delaware Distributors, L.P. DDI is the corporate general partner of Delaware
Distributors, L.P. and both DDI and Delaware Distributors, L.P. are indirect,
wholly-owned subsidiaries of Delaware Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate of the
Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as the
Series' shareholder servicing, dividend disbursing and transfer agent pursuant
to a Shareholders Services Agreement dated June 29, 1988 for the USA Fund and
the Insured Fund and November 10, 1992 for the USA Intermediate Fund. The
Transfer Agent is also an indirect, wholly-owned subsidiary of Delaware
Management Holdings, Inc.
OFFICERS AND DIRECTORS
The business and affairs of the Fund are managed under the direction of its
Board of Directors.
Certain officers and directors of the Fund hold identical positions in each of
the other funds in the Delaware Group. On October 31, 1995, the Fund's officers
and directors owned approximately 2.56%, less than 1% and approximately 2.51% of
the outstanding shares of the Class A Shares of, respectively, the USA Fund,
Insured Fund and USA Intermediate Fund and less than 1% the outstanding shares
of the Class B Shares of, respectively, the USA Fund, Insured Fund and USA
Intermediate Fund.
As of October 31, 1995, the Fund believes the following accounts held 5% or
more of the outstanding shares of the Tax-Free Insured Fund B Class: Merrill,
Lynch, Pierce, Fenner & Smith Inc., Mutual Fund Operations, Attention Book
Entry, 4800 Deer Lake Drive East, 3rd Fl., Jacksonville, FL 32246 held of record
for the benefit of others 32,205 shares (13.69%); Gerry M. Fleuriet SUCC TTEE,
Trust A/U/A DTD 3/16/77, Kenneth W. Mac Pherson and Hazel Mac Pherson Grantors,
621 E. Tyler, Harlingen, TX 78550 held 22,520 shares (9.57%); and Anthony F.
Czekanski, 300 Strawbridge Ave., Westmont, NJ 08108 held 12,485 shares (5.31%)
of the outstanding shares of the Tax-Free Insured Fund B Class.
As of October 31, 1995, the Fund believes the following accounts held 5% or
more of the outstanding shares of the Tax-Free USA Intermediate Fund B Class:
Maimee G. Chapin and Merlaine G. Tralham and Dolores Ann Lund & Norma J.
Alguard, 429 Lower 36th Avenue South, Jacksonville Beach, FL 32250 held 10,268
shares (10.67%); Bobbie Crump and Miriam Crump, Tennants In Common, 7460 Ricnzi
Blvd., Baton Rouge, LA 70809 held 9,765 shares (10.15%); Charles D. La Motta,
286 Stonegate Drive, Devon, PA 19333 held 9,699 shares (10.08%); Smith Barney,
Inc., 00110803614, 388 Greenwich Street, New York, NY 10013 held 7,869 shares
(8.18%); Merrill, Lynch, Pierce, Fenner & Smith Inc., Mutual Fund Operations,
Attention Book Entry, 4000 Deer Lake Drive East, 3rd Fl., Jacksonville, FL 32246
held of record for the benefit of others 7,613 shares (7.91%); Ann Shirilla, 626
Dumont, Campbell, OH 44405 held 6,020 shares (6.25%); Anna Swavely, Katherine M.
Tulley and Carol A. Masterson, 269 Madison Rd., Huntington Valley, PA 19006 held
5,747 shares (5.97%); and NFSC FEBO OBV-636037, Craig II. Rosen and Judith E.
Rosen, 42 Southwood Drive, Cherry Hill, NJ 08002 held 5,203 shares (5.40%).
DMH Corp., Delaware Management Company, Inc., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Management Trust Company, Delaware
International Holdings Ltd., Founders Holdings, Inc., Delaware International
Advisers Ltd. and Delaware Investment Counselors, Inc. are direct or indirect,
wholly-owned subsidiaries of Delaware Management Holdings, Inc. ("DMH"). On
April 3, 1995, a merger between DMH and a wholly-owned subsidiary of Lincoln
National Corporation ("Lincoln National") was completed. In connection with the
merger, new Investment Management Agreements between the Fund on behalf of each
Series and the Manager were executed following shareholder approval. DMH and the
Manager are now wholly-owned subsidiaries, and subject to the ultimate control,
of Lincoln National. Lincoln National, with headquarters in Fort Wayne, Indiana,
is a diversified organization with operations in many aspects of the financial
services industry, including insurance and investment management.
Directors and principal officers of the Fund 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.
- 27
<PAGE> 111
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 28
*WAYNE A. STORK (58)
Chairman, President, Chief Executive Officer, Director and/or Trustee of the
Fund, 15 other funds in the Delaware Group (which excludes Delaware Pooled
Trust, Inc.) and Delaware Management Holdings, Inc.
Chairman and Director of Delaware Investment Counselors, Inc. and Delaware
Pooled Trust, Inc.
Chairman, Chief Executive Officer, Chief Investment Officer and Director of
Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of DMH Corp., Delaware
International Advisers Ltd., Delaware International Holdings Ltd. and
Founders Holdings, Inc.
Director of Delaware Distributors, Inc. and Delaware Service Company, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
WINTHROP S. JESSUP (50)
Executive Vice President of the Fund, 15 other funds in the Delaware Group
(which excludes Delaware Pooled Trust, Inc.) and Delaware Management
Holdings, Inc.
President and Chief Executive Officer of Delaware Pooled Trust, Inc.
President and Director of Delaware Investment Counselors, Inc.
Executive Vice President and Director of DMH Corp., Delaware Management
Company, Inc., Delaware International Holdings Ltd. and Founders Holdings,
Inc.
Vice Chairman and Director of Delaware Distributors, Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Management Trust Company, Delaware Service Company, Inc.
and Delaware International Advisers Ltd.
During the past five years, Mr. Jessup has served in various executive
capacities at different times within the Delaware organization.
RICHARD G. UNRUH, JR. (56)
Executive Vice President of the Fund and each of the other 16 funds in the
Delaware Group.
Executive Vice President and Director of Delaware Management Company, Inc.
Senior Vice President of Delaware Management Holdings, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
WALTER P. BABICH (68)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from 1988
to 1991, he was a partner of I&L Investors.
ANTHONY D. KNERR (56)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Consultant, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989, he was also
a lecturer in English at the University. In addition, Mr. Knerr was
Chairman of The Publishing Group, Inc., New York, from 1988 to 1990. Mr.
Knerr founded The Publishing Group, Inc. in 1988.
ANN R. LEVEN (55)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of the
Smithsonian Institution, Washington, DC, and from 1975 to 1994, she was
Adjunct Professor of Columbia Business School.
W. THACHER LONGSTRETH (75)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
1617 John F. Kennedy Boulevard, Philadelphia, PA 19103.
Vice Chairman, Packquisition Corp., a financial printing, commercial printing
and information processing firm.
Philadelphia City Councilman.
President, MLW, Associates.
Director, Tasty Baking Company.
Director, Healthcare Services Group.
CHARLES E. PECK (69)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of The
Ryland Group, Inc., Columbia, MD.
- ------------------
*Director affiliated with the investment manager of the Fund and considered an
"interested person" as defined in the Investment Company Act of 1940.
- 28
<PAGE> 112
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 29
DAVID K. DOWNES (55)
Senior Vice President/Chief Administrative Officer/Chief Financial Officer of
the Fund, each of the other 16 funds in the Delaware Group and Delaware
Management Company, Inc.
Chairman and Director of Delaware Management Trust Company.
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer/Treasurer of Delaware Management Holdings, Inc.
Senior Vice President/Chief Financial Officer/Treasurer and Director of DMH
Corp.
Senior Vice President/Chief Administrative Officer/Chief Financial Officer and
Director of Delaware Service Company, Inc.
Senior Vice President/Chief Administrative Officer of Delaware Distributors,
L.P.
Senior Vice President/Chief Administrative Officer and Director of Delaware
Distributors, Inc.
Chief Financial Officer and Director of Delaware International Holdings Ltd.
Senior Vice President/Chief Financial Officer/Treasurer of Delaware Investment
Counselors, Inc.
Senior Vice President and Director of Founders Holdings, Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes was Chief Administrative
Officer, Chief Financial Officer and Treasurer of Equitable Capital
Management Corporation, New York, from December 1985 through August 1992,
Executive Vice President from December 1985 through March 1992, and Vice
Chairman from March 1992 through August 1992.
GEORGE M. CHAMBERLAIN, JR. (48)
Senior Vice President and Secretary of the Fund, each of the other 16 funds in
the Delaware Group, Delaware Management Holdings, Inc., Delaware
Distributors, L.P. and Delaware Investment Counselors, Inc.
Executive Vice President, Secretary and Director of Delaware Management Trust
Company.
Senior Vice President, Secretary and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc. and Delaware Service
Company, Inc.
Corporate Vice President, Secretary and Director of Founders Holdings, Inc.
Secretary and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various capacities
at different times within the Delaware organization.
PATRICK P. COYNE (32)
Vice President/Senior Portfolio Manager of the Fund, of nine other funds in
the Delaware Group and Delaware Management Company, Inc.
From 1986 to 1990, Mr. Coyne was Vice President/ Municipal Trading with Kidder
Peabody & Co., Inc. Mr. Coyne joined the Delaware Group in 1990.
JOSEPH H. HASTINGS (45)
Vice President/Corporate Controller of the Fund, each of the other 16 funds in
the Delaware Group, Delaware Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Investment
Counselors, Inc. and Founders Holdings, Inc.
Executive Vice President/Treasurer/Chief Financial Officer of Delaware
Management Trust Company.
Assistant Treasurer of Founders CBO Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief Financial
Officer for Prudential Residential Services, L.P., New York, NY from 1989
to 1992. Prior to that, Mr. Hastings served as Controller and Treasurer for
Fine Homes International, L.P., Stamford, CT from 1987 to 1989.
MICHAEL P. BISHOF (33)
Vice President/Treasurer of the Fund, each of the other 16 funds in the
Delaware Group, Delaware Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Founders
Holdings, Inc. and Founders CBO Corporation.
Prior to joining the Delaware Group in 1995, Mr. Bishof was a vice president
for Bankers Trust, New York, NY from 1994 to 1995, a vice president for
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.
- 29
<PAGE> 113
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 30
The following is a compensation table listing for each director entitled to
receive compensation, the aggregate compensation received from the Fund and the
total compensation received from all Delaware Group funds for the fiscal year
ended August 31, 1995 and an estimate of annual benefits to be received upon
retirement under the Delaware Group Retirement Plan for Directors/Trustees as of
August 31, 1995.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT ESTIMATED TOTAL
BENEFITS ANNUAL COMPENSATION
AGGREGATE ACCRUED BENEFITS FROM ALL 17
COMPENSATION AS PART OF UPON DELAWARE
NAME FROM FUND FUND EXPENSES RETIREMENT* GROUP FUNDS
- ---- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
W. Thacher Longstreth $ 3,098.19 None $18,100 $51,187.97
Ann R. Leven $ 3,600.63 None $18,100 $59,323.96
Walter P. Babich $ 3,667.23 None $18,100 $60,323.88
Anthony D. Knerr $ 2,533.11 None $18,100 $43,815.91
Charles E. Peck $ 2,927.19 None $18,100 $48,052.01
</TABLE>
*Under the terms of the Delaware Group Retirement Plan for Directors/Trustees,
each disinterested 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 fund in the
Delaware Group for a period equal to the lesser of the number of years that
such person served as a director or the remainder of such person's life. The
amount of such payments will be equal, on an annual basis, to the amount of the
annual retainer that is paid to directors of each fund at the time of such
person's retirement. If an eligible director retired as of August 31, 1995, he
or she would be entitled to annual payments totaling $18,100, in the aggregate,
from all of the funds in the Delaware Group, based on the number of funds in
the Delaware Group as of that date.
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and for
shareholders of classes of other funds in the Delaware Group are set forth in
the relevant prospectuses for such classes. The following supplements that
information. The Fund may modify, terminate or suspend the exchange privilege
upon 60 days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the exchange
is made. As with any purchase, an investor should obtain and carefully read that
fund's prospectus before buying shares in an exchange. The prospectus contains
more complete information about the fund, including charges and expenses. A
shareholder requesting such an exchange will be sent a current prospectus and an
authorization form for any of the other mutual funds in the Delaware Group.
Exchange instructions must be signed by the record owner(s) exactly as the
shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund and the
purchase of another. The sale may involve either a capital gain or loss to the
shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between funds
in the Delaware Group on behalf of their clients by telephone or other expedited
means. This service may be discontinued or revised at any time by the Transfer
Agent. Such exchange requests may be rejected if it is determined that a
particular request or the total requests at any time could have an adverse
effect on any of the funds. Requests for expedited exchanges may be submitted
with a properly completed exchange authorization form, as described above.
TELEPHONE EXCHANGE PRIVILEGE
Shareholders owning shares for which certificates have not been issued or
their investment dealers of record may exchange shares by telephone for shares
in other mutual funds in the Delaware Group. This service is automatically
provided unless the Fund receives written notice from the shareholder to the
contrary.
Shareholders or their investment dealers of record may contact the Transfer
Agent at 800-523-1918 (in Philadelphia, 215-988-1241) to effect an exchange. The
shareholder's current Series account number must be identified, as well as the
registration of the account, the share or dollar amount to be exchanged and the
fund into which the exchange is to be made. Requests received on any day after
the time the offering price and net asset value are determined will be processed
the following day. See Determining Offering Price and Net Asset Value. Any new
account established through the exchange will automatically carry the same
registration, shareholder information and dividend option as the account from
which the shares were exchanged. The exchange requirements of the fund into
which the exchange is being made, such as sales charges, eligibility and
investment minimums, must be met. (See the prospectus of the fund desired or
inquire by calling the Transfer Agent.)
The telephone exchange privilege is intended as a convenience to shareholders
and is not intended to be a vehicle to speculate on short-term swings in the
securities market through frequent transactions in and out of the funds in the
Delaware Group. Telephone exchanges may be subject to limitations as to amounts
or frequency. The Transfer Agent and the Fund reserve the right to record
exchange instructions received by telephone, to reject any exchange request and
to modify, terminate or suspend the telephone exchange service at any time in
the future.
As described in the Series' Prospectuses, neither the Fund nor the Transfer
Agent is responsible for any shareholder loss incurred in acting upon written or
telephone instructions for redemption or exchange of Series shares which are
reasonably believed to be genuine.
RIGHT TO REFUSE TIMING ACCOUNTS
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Fund will refuse any new Timing
Arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Group funds from Timing Firms. The 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
- 30
<PAGE> 114
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 31
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 Group funds: (1) Decatur Income
Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4) Limited-Term
Government Fund, (5) Tax-Free USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware Group
funds are available for Timed Exchanges. Assets redeemed or exchanged out of
Timing Accounts in Delaware Group funds not listed above may not be reinvested
back into that Timing Account. The Fund reserves the right to apply these same
restrictions to the account(s) of any person whose transactions seem to follow a
timing pattern (as described above).
The 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 the 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 the Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers of
record will be permitted to make exchanges or redemptions.
Following is a summary of the investment objectives of the other Delaware
Group funds:
DELAWARE FUND seeks long-term growth by a balance of capital appreciation,
income and preservation of capital. It uses a dividend-oriented valuation
strategy to select securities issued by established companies that are believed
to demonstrate potential for income and capital growth. DEVON FUND seeks current
income and capital appreciation by investing primarily in income-producing
common stocks, with a focus on common stocks the Manager believes have the
potential for above average dividend increases over time.
TREND FUND seeks long-term growth by investing in common stock issued by
emerging growth companies exhibiting strong capital appreciation potential.
VALUE FUND seeks capital appreciation by investing primarily in common stocks
whose market values appear low relative to their underlying value or future
potential.
DELCAP FUND seeks long-term capital growth by investing in common stocks and
securities convertible into common stocks of companies that have a demonstrated
history of growth and have the potential to support continued growth.
DECATUR INCOME FUND seeks the highest possible current income by investing
primarily in common stocks that provide the potential for income and capital
appreciation without undue risk to principal. DECATUR TOTAL RETURN FUND seeks
long-term growth by investing primarily in securities that provide the potential
for income and capital appreciation without undue risk to principal.
DELCHESTER FUND seeks as high a current income as possible by investing
principally in corporate bonds, and also in U.S. Government securities and
commercial paper.
U.S. GOVERNMENT FUND seeks high current income by investing primarily in
long-term debt obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
LIMITED-TERM GOVERNMENT FUND seeks high, stable income by investing primarily
in a portfolio of short- and intermediate-term securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and instruments
secured by such securities. U.S. GOVERNMENT MONEY FUND seeks maximum current
income with preservation of principal and maintenance of liquidity by investing
only in short-term securities issued or guaranteed as to principal and interest
by the U.S. Government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities, while maintaining a stable net
asset value.
DELAWARE CASH RESERVE seeks the highest level of income consistent with the
preservation of capital and liquidity through investments in short-term money
market instruments, while maintaining a stable net asset value.
TAX-FREE 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.
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.
INTERNATIONAL EQUITY FUND seeks to achieve long-term growth without undue risk
to principal by investing primarily in international securities that provide the
potential for capital appreciation and income. GLOBAL BOND FUND seeks to achieve
current income consistent with the preservation of principal by investing
primarily in global fixed income securities that may also provide the potential
for capital appreciation. GLOBAL ASSETS FUND seeks to achieve long-term total
return by investing in global securities which will provide higher current
income than a portfolio comprised exclusively of equity securities, along with
the potential for capital growth.
DELAWARE GROUP PREMIUM FUND offers nine series available exclusively as
funding vehicles for certain insurance company separate accounts. EQUITY/INCOME
SERIES seeks the highest possible total rate of return by selecting issues that
exhibit the potential for capital appreciation while providing higher than
average dividend income. HIGH YIELD SERIES seeks as high a current income as
possible by investing in rated and unrated corporate bonds, U.S. Government
securities and commercial paper. CAPITAL RESERVES SERIES seeks a high stable
level of current income while minimizing fluctuations in principal by investing
in a
- 31
<PAGE> 115
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 32
diversified portfolio of short- and intermediate-term securities. MONEY MARKET
SERIES seeks the highest level of income consistent with preservation of capital
and liquidity through investments in short-term money market instruments. GROWTH
SERIES seeks long-term capital appreciation by investing its assets in a
diversified portfolio of securities exhibiting the potential for significant
growth. MULTIPLE STRATEGY SERIES seeks a balance of capital appreciation, income
and preservation of capital. It uses a dividend-oriented valuation strategy to
select securities issued by established companies that are believed to
demonstrate potential for income and capital growth. INTERNATIONAL EQUITY SERIES
seeks long-term growth without undue risk to principal by investing primarily in
equity securities of foreign issuers that provide the potential for capital
appreciation and income. VALUE SERIES seeks capital appreciation by investing in
small- to midcap common stocks whose market value appears low relative to their
underlying value or future earnings and growth potential. Emphasis will also be
placed on securities of companies that may be temporarily out of favor or whose
value is not yet recognized by the market. EMERGING GROWTH SERIES seeks
long-term capital appreciation by investing primarily in small-cap common stocks
and convertible securities of emerging and other growth-oriented companies.
These securities will have been judged to be responsive to changes in the market
place and to have fundamental characteristics to support growth. Income is not
an objective.
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus from the Distributor. Read it carefully
before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the information
contained in each fund's prospectus(es).
GENERAL INFORMATION
The Manager is the investment manager of each Series of the Fund. The Manager
or its affiliate, Delaware International Advisers Ltd., also manages the other
funds in the Delaware Group. The Manager, through a separate division, also
manages private investment accounts. While investment decisions for the Series
are made independently from those of the other funds and accounts, they may
make investment decisions at the same time.
Access persons and advisory persons of the Delaware Group of funds, as those
terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide services to
the Manager, Delaware International Advisers Ltd. or their affiliates, are
permitted to engage in personal securities transactions subject to the
exceptions set forth in Rule 17j-1 and the following general restrictions and
procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for the Fund and for the other
mutual funds in the Delaware Group. As previously described, prior to January 3,
1995, DDI served as the national distributor for the Series. The Distributor
and, in its capacity as such, DDI received net commissions from the Series on
behalf of their respective Class A Shares, after reallowances to dealers, as
follows:
<TABLE>
<CAPTION>
USA FUND
CLASS A SHARES
TOTAL
AMOUNT NET
OF UNDER- AMOUNTS COMMISSION
FISCAL WRITING REALLOWED TO
YEAR ENDING COMMISSION TO DEALERS DISTRIBUTOR
- ----------- ---------- ---------- ----------
<S> <C> <C> <C>
8/31/95 $1,466,837 $1,217,558 $249,279
8/31/94 1,707,115 1,424,013 283,102
8/31/93 2,040,284 1,693,492 346,792
</TABLE>
<TABLE>
<CAPTION>
INSURED FUND
CLASS A SHARES
TOTAL
AMOUNT AMOUNTS NET
OF UNDER- REALLOWED COMMISSION
FISCAL WRITING TO TO
YEAR ENDING COMMISSION DEALERS DISTRIBUTOR
- ----------- ---------- --------- ----------
<S> <C> <C> <C>
8/31/95 $162,537 $134,900 $ 27,637
8/31/94 261,324 216,220 45,104
8/31/93 477,503 396,947 80,556
</TABLE>
<TABLE>
<CAPTION>
USA INTERMEDIATE FUND
CLASS A SHARES
TOTAL
AMOUNT AMOUNTS NET
OF UNDER- REALLOWED COMMISSION
FISCAL WRITING TO TO
YEAR ENDING COMMISSION DEALERS DISTRIBUTOR
- ----------- ---------- --------- ----------
<S> <C> <C> <C>
8/31/95 $ 48,037 $ 39,409 $ 8,628
8/31/94 172,869 141,372 31,497
8/31/93 213,327 174,151 39,176
</TABLE>
During the fiscal year ended 1993, there were no Limited CDSC payments made to
DDI with respect to the Class A Shares of the each Series. During the fiscal
year ended August 31, 1994, DDI received Limited CDSC payments in the amount of
$1,449 with respect to the Class A Shares of the USA Fund. No amounts were paid
for 1994 with respect to the Class A Shares of the Insured Fund and USA
Intermediate Fund. During the fiscal year ended August 31, 1995, the
Distributor, and in its capacity as such, DDI received Limited CDSC payments in
the amounts of $12,302, $74 and $6,145 with respect to the Class A Shares of the
USA Fund, Insured Fund and USA Intermediate Fund, respectively.
During the period from inception on May 2, 1994 through August 31, 1994, DDI
received CDSC payments in the amount of $400 with respect to the Class B Shares
of the Insured Fund. No amounts were paid for the fiscal year
- 32
<PAGE> 116
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 33
ended 1994 with respect to the Class B Shares of the USA Fund and USA
Intermediate Fund. During the fiscal year ended August 31, 1995, the Distributor
and, in its capacity as such, DDI received CDSC payments in the amounts of
$120,883, $228 and $756 with respect to the Class B shares of the USA Fund,
Insured Fund and USA Intermediate Fund, respectively.
Effective as of January 1, 1995, all such payments described above have been
paid to the Distributor.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Fund and for the other
mutual funds in the Delaware Group. The Transfer Agent is paid a fee by each
Series 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
Directors, including a majority of the disinterested directors.
The Manager and its affiliates own the name "Delaware Group." Under certain
circumstances, including the termination of the Fund's advisory relationship
with the Manager or its distribution relationship with the Distributor, the
Manager and its affiliates could cause the Fund to delete the words "Delaware
Group" from the Fund's name.
Morgan Guaranty Trust Company of New York ("Morgan"), 60 Wall Street, New
York, NY 10260, is custodian of the Fund's securities and cash. As custodian for
the Fund, Morgan maintains a separate account or accounts for the Fund;
receives, holds and releases portfolio securities on account of the Fund; makes
receipts and disbursements of money on behalf of the Fund; and collects and
receives income and other payments and distributions on account of the Fund's
portfolio securities.
The legality of the issuance of the shares offered hereby registered, pursuant
to Rule 24f-2 under the Investment Company Act of 1940, has been passed upon for
the Fund by Stradley, Ronon, Stevens & Young, Philadelphia, Pennsylvania.
CAPITALIZATION
The Fund has present authorized capitalization of five hundred million shares
of capital stock with a $.01 par value per share. The Board of Directors has
allocated two hundred twenty-five million shares to the Tax-Free USA Fund with
one hundred seventy-five million shares allocated to Class A Shares, twenty-five
million shares to the Class B Shares and twenty-five million shares to the Class
C Shares; one hundred seventy-five million shares to the Tax-Free Insured Fund
with one hundred twenty-five million shares allocated to Class A Shares,
twenty-five million shares to the Class B Shares and twenty-five million shares
to the Class C Shares; and one hundred million shares to the Tax-Free USA
Intermediate Fund with fifty million shares allocated to Class A Shares,
twenty-five million shares to the Class B Shares and twenty-five million shares
to the Class C Shares.
While all shares have equal voting rights on matters affecting the entire
Fund, the Series would vote separately on any matter which affects only one
Series, such as any change in its own investment objective and policies or
action to dissolve the Series and as prescribed by the 1940 Act. Shares of a
Series have a priority in the assets of the Series, and in gains on and income
from the portfolio of the Series. Class A Shares, Class B Shares and Class C
Shares of each Series represent a proportionate interest in the assets of a
Series and have the same voting and other rights and preferences, except that,
as a general matter, Class A Shares, Class B Shares and Class C Shares may vote
only on matters affecting the 12b-1 Plan that relates to the class of shares
that they hold. However, Class B Shares may vote on any proposal to increase
materially the fees to be paid by a Series under the Plan relating to the
respective Class A Shares. The shares of each Class have no preemptive rights
are fully transferable and, when issued, are fully paid and nonassessable.
Prior to May 2, 1994, the Tax-Free USA Fund A Class was known as the Tax-Free
USA Fund, and prior to June 1, 1992, it was known as the USA Series. Prior to
May 2, 1994, the Tax-Free Insured Fund A Class was known as the Tax-Free Insured
Fund, and prior to June 1, 1992, it was known as the USA Insured Series. Prior
to May 2, 1994, the Tax-Free USA Intermediate Fund A Class was known as the
Tax-Free USA Intermediate Fund.
NONCUMULATIVE VOTING
THESE SHARES HAVE NONCUMULATIVE VOTING RIGHTS WHICH MEANS THAT THE HOLDERS OF
MORE THAN 50% OF THE SHARES OF THE FUND VOTING FOR THE ELECTION OF DIRECTORS CAN
ELECT ALL THE DIRECTORS IF THEY CHOOSE TO DO SO, AND, IN SUCH EVENT, THE HOLDERS
OF THE REMAINING SHARES WILL NOT BE ABLE TO ELECT ANY DIRECTORS.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the Securities and Exchange
Commission.
- 33
<PAGE> 117
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 34
APPENDIX A--DESCRIPTION OF RATINGS
BONDS
Excerpts from Moody's description of its bond ratings: Aaa--judged to be the
best quality. They carry the smallest degree of investment risk; Aa--judged to
be of high quality by all standards; A--possess favorable attributes and are
considered "upper medium" grade obligations; Baa--considered as medium grade
obligations. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time; Ba--judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; Caa--of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest;
Ca--represent obligations which are speculative in a high degree. Such issues
are often in default or have other marked shortcomings; C--the lowest rated
class of bonds, and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB--regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D--in default, and payment
of interest and/or repayment of principal is in arrears.
COMMERCIAL PAPER
Excerpts from S&P's description of its two highest commercial paper ratings:
A-1--judged to be the highest investment grade category possessing the highest
relative strength; A-2--investment grade category possessing less relative
strength than the highest rating.
Excerpts from Moody's description of its two highest commercial paper ratings:
P-1--the highest grade possessing greatest relative strength; P-2--second
highest grade possessing less relative strength than the highest grade.
STATE AND MUNICIPAL NOTES
MIG-1--Notes bearing this description are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2--Notes bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
- 34
<PAGE> 118
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 35
APPENDIX B--EQUIVALENT YIELDS: TAX EXEMPT VERSUS TAXABLE SECURITIES
The table below shows the effect of the tax status of bonds on the effective
yield received by their holders under the federal income tax laws. It gives the
approximate yield a taxable security must earn at various income brackets to
produce after-tax yields equivalent to those of tax-exempt bonds yielding from
4% to 9%.
This table, which is based on incremental tax rates at the specified levels of
taxable income in effect on the date of this Part B, provides separate
computations for taxpayers who file joint or individual returns.
1995 RATES
<TABLE>
<CAPTION>
4.0%* 5.0%* 6.0%* 7.0%* 8.0%* 9.0%*
TAXABLE INCOME FEDERAL FEDERAL FEDERAL FEDERAL FEDERAL FEDERAL
- ------------------------------------- FEDERAL TAXABLE TAXABLE TAXABLE TAXABLE TAXABLE TAXABLE
JOINT RETURN SINGLE RETURN RATE RAX EQUIVALENT EQUIVALENT EQUIVALENT EQUIVALENT EQUIVALENT EQUIVALENT
- ---------------- ---------------- -------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0-38,000 $0-22,750 15% 4.7% 5.9% 7.1% 8.2% 9.4% 10.6%
$38,001-91,850 $22,751-55,100 28% 5.6% 6.9% 8.3% 9.7% 11.1% 12.5%
$91,851-140,000 $55,101-115,000 31% 5.8% 7.2% 8.7% 10.1% 11.6% 13.0%
$140,001-250,000 $115,001-250,000 36%+ 6.3% 7.8% 9.4% 10.9% 12.5% 14.1%
Over $250,000 Over $250,000 39.6%+ 6.6% 8.3% 9.9% 11.6% 13.2% 14.9%
</TABLE>
The equivalent yields are calculated on 4, 5, 6, 7, 8 and 9 percent tax-free
yields. While it is expected that the Series will invest principally in
obligations generating interest exempt from federal income tax, other income
received by the Series may be taxable.
- ------------------
*This should not be considered representative of the Series' yield at any
specific time.
+For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate. In
addition, a 10% surtax (not applicable to capital gains) applies to certain
high-income taxpayers. It is computed by applying a 39.6% rate to taxable
income in excess of $250,000. The above table does not reflect the personal
exemption phaseout nor the limitations of itemized deductions that may apply.
- 35
<PAGE> 119
DELAWARE GROUP TAX-FREE FUND, INC.-PART B--PAGE 36
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for the Fund and, in its
capacity as such, audits the financial statements contained in the Fund's Annual
Reports. The USA Fund's, Insured Fund's and USA Intermediate Fund's Statements
of Net Assets, Statements of Operations, Statements of Changes in Net Assets and
Notes to Financial Statements, as well as the reports of Ernst & Young LLP,
independent auditors, for the fiscal year ended August 31, 1995, are included in
the Fund's Annual Reports to shareholders. The financial statements, the notes
relating thereto and the reports of Ernst & Young LLP, listed above are
incorporated by reference from the Annual Reports into this Part B.
- 36
<PAGE> 120
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - Financial Highlights
*Part B - Statements of Net Assets
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Accountant's Reports
* The financial statements and Accountant's Reports
listed above are incorporated by reference from the
Registrant's Annual Reports for the fiscal year ended
August 31, 1995 into Part B.
(b) Exhibits:
(1) Articles of Incorporation.
(a) Articles of Incorporation, as
amended and supplemented to
date, attached as Exhibit.
(b) Form of Articles Supplementary (November
1995) attached as Exhibit.
(2) By-Laws. By-Laws, as amended to date,
attached as Exhibit.
(3) Voting Trust Agreement. Inapplicable.
i
<PAGE> 121
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
(4) Copies of All Instruments Defining the
Rights of Holders.
(a) Articles of Incorporation, Articles Supplementary
and Articles of Amendment. Article Second of
Articles Supplementary (April 29, 1994), Article
Fifth of the Articles of Incorporation (August 17,
1983) and Article Eighth of Articles of Amendment
(May 2, 1985) attached as Exhibit 24(b)(1)(a) and
Form of Articles Supplementary (November 1995)
attached as Exhibit 24(b)(1)(b).
(b) By-Laws. Article II, Article III, as amended, and
Article XIII, which was subsequently redesignated
as Article XIV, attached as Exhibit 24(b)(2).
(5) Investment Management Agreements. Investment Management
Agreements between Delaware Management Company,
Inc. and the Registrant on behalf of each Series dated
April 3, 1995 attached as Exhibit.
(6) (a) Distribution Agreements.
(i) Form of Distribution Agreement (April 1995)
included as Module.
(ii) Form of Amendment No. 1 to Distribution
Agreement (November 1995) included as
Module.
(b) Administration and Service Agreement. Form of
Administration and Service Agreement (as amended
November 1995) included as Module.
(c) Dealer's Agreement. Form of Dealer's Agreement
(as amended November 1995) included as Module.
(d) Form of Mutual Fund Agreement for the Delaware
Group of Funds included as Module.
(7) Bonus, Profit Sharing, Pension Contracts. Amended and
Restated Profit Sharing Plan included as Module.
(8) Custodian Agreements. Incorporated into this filing by
reference to Post-Effective Amendment No. 11 filed October
26, 1989 and Post-Effective Amendment No. 16 filed
November 13, 1992.
ii
<PAGE> 122
<TABLE>
<CAPTION>
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
<S> <C>
(9) Other Material Contracts. Shareholders Services Agreements
incorporated into this filing by reference to Post-Effective
Amendment No. 9 filed August 26, 1988 and Post-Effective
Amendment No. 16 filed November 13, 1992.
(10) Opinion of Counsel. Filed with letter relating to Rule
24f-2 on October 25, 1995.
(11) Consent of Auditors. Attached as Exhibit.
(12) Inapplicable.
(13) Undertaking of Initial Shareholder. Incorporated into this
filing by reference to Pre-Effective Amendment No. 1 filed
November 22, 1983.
(14) Inapplicable.
(15) Plans under Rule 12b-1.
(a) Form of Plan under Rule 12b-1 for Class A
(November 1995) included as Module.
(b) Form of Plan under Rule 12b-1 for Class B
(November 1995) included as Module.
(c) Form of Plan under Rule 12b-1 for Class C
(November 1995) included as Module.
(16) Schedules of Computation for each Performance Quotation.
Attached as Exhibit.
(17) Financial Data Schedules. Attached as Exhibit.
(18) Inapplicable.
(19) Other: Directors' Power of Attorney. Attached as Exhibit.
Item 25. Persons Controlled by or under Common Control with Registrant. None.
</TABLE>
iii
<PAGE> 123
<TABLE>
<CAPTION>
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
Item 26. Number of Holders of Securities.
(1) (2)
Number of
Title of Class Record Holders*
-------------- --------------
<S> <C>
Delaware Group Tax-Free Fund, Inc.'s
Tax-Free USA Fund Series:
Tax-Free USA Fund A Class
Common Stock Par Value 17,104 Accounts as of
$.01 Per Share October 31, 1995
Tax-Free USA Fund B Class
Common Stock Par Value 479 Accounts as of
$.01 Per Share October 31, 1995
Tax-Free USA Fund C Class
Common Stock Par Value 0 Accounts as of
$.01 Per Share October 31, 1995
Delaware Group Tax-Free Fund, Inc.'s
Tax-Free Insured Fund Series:
Tax-Free Insured Fund A Class
Common Stock Par Value 2,021 Accounts as of
$.01 Per Share October 31, 1995
Tax-Free Insured Fund B Class
Common Stock Par Value 57 Accounts as of
$.01 Per Share October 31, 1995
Tax-Free Insured Fund C Class
Common Stock Par Value 0 Accounts as of
$.01 Per Share October 31, 1995
</TABLE>
* Class C Shares were not offered prior to the effective date of this
Registration Statement.
iv
<PAGE> 124
<TABLE>
<CAPTION>
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
Number of
Title of Class Record Holders*
-------------- --------------
<S> <C>
Delaware Group Tax-Free Fund, Inc.'s
Tax-Free USA Intermediate Fund Series:
Tax-Free USA Intermediate Fund A Class
Common Stock Par Value 549 Accounts as of
$.01 Per Share October 31, 1995
Tax-Free USA Intermediate Fund B Class
Common Stock Par Value 38 Accounts as of
$.01 Per Share October 31, 1995
Tax-Free USA Intermediate Fund C Class
Common Stock Par Value 0 Accounts as of
$.01 Per Share October 31, 1995
</TABLE>
* Class C Shares were not offered prior to the effective date of this
Registration Statement.
Item 27. Indemnification. Incorporated into this filing by
reference to initial Registration Statement filed
September 19, 1983 and Article VII of the By-Laws, as
amended, attached as Exhibit 24(b)(2).
Item 28. Business and Other Connections of Investment Adviser.
Delaware Management Company, Inc. (the "Manager") or
its affiliate, Delaware International Advisers Ltd., also serves as investment
manager to the other funds in the Delaware Group (Delaware Group Delaware Fund,
Inc., Delaware Group Trend Fund, Inc., Delaware Group Value Fund, Inc.,
Delaware Group DelCap Fund, Inc., Delaware Group Decatur Fund, Inc., Delaware
Group Delchester High-Yield Bond Fund, Inc., Delaware Group Government Fund,
Inc., Delaware Group Limited-Term Government Funds, Inc., Delaware Group Cash
Reserve, Inc., DMC Tax-Free Income Trust-Pennsylvania, Delaware Group Tax-Free
Money Fund, Inc., Delaware Group Premium Fund, Inc., Delaware Group Global &
International Funds, Inc., Delaware Pooled Trust, Inc., Delaware Group Dividend
and Income Fund, Inc. and Delaware Group Global Dividend and Income Fund, Inc.)
and provides investment advisory services to institutional accounts, primarily
retirement plans and endowment funds. In addition, certain directors of the
Manager also serve as directors/trustees of the other Delaware Group funds, and
certain officers are also officers of these other funds. A company owned by
the Manager's parent company acts as principal underwriter to the mutual funds
in the Delaware Group (see Item 29 below) and another such company acts as the
shareholder servicing, dividend disbursing and transfer agent for all of the
mutual funds in the Delaware Group.
v
<PAGE> 125
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
The following persons serving as directors or officers of the
Manager have held the following positions during the past two years:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------------- -------------------------------------------------------------------------------------
<S> <C>
Wayne A. Stork Chairman of the Board, Chief Executive Officer, Chief Investment Officer and Director of
Delaware Management Company, Inc.; President, Chief Executive Officer, Chairman of the
Board and Director of the Registrant, and with the exception of Delaware Pooled Trust,
Inc., each of the other funds in the Delaware Group and Delaware Management Holdings,
Inc.; Chairman of the Board and Director of Delaware Pooled Trust, Inc. and Delaware
Investment Counselors, Inc.; Chairman, Chief Executive Officer and Director of DMH Corp.,
Delaware International Advisers Ltd., Delaware International Holdings Ltd. and Founders
Holdings, Inc.; and Director of Delaware Distributors, Inc. and Delaware Service Company,
Inc.
Winthrop S. Jessup Executive Vice President and Director of Delaware Management Company, Inc., DMH Corp.,
Delaware International Holdings Ltd. and Founders Holdings, Inc.; Executive Vice
President of the Registrant and, with the exception of Delaware Pooled Trust, Inc., each
of the other funds in the Delaware Group and Delaware Management Holdings, Inc.;
President and Chief Executive Officer of Delaware Pooled Trust, Inc.; Vice Chairman of
Delaware Distributors, L.P.; Vice Chairman and Director of Delaware Distributors, Inc.;
Director of Delaware Service Company, Inc., Delaware Management Trust Company and
Delaware International Advisers Ltd.; and President and Director of Delaware Investment
Counselors, Inc.
Richard G. Unruh, Jr. Executive Vice President and Director of Delaware Management Company, Inc.; Executive
Vice President of the Registrant and each of the other funds in the Delaware Group;
Senior Vice President of Delaware Management Holdings, Inc.; and Director of Delaware
International Advisers Ltd.
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company since
1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Chairman of Finance
Committee, Mid Atlantic, Inc., since 1989, 2040 Market Street, Philadelphia, PA
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
vi
<PAGE> 126
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------------- ------------------------------------------------------------------------------------
<S> <C>
Paul E. Suckow Senior Vice President/Chief Investment Officer, Fixed Income of Delaware Management
Company, Inc., the Registrant, each of the other funds in the Delaware Group and
Delaware Management Holdings, Inc.; Senior Vice President and Director of Founders
Holdings, Inc.; and Director of Founders CBO Corporation
David K. Downes Senior Vice President, Chief Administrative Officer and Chief Financial Officer of
Delaware Management Company, Inc., the Registrant and each of the other funds in the
Delaware Group; Chairman and Director of Delaware Management Trust Company; Senior Vice
President, Chief Administrative Officer, Chief Financial Officer and Treasurer of
Delaware Management Holdings, Inc.; Senior Vice President, Chief Financial Officer,
Treasurer and Director of DMH Corp.; Senior Vice President, Chief Administrative Officer
and Director of Delaware Distributors, Inc.; Senior Vice President and Chief
Administrative Officer of Delaware Distributors, L.P.; Senior Vice President, Chief
Administrative Officer, Chief Financial Officer and Director of Delaware Service
Company, Inc.; Chief Financial Officer and Director of Delaware International Holdings
Ltd.; Senior Vice President, Chief Financial Officer and Treasurer of Delaware
Investment Counselors, Inc.; Senior Vice President and Director of Founders Holdings,
Inc.; and Director of Delaware International Advisers Ltd.
George M. Chamberlain, Jr. Senior Vice President, Secretary and Director of Delaware Management Company, Inc., DMH
Corp., Delaware Distributors, Inc. and Delaware Service Company, Inc.; Senior Vice
President and Secretary of the Registrant, each of the other funds in the Delaware
Group, Delaware Distributors, L.P., Delaware Investment Counselors, Inc. and Delaware
Management Holdings, Inc.; Executive Vice President, Secretary and Director of Delaware
Management Trust Company; Corporate Vice President, Secretary and Director of Founders
Holdings, Inc.; Secretary and Director of Delaware International Holdings Ltd.; and
Director of Delaware International Advisers Ltd.
Director of ICI Mutual Insurance Co. since 1992, P.O. Box 730, Burlington, VT
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
vii
<PAGE> 127
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------------- -------------------------------------------------------------------------------------
<S> <C>
Richard J. Flannery Managing Director/Corporate Tax & Affairs of Delaware Management Company, Inc., Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust Company, Delaware
International Holdings Ltd., Delaware Investment Counselors, Inc. and Founders CBO
Corporation; Vice President of the Registrant and each of the other funds in the Delaware
Group; Managing Director/Corporate Tax & Affairs and Director of Founders Holdings, Inc.;
and Director of Delaware International Advisers Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverton, PA; Director
and Member of Executive Committee of Stonewall Links, Inc. since 1991, Bulltown Rd.,
Elverton, PA
Michael P. Bishof(1) Vice President and Treasurer of Delaware Management Company, Inc., the Registrant, each
of the other funds in the Delaware Group, Delaware Management Holdings, Inc., DMH Corp.,
Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.,
Founders Holdings, Inc. and Founders CBO Corporation
Eric E. Miller Vice President and Assistant Secretary of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group, Delaware Management Holdings,
Inc., DMH Corp., Delaware Distributors, L.P., Delaware Distributors Inc., Delaware
Service Company, Inc., Delaware Management Trust Company, Delaware Investment Counselors,
Inc. and Founders Holdings, Inc.
Richelle S. Maestro Vice President and Assistant Secretary of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group, Delaware Management Holdings,
Inc., Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company,
Inc., DMH Corp., Delaware Management Trust Company, Delaware Investment Counselors, Inc.
and Founders Holdings, Inc.; and Assistant Secretary of Founders CBO Corporation
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Ln., Philadelphia, PA
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
viii
<PAGE> 128
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------------- -------------------------------------------------------------------------------------
<S> <C>
Joseph H. Hastings Vice President/Corporate Controller of Delaware Management Company, Inc., the Registrant,
each of the other funds in the Delaware Group, Delaware Management Holdings, Inc., DMH
Corp., Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., Delaware Investment Counselors, Inc. and Founders Holdings, Inc.;
Executive Vice President, Chief Financial Officer and Treasurer of Delaware Management
Trust Company; and Assistant Treasurer of Founders CBO Corporation
Bruce A. Ulmer Vice President/Director of Internal Audit of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group, Delaware Management Holdings,
Inc., DMH Corp. and Delaware Management Trust Company
Lisa O. Brinkley(2) Vice President/Compliance of Delaware Management Company, Inc., the Registrant, each of
the other funds in the Delaware Group, DMH Corp., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Management Trust Company and
Delaware Investment Counselors, Inc.
Rosemary E. Milner Vice President/Legal of Delaware Management Company, Inc., the Registrant, each of the
other funds in the Delaware Group, Delaware Distributors, L.P. and Delaware Distributors,
Inc.
Douglas L. Anderson(3) Vice President/Operations of Delaware Management Company, Inc. and Delaware Service
Company, Inc.; and Vice President/Operations and Director of Delaware Management Trust
Company
Michael T. Taggart(4) Vice President/Facilities Management and Administrative Services of Delaware Management
Company, Inc.
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds, the fixed income funds and the closed-end funds
in the Delaware Group; Vice President of Founders Holdings, Inc.; and Treasurer and
Director of Founders CBO Corporation
J. Michael Pokorny Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds and the fixed income funds in the Delaware Group
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
ix
<PAGE> 129
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------------- -------------------------------------------------------------------------------------
<S> <C>
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds and the fixed income funds in the Delaware Group
and Delaware Investment Counselors, Inc.
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds, the fixed income funds and the closed-end funds
in the Delaware Group; Vice President of Founders Holdings, Inc.; and Secretary and
Director of Founders CBO Corporation
James R. Raith, Jr. Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds, the fixed income funds and the closed-end funds
in the Delaware Group; Vice President of Founders Holdings, Inc.; and President and
Director of Founders CBO Corporation
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds and the fixed income funds in the Delaware Group
Roger A. Early(5) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds and the fixed income funds in the Delaware Group
Edward N. Antoian Vice President/Senior Portfolio Manager of Delaware Management Company, Inc. and each of
the equity funds in the Delaware Group
George H. Burwell Vice President/Senior Portfolio Manager of Delaware Management Company, Inc. and each of
the equity funds in the Delaware Group
John B. Fields Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., each of the
equity funds in the Delaware Group and Delaware Investment Counselors, Inc.
Edward A. Trumpbour Vice President/Senior Portfolio Manager of Delaware Management Company, Inc. and each of
the equity funds in the Delaware Group
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
x
<PAGE> 130
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------------- -------------------------------------------------------------------------------------
<S> <C>
David C. Dalrymple Vice President/Senior Portfolio Manager of Delaware Management Company, Inc. and each of
the equity funds in the Delaware Group
</TABLE>
(1) VICE PRESIDENT/GLOBAL INVESTMENT MANAGEMENT OPERATIONS, Bankers
Trust and VICE PRESIDENT, CS First Boston Investment Management
prior to June 1995.
(2) VICE PRESIDENT AND COMPLIANCE OFFICER, Banc One Securities
Corporation prior to June 1994 and ASSISTANT VICE PRESIDENT AND
COMPLIANCE OFFICER, Aetna Life and Casualty prior to March 1993.
(3) VICE PRESIDENT OF OPERATIONS, Supervised Service Company prior
to March 1994.
(4) ASSISTANT VICE PRESIDENT/ADMINISTRATIVE SERVICES, United Pacific
Life Insurance prior to January 1994.
(5) SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER, Federated Investors
prior to July 1994.
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal
underwriter for all the mutual funds in the
Delaware Group.
(b) Information with respect to each director, officer or
partner of principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------------------- --------------------- -----------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Management
Company, Inc. Limited Partner Investment Manager
Delaware Investment
Counselors, Inc. Limited Partner None
Winthrop S. Jessup Vice Chairman Executive Vice President
Keith E. Mitchell President and Chief None
Executive Officer
David K. Downes Senior Vice President and Senior Vice President/Chief
Chief Administrative Officer Administrative Officer/Chief
Financial Officer
George M. Chamberlain, Jr. Senior Vice President/ Senior Vice President/
Secretary Secretary
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xi
<PAGE> 131
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------------------- --------------------- -----------------------
<S> <C> <C>
J. Lee Cook Senior Vice President/ None
National Sales Manager
Stephen H. Slack Senior Vice President/ None
Wholesaler
William F. Hostler Senior Vice President/ None
Marketing Services
Minette van Noppen Senior Vice President/ None
Retirement Services
Richard J. Flannery Managing Director/Corporate Vice President
& Tax Affairs
Eric E. Miller Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Joseph H. Hastings Vice President/ Vice President/
Corporate Controller Corporate Controller
Michael P. Bishof Vice President/Treasurer Vice President/Treasurer
Lisa O. Brinkley Vice President/ Vice President/
Compliance Compliance
Rosemary E. Milner Vice President/Legal Vice President/Legal
Diane M. Anderson Vice President/ None
Retirement Services
Denise F. Guerriere Vice President/Client Services None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xii
<PAGE> 132
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------------------- --------------------- -----------------------
<S> <C> <C>
Julia R. Vander Els Vice President/ None
Retirement Services
Jerome J. Alrutz Vice President/ None
Retirement Services
Martin J. Cole Vice President/ None
Retirement Services
Joanne A. Mettenheimer Vice President/ None
National Accounts
Christopher H. Price Vice President/Annuity None
Marketing & Administration
Thomas S. Butler Vice President/ None
DDI Administration
Frank Albanese Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William S. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Robert M. Frank Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Alan D. Kessler Vice President/Wholesaler None
William M. Kimbrough Vice President/Wholesaler None
Mac McAuliffe Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xiii
<PAGE> 133
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------------------- --------------------- -----------------------
<S> <C> <C>
Patrick L. Murphy Vice President/Wholesaler None
Henry W. Orvin Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Dion D. Rooney Vice President/Wholesaler None
Michael W. Rose Vice President/Wholesaler None
Thomas E. Sawyer Vice President/Wholesaler None
Sanford G. Simmons, Jr. Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at
1818 Market Street, Philadelphia, PA 19103 or One Commerce
Square, Philadelphia, PA 19103.
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
xiv
<PAGE> 134
Form N-1A
File No. 2-86606
Delaware Group Tax-Free Fund, Inc.
(d) The Registrant hereby undertakes to promptly call a meeting
of shareholders for the purpose of voting upon the
question of removal of any director when requested in
writing to do so by the record holders of not less than 10%
of the outstanding shares.
xv
<PAGE> 135
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia and Commonwealth of Pennsylvania on
this 21 day of November, 1995.
DELAWARE GROUP TAX-FREE FUND, INC.
By/s/Wayne A. Stork
-----------------------------------
Wayne A. Stork
President, Chairman of the Board,
Chief Executive Officer and Director
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> <C>
President, Chairman of the Board
/s/Wayne A. Stork Chief Executive Officer and Director November 21, 1995
- -------------------------------------
Wayne A. Stork
Senior Vice President/Chief Administrative
Officer/Chief Financial Officer (Principal
Financial Officer and Principal
/s/David K. Downes Accounting Officer) November 21, 1995
- ------------------------------------
David K. Downes
/s/Walter P. Babich * Director November 21, 1995
- ------------------------------------
Walter P. Babich
/s/Anthony D. Knerr * Director November 21, 1995
- ------------------------------------
Anthony D. Knerr
/s/Ann R. Leven * Director November 21, 1995
- ------------------------------------
Ann R. Leven
/s/W. Thacher Longstreth * Director November 21, 1995
- ------------------------------------
W. Thacher Longstreth
/s/Charles E. Peck * Director November 21, 1995
- ------------------------------------
Charles E. Peck
</TABLE>
*By/s/Wayne A. Stork
-------------------------------
Wayne A. Stork
as Attorney-in-Fact for
each of the persons indicated
<PAGE> 136
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE> 137
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.B1A Articles of Incorporation, as amended and supplemented to date
EX-99.B1B Form of Articles Supplementary (November 1995)
EX-99.B2 By-Laws, as amended to date
EX-99.B5 Investment Management Agreements (April 3, 1995)
EX-99.B6AI Form of Distribution Agreement (April 1995)
(Module Name
DIS_AGR_NON_MON)
EX-99.B6AII Form of Amendment No. 1 to Distribution Agreement (November 1995)
(Module Name
AMD_DIS_AGR_NON)
EX-99.B6B Form of Administration and Service Agreement (as amended November 1995)
(Module Name
ADMIN_SER_AGREE)
EX-99.B6C Form of Dealer's Agreement (as amended November 1995)
(Module Name
DEALERS_AGREE)
EX-99.B6D Form of Mutual Fund Agreement for the Delaware Group of Funds
(Module Name
MUTUAL_FUND_AGR)
EX-99.B7 Amended and Restated Profit Sharing Plan
(Module Name
PROF_SHARE_PLAN)
EX-99.B11 Consent of Auditors
EX-99.B15A Form of Plan under Rule 12b-1 for Class A (November 1995)
(Module Name
CL_A_SHARE_NON)
EX-99.B15B Form of Plan under Rule 12b-1 for Class B (November 1995)
(Module Name
CL_B_SHARE_ALL)
EX-99.B15C Form of Plan under Rule 12b-1 for Class C (November 1995)
(Module Name
CL_C_SHARE_ALL)
</TABLE>
<PAGE> 138
<TABLE>
<S> <C>
EX-99.B16 Schedules of Computation for each Performance Quotation
EX-27 Financial Data Schedules
EX-99.B19 Directors' Power of Attorney
</TABLE>
<PAGE> 1
DELAWARE GROUP TAX-FREE FUND, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Group Tax-Free Fund, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (the "Corporation"), hereby certifies,
in accordance with Section 2-208 of the Maryland General Corporation Law, to
the State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation has adopted
resolutions taking the following actions:
1. classifying a second class of shares of the Tax-Free USA Fund
series of Common Stock as the Tax-Free USA Fund B Class and reclassifying
50,000,000 shares of authorized and unissued Common Stock, par value $.01 per
share, previously classified and allocated to the existing class of Common
Stock of the Tax-Free USA Fund series, to the Tax-Free USA Fund B Class;
2. classifying a second class of shares of the Tax-Free Insured Fund
series of Common Stock of the Corporation as the Tax-Free Insured Fund B Class
and classifying 50,000,000 shares of authorized, unissued and unclassified
Common Stock of the Corporation, par value $.01 per share, to the Tax-Free
Insured Fund B Class; and
3. classifying a second class of shares of the Tax-Free USA
Intermediate Fund series of Common Stock of the Corporation as the Tax-Free USA
Intermediate Fund B Class and classifying 50,000,000 shares of authorized,
unissued and unclassified Common Stock of the Corporation, par value $.01 per
share, to the Tax-Free USA Intermediate Fund B Class.
SECOND: The shares of the Tax-Free USA Fund B Class, the Tax-Free
Insured Fund B Class and the Tax-Free USA Intermediate Fund B Class
(each referred to herein as a "B Class") shall represent proportionate
interests in the same portfolio of investments as the shares of the existing
classes of Common Stock of the Tax-Free USA Fund series, the Tax-Free Insured
Fund series and the Tax-Free USA Intermediate Fund series, respectively (each
referred to herein as an "A Class") of the Corporation. The shares of a
<PAGE> 2
B Class shall have the same preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption as the shares of the A Class of that series, all as
set forth in the Articles of Incorporation of the Corporation, except for the
differences hereafter set forth:
1. The dividends and distributions of investment income and capital
gains with respect to a B Class of shares of Common Stock of a series shall be
in such amounts as may be declared from time to time by the Board of Directors,
and such dividends and distributions may vary with respect to such class from
the dividends and distributions of investment income and capital gains with
respect to the A Class of Common Stock of the series to reflect differing
allocations of the expenses of the Corporation among the classes and any
resultant difference among the net asset values per share of the classes, to
such extent and for such purposes as the Board of Directors may deem
appropriate. The allocation of investment income and capital gains and
expenses and liabilities of each series between its two classes of Common Stock
shall be determined by the Board of Directors in a manner that is consistent
with the orders, as applicable, dated April 10, 1987 and November 9, 1992
(Investment Company Act of 1940 Release Nos. 15675 and 19086) issued by the
Securities and Exchange Commission, and any existing or future amendment to
such orders or any rule or interpretation under the Investment Company Act of
1940, as amended, that modifies or supersedes such orders;
2. Except as may otherwise be required by law pursuant to any
applicable order, rule or interpretation issued by the Securities and Exchange
Commission, or otherwise, the holders of B Class shares shall have (i)
exclusive voting rights with respect to any matter submitted to a vote of
stockholders that affects only holders of B Class shares, including without
limitation, the provisions of any Distribution Plan adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended, (a "Distribution
Plan") applicable to that B Class and (ii) no voting rights with respect to the
provisions of any Distribution Plan applicable to the existing class of a
series or with regard to any other matter submitted to a vote of stockholders
which does not affect holders of the B Class shares.
3. (a) Each share of a B Class, other than shares described in
paragraph (3)(b) herein, shall be converted automatically, and without any
action or choice on the part of the holder thereof, into shares of the A Class
of that series on the Conversion Date. The term "Conversion Date" when used
herein shall mean (i) a date set forth in the Corporation's prospectus, as such
prospectus may be amended from time to time, that is no later than three months
after either (i) the date on which the eighth anniversary of the
<PAGE> 3
date of issuance of the share occurs, or (ii) any such other anniversary date
as may be determined by the Board of Directors and set forth in the
Corporation's prospectus, as such prospectus may be amended from time to time;
provided that any such other anniversary date determined by the Board of
Directors shall be a date that will occur prior to the anniversary date set
forth in clause (i) and any such other date theretofore determined by the Board
of Directors pursuant to this clause (ii); but further provided that, subject
to the provisions of the next sentence, for any shares of a B Class acquired
through an exchange, or through a series of exchanges, as permitted by the
Corporation as provided in the Corporation's prospectus, as such prospectus may
be amended from time to time, from another investment company (an "eligible
investment company"), the Conversion Date shall be the conversion date
applicable to the shares of stock of the eligible investment company originally
subscribed for in lieu of the Conversion Date of any stock acquired through
exchange if such eligible investment company issuing the stock originally
subscribed for had a conversion feature, but not later than the Conversion Date
determined under (i) or (ii) above. For the purpose of calculating the holding
period required for conversion, the date of issuance of a share of a B Class
shall mean (i) in the case of a share of a B Class obtained by the holder
thereof through an original subscription to the Corporation, the date of the
issuance of such share of a B Class, or (ii) in the case of a share of a B
Class obtained by the holder thereof through an exchange, or through a series
of exchanges, from an eligible investment company, the date of issuance of the
share of the eligible investment company to which the holder originally
subscribed.
(b) Each share of a B Class (i) purchased through the automatic
reinvestment of a dividend or distribution with respect to that B Class or the
corresponding B Class of any other investment company issuing such class of
shares or (ii) issued pursuant to an exchange privilege granted by the
Corporation in an exchange or series of exchanges for shares originally
purchased through the automatic reinvestment of a dividend or distribution with
respect to shares of capital stock of an eligible investment company shall be
segregated in a separate sub-account on the stock records of the Corporation
for each of the holders of record thereof. On any Conversion Date, a number of
the shares held in the separate sub-account of the holder of record of the
share or shares being converted, calculated in accordance with the next
following sentence, shall be converted automatically, and without any action or
choice on the part of the holder, into shares of the A Class of that series.
The number of shares in the holder's separate sub-account so converted shall
(i) bear the same ratio to the total number of shares maintained in the
separate sub-account on the Conversion Date (immediately prior to conversion)
as the number of shares of
<PAGE> 4
the holder converted on the Conversion Date pursuant to paragraph (3)(a) hereof
bears to the total number of B Class shares of the holder on the Conversion
Date (immediately prior to conversion) after subtracting the shares then
maintained in the holder's separate sub-account, or (ii) be such other number
as may be calculated in such other manner as may be determined by the Board of
Directors and set forth in the Corporation's prospectus, as such prospectus may
be amended from time to time.
(c) The number of shares of the A Class into which a share of a B
Class is converted pursuant to paragraphs 3(a) and 3(b) hereof shall equal the
number (including for this purpose fractions of a share) obtained by dividing
the net asset value per share of the B Class for purposes of sales and
redemption thereof on the Conversion Date by the net asset value per share of
the A Class for purposes of sales and redemption thereof on the Conversion
Date.
(d) On the Conversion Date, the shares of a B Class converted into
shares of an A Class will no longer be deemed outstanding and the rights of the
holders thereof (except the right to receive (i) the number of shares of the A
Class into which the shares of the B Class have been converted and (ii)
declared but unpaid dividends to the Conversion Date or such other date set
forth in the Corporation's prospectus, as such prospectus may be amended from
time to time and (iii) the right to vote converting shares of the B Class held
as of any record date occurring on or before the Conversion Date and
theretofore set with respect to any meeting held after the Conversion Date)
will cease. Certificates representing shares of the A Class resulting from the
conversion need not be issued until certificates representing shares of the B
Class converted, if issued, have been received by the Corporation or its agent
duly endorsed for transfer.
(e) The automatic conversion of a B Class into an A Class as set
forth in paragraphs 3(a) and 3(b) of this Article SECOND shall be suspended at
any time that the Board of Directors determines (i) that there is not
available a reasonably satisfactory opinion of counsel to the effect that
(x) the assessment of the higher fee under the Distribution Plan with respect
to the B Class does not result in the Corporation's dividends or distributions
constituting a "preferential dividend" under the Internal Revenue Code of 1986,
as amended, and (y) the conversion of the B Class does not constitute a taxable
event under federal income tax law, or (ii) any other condition to conversion
set forth in the Corporation's prospectus, as such prospectus may be amended
from time to time, is not satisfied.
(f) The automatic conversion of a B Class into an A Class as set
forth in paragraphs 3(a) and 3(b) hereof may also be suspended by action of the
Board of Directors at any
<PAGE> 5
time that the Board of Directors determines such suspension to be appropriate
in order to comply with, or satisfy the requirements of the Investment Company
Act of 1940, as amended, and in effect from time to time, or any rule,
regulation or order issued thereunder relating to voting by the holders of the
B Class on any Distribution Plan with respect to the A Class and in effect from
time to time, and in connection with, or in lieu of, any such suspension, the
Board of Directors may provide holders of the B Class with alternative
conversion or exchange rights into other classes of stock of the Corporation in
a manner consistent with the law, rule, regulation or order giving rise to
the possible suspension of the conversion right.
THIRD: The shares of the Tax-Free USA Fund B Class, the Tax-Free
Insured Fund B Class and the Tax-Free USA Intermediate Fund B Class have been
classified by the Board of Directors pursuant to authority contained in the
Articles of Incorporation of the Corporation.
IN WITNESS WHEREOF, Delaware Group Tax-Free Fund, Inc. has caused
these Articles Supplementary to be signed in its name and on its behalf this
28th day of April, 1994.
DELAWARE GROUP TAX-FREE FUND, INC.
By:/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
Senior Vice President
ATTEST:
/s/Eric E. Miller
- -----------------
Eric E. Miller
Assistant Secretary
THE UNDERSIGNED, Senior Vice President of DELAWARE GROUP TAX-FREE
FUND, INC., who executed on behalf of the said Corporation the foregoing
Articles Supplementary, of which this instrument is made a part, hereby
acknowledges, in the name of and on behalf of said Corporation, said Articles
Supplementary to be the corporate act of said Corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the authorization and approval thereof
are true in all material respects, under the penalties of perjury.
<PAGE> 6
/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
Senior Vice President
<PAGE> 7
DELAWARE GROUP TAX-FREE FUND, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Group Tax-Free Fund, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (the "Corporation"), hereby certifies,
in accordance with Section 2-208 of the Maryland General Corporation Law, to
the State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a meeting held
on September 17, 1992, adopted a resolution designating a series of common
stock of the Corporation as the Tax-Free USA Intermediate Fund and classified
and allocated 50 Million (50,000,000) shares of unissued Common Stock, with a
par value of one cent ($.01) per share, to the Tax-Free USA Intermediate Fund.
SECOND: The shares of the Tax-Free USA Intermediate Fund shall have
the rights and privileges, and shall be subject to the limitations and
priorities, set forth in the Articles of Incorporation of the Corporation.
THIRD: The shares of said Tax-Free USA Intermediate Fund have been
classified by the Board of Directors pursuant to authority contained in the
Articles of Incorporation of the Corporation.
IN WITNESS WHEREOF, Delaware Group Tax-Free Fund, Inc. has caused
these Articles Supplementary to be signed in its name and on its behalf this
13th day of October, 1992.
DELAWARE GROUP TAX-FREE FUND, INC.
By:/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
Vice President
ATTEST:
/s/Richard J. Flannery
- ----------------------
Richard J. Flannery
Assistant Secretary
<PAGE> 8
THE UNDERSIGNED, Vice President of DELAWARE GROUP TAX-FREE FUND, INC.,
who executed on behalf of the said Corporation the foregoing Articles
Supplementary, of which this instrument is made a part, hereby acknowledges, in
the name of and on behalf of said Corporation, said Articles Supplementary to
be the Corporate act of said Corporation, and further certifies that, to the
best of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
<PAGE> 9
DELAWARE GROUP TAX-FREE FUND, INC.
ARTICLES OF AMENDMENT
DELAWARE GROUP TAX-FREE FUND, INC., a Maryland corporation having its
principal Maryland office in Baltimore, Maryland (hereinafter called the
"Corporation"), certifies that:
FIRST: The Articles of Incorporation of the Corporation are hereby
amended by deleting the first paragraph of Article FIFTH in its entirety and
inserting the following paragraph in lieu thereof:
FIFTH: The total number of shares of stock of all series which the
Corporation is authorized to issue is Five Hundred Million
(500,000,000), of which Two Hundred Twenty-Five Million (225,000,000)
are shares of Tax-Free USA Fund series and One Hundred Twenty-Five
Million (125,000,000) are shares of Tax-Free Insured Fund series. One
Hundred Fifty Million (150,000,000) shares are not classified. The
par value of the shares is One Cent ($.01) per share. The aggregate
par value of all shares of all series of stock is Five Million Dollars
($5,000,000).
SECOND: The amendment was advised by the Board of Directors and
approved by the stockholders.
THIRD: The Articles of Amendment shall become effective at
9:00 A.M. on June 1, 1992.
THE UNDERSIGNED, Vice President of DELAWARE GROUP TAX-FREE FUND, INC.,
who executed on behalf of the said Corporation the foregoing Articles of
Amendment, of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said Corporation, said Articles of Amendment to be
the corporate act of said Corporation and further certifies that, to the best
of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
/s/Eric E. Miller
-----------------
Eric E. Miller
Vice President
IN WITNESS WHEREOF, DELAWARE GROUP TAX-FREE FUND, INC. has caused
these Articles of Amendment to be signed in its name and on its behalf by its
Vice President and attested by its Assistant Secretary, on May 18, 1992.
ATTEST: DELAWARE GROUP TAX-FREE FUND, INC.
<PAGE> 10
/s/Richard J. Flannery By:/s/Eric E. Miller
- ---------------------- -----------------
Richard J. Flannery Eric E. Miller
Assistant Secretary Vice President
<PAGE> 11
DELAWARE GROUP TAX-FREE FUND, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Group Tax-Free Fund, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (the "Corporation"), hereby certifies,
in accordance with Section 2-208 of the Maryland General Corporation Law, to
the State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation has adopted a
resolution permitting the reclassification of the USA II class of shares of the
USA Series, and the reclassification of the USA Insured II class of shares of
the USA Insured Series, thereby converting to the status of authorized and
unissued shares of the existing class of the USA Series, the Fifty Million
(50,000,000) shares of common stock of the Corporation ($.01 par value per
share) previously classified to the USA II class, and converting to the status
of authorized and unissued shares of the existing class of the USA Insured
Series, the Fifty Million (50,000,000) shares of common stock of the
Corporation ($.01 par value per share) previously classified as the USA Insured
II class.
SECOND: After giving effect to such reclassification: (i) the USA
Series consists of one class of shares which has Two Hundred Twenty-Five
Million (225,000,000) shares of common stock with a par value of one cent
($.01) per share, and an aggregate par value of Two Million Two Hundred Fifty
Thousand Dollars ($2,250,000); and (ii) the USA Insured Series consists of one
class of shares which has One Hundred Twenty-Five Million (125,000,000) shares
of common stock with a par value of one cent ($.01) per share, and an aggregate
par value of One Million Two Hundred Fifty Thousand Dollars ($1,250,000).
THIRD: The shares of the USA II class and the USA Insured II class
have been reclassified by the Board of Directors pursuant to authority
contained in the Articles of the Incorporation of the Corporation.
IN WITNESS WHEREOF, Delaware Group Tax-Free Fund, Inc.has caused these
Articles Supplementary to be signed in its name and on its behalf this 15th day
of May, 1992.
DELAWARE GROUP TAX-FREE FUND, INC.
<PAGE> 12
By:/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
Vice President
ATTEST:
/s/Eric E. Miller
- -----------------
Eric E. Miller
Assistant Secretary
THE UNDERSIGNED, Vice President of DELAWARE GROUP TAX-FREE FUND, INC.,
who executed on behalf of the said Corporation the foregoing Articles
Supplementary, of which this instrument is made a part, hereby acknowledges, in
the name of and on behalf of said Corporation, said Articles Supplementary to
be the corporate act of said Corporation and further certifies that, to the
best of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
<PAGE> 13
DELAWARE GROUP TAX-FREE FUND, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Group Tax-Free Fund, Inc. a Maryland corporation having its
principal Maryland office in Baltimore, Maryland (the "Corporation") hereby
certifies, in accordance with Section 2-208 of the Maryland General Corporation
Law, to the State Department of Assessments and Taxation of Maryland that:
FIRST: The allocation of shares to each of the two existing series is
as follows: the existing class of the USA Series, Seventy-Five Million
(75,000,000) shares of common stock with a par value of one cent ($.01) per
share and the existing class of the USA Insured Series, Twenty-Five Million
(25,000,000) shares of common stock with a par value of one cent ($.01) per
share. The Board of Directors of the Corporation, at a meeting duly convened
and held on September 17, 1990, adopted resolutions classifying and allocating
unallocated and unissued stock of the Corporation as follows: One Hundred
Million (100,000,000) shares of common stock with a par value of one cent
($.01) per share to the existing class of the USA Series; Fifty Million
(50,000,000) shares of common stock with a par value of one cent ($.01) per
share to the existing class of the USA Insured Series; Fifty Million
(50,000,000) shares of common stock with a par value of one cent ($.01) per
share to a new class of shares of the USA Series designated as the USA II class
of shares; and Fifty Million (50,000,000) shares of common stock with a par
value of one cent ($.01) per share to a new class of shares of the USA Insured
Series designated as the USA Insured II class of shares.
After giving effect to such classifications and allocations: (i) the
USA Series consists of two classes of shares, the existing class of shares
which has One Hundred Seventy-Five Million (175,000,000) shares of common stock
with a par value of one cent ($.01) per share and the USA II class of shares
which has Fifty Million (50,000,000) shares of common stock with a par value of
one cent ($.01) per share; and (ii) the USA Insured Series consists of two
classes of shares, the existing class of shares which has Seventy-Five Million
(75,000,000) shares of common stock with a par value of one cent ($.01) per
share and the USA Insured II class of shares which has Fifty Million
(50,000,000) shares of common stock with a par value of one cent ($.01) per
share.
SECOND: The shares of the USA II Class of the USA Series of the
Corporation shall have the same rights and
<PAGE> 14
privileges, and shall be subject to the same limitations and priorities as the
shares of the existing class of the USA Series, all as set forth in the
Articles of Incorporation of the Corporation, provided, that dividends paid on
the existing class of shares of the USA Series of shares shall not reflect any
reduction for payment of fees under the Distribution Plan of the USA II Class
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended, and provided further, that the shares of the existing class of the USA
Series shall not vote upon or with respect to any matter relating to or arising
from any such Distribution Plan.
THIRD: The shares of the USA Insured II Class of the USA Insured
Series of the Corporation shall have the same rights and privileges, and shall
be subject to the same limitations and priorities as the existing class of
shares of the USA Insured Series, all as set forth in the Articles of
Incorporation of the Corporation, provided, that dividends paid on the existing
class of shares of the USA Insured Series shall not reflect any reduction for
payment of fees under the Distribution Plan of the USA Insured II Class adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended,
and provided further, that the shares of the existing class of shares of the
USA Insured Series shall not vote upon or with respect to any matter relating
to or arising from any such Distribution Plan.
FOURTH: The shares of each such Class of the Corporation have been
classified and reclassified by the Board of Directors pursuant to authority
contained in the Articles of Incorporation of the Corporation.
IN WITNESS WHEREOF, Delaware Group Tax-Free Fund, Inc. has caused
these Articles Supplementary to be signed in its name and on its behalf this
28th day of January, 1991.
ATTEST: DELAWARE GROUP TAX-FREE FUND, INC.
/s/Eric E. Miller By:/s/George M. Chamberlain, Jr.
- ----------------- -----------------------------
Eric E. Miller George M. Chamberlain, Jr.
Assistant Secretary Vice President
THE UNDERSIGNED, Vice President of DELAWARE GROUP TAX-FREE FUND, INC.,
who executed on behalf of the said Corporation the foregoing Articles
Supplementary, of which this instrument is made a part, hereby acknowledges, in
the name of and on behalf of said Corporation, said Articles Supplementary to
be the corporate act of said Corporation and further certifies that, to the
best of his knowledge,
<PAGE> 15
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
<PAGE> 16
CERTIFIED COPY OF RESOLUTION OF BOARD OF DIRECTORS
FOR DESIGNATION
I, the undersigned, do hereby certify that I am the duly elected,
qualified and acting secretary of Delaware Group Tax Free Fund, Inc., a
corporation formed and existing under the laws of the State of Maryland, and
that at a meeting of the board of directors of said corporation, held by
unanimous consent as of the 25th day of October, 1989, the following resolution
was adopted, which said resolution remains in full force and effect:
RESOLVED, that the resident agent of this corporation in the State of
Maryland be and it hereby is designated to be THE CORPORATION TRUST
INCORPORATED, the post office address of which is 32 South Street,
Baltimore, Maryland 21202. The said resident agent so designated is a
corporation of the State of Maryland."
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
<PAGE> 17
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
DMC TAX-FREE INCOME - USA, INC.
DMC TAX-FREE INCOME - USA, INC., a Maryland corporation having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland,
that:
ONE: ARTICLE SECOND of the Articles of Incorporation is hereby
amended in its entirety to read as follows:
SECOND: The name of the corporation is Delaware Group Tax-Free Fund,
Inc.
The Corporation expressly agrees and acknowledges that the name
"Delaware Group" is the sole property of Delaware Management Company,
Inc. ("DMC"), that similar names are used by affiliated funds in the
investment business with the permission of DMC, and that the
Corporation's use of such name is with the permission of DMC. The
Corporation further expressly agrees and acknowledges that its use of
"Delaware Group" in its name may be terminated by DMC if the
Corporation ceases to use Delaware Management Company, Inc. as its
investment adviser or Delaware Distributors, Inc. ("DDI") as its
principal underwriter (or to use affiliates of DMC and DDI for such
purposes). The Corporation further expressly agrees and acknowledges
that in such event DMC may require the Corporation to present to its
shareholders, at the next annual or special meeting of the Corporation
held after such request, a proposal to change the name of the
Corporation to delete reference to the name "Delaware Group." The
Corporation further expressly agrees and acknowledges in such event to
use its best efforts to promptly comply with such request to change
its name and that the Board of Directors of the Corporation shall
recommend such a proposal to it shareholders. The Corporation further
expressly acknowledges and agrees, upon shareholder approval of such a
proposal, to make and cause to be made such filings to effect the
change of name as may be necessary with the State of Maryland, the
United States Securities and Exchange Commission, or other regulatory
authorities.
TWO: Pursuant to Section 2-604(b) of the Maryland General Corporation
Law, the board of directors of the Corporation on April 7, 1988 duly adopted a
resolution setting forth the foregoing amendment to the Articles of
<PAGE> 18
Incorporation, declaring said amendment to the Articles of Incorporation
advisable and directing that it be submitted for consideration by the
shareholders of the Corporation at the annual meeting to be held on June 14,
1988.
THIRD: Notice setting forth said amendment to the Articles of
Incorporation and stating that a purpose of the meeting of the shareholders
would be to take action thereon was given, as required by law, to all
shareholders entitled to vote thereon. The amendment to the Articles of
Incorporation was approved by the shareholders of the Corporation at said
meeting by the affirmative vote of a majority of all the votes entitled to be
cast thereon. (Approval by a majority of all the votes entitled to be cast on
the matter is authorized pursuant to the Articles of Incorporation of the
Corporation.)
FOURTH: The amendment to the Articles of Incorporation as hereinabove
set forth has been duly advised by the board of directors and approved by the
shareholders of the Corporation.
FIFTH: The amendment to the Articles of Incorporation as hereinabove
set forth shall be duly filed with Maryland Department of Assessments and
Taxation on June 15, 1988, the effective time being 5:00 p.m. on that date.
IN WITNESS WHEREOF, DMC Tax-Free Income - USA, has caused these
Articles of Amendment to be signed by its President and attested by its
Secretary on June 14, 1988.
DMC Tax-Free Income - USA, Inc.
/s/John H. Durham
-----------------
John H. Durham
President
Attest:
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
THE UNDERSIGNED, President of DMC Tax-Free Income - USA, who executed
on behalf of said Corporation the foregoing Articles of Amendment, of which
this certificate is made a part, hereby acknowledges, in the name and on behalf
of said Corporation, the foregoing Articles of Amendment to be the corporate
act of said Corporation and further certifies that,
<PAGE> 19
to the best of his knowledge, information and belief, the matters and facts set
forth therein with respect to the approval thereof are true in all material
respects, under the penalties of perjury.
/s/John H. Durham
-----------------
John H. Durham
President
<PAGE> 20
AGREEMENT AND ARTICLES OF MERGER
AGREEMENT AND ARTICLES OF MERGER, dated as of the 17th day of August,
1987 (hereinafter referred to as the "Agreement"), by and between DMC TAX-FREE
INCOME--USA, INC., a Maryland Corporation (hereinafter referred to as the "USA
Fund" or the "Surviving Corporation"), and DELAWARE GROUP STATE TAX-FREE FUND,
INC., a Maryland corporation (hereinafter referred to as "State Fund"), said
corporations being hereinafter sometimes collectively referred to as the
"Constituent Corporations."
BACKGROUND
The USA Fund is a corporation duly organized and existing under the
laws of the State of Maryland, having been incorporated on August 17, 1983
under the General Corporation Law of the State of Maryland, and has authorized
capital stock consisting of 500,000,000 common shares, par value $.01 per
share, with an aggregate par value of $5,000,000. The USA Fund has allocated
75,000,000 shares to its DMC Tax-Free Income--USA Series (the "USA Series") and
25,000,000 shares to its DMC Tax-Free Income--USA Insured Series.
The State Fund is a corporation duly organized and existing under the
laws of the State of Maryland, having been incorporated on April 15, 1986 under
the General Corporation Law of the State of Maryland, and has authorized
capital stock consisting of 750,000,000 shares of common stock, par value $.01
per share, with an aggregate par value of $7,500,000. The State Fund has
allocated 50,000,000 shares to each of the following series of shares:
Massachusetts Series; Michigan Series; Minnesota Series, New York Series; and
Ohio Series. The New York Series is the only series of shares of the State
Fund with issued and outstanding shares.
The principal offices of the USA Fund and the State Fund in the State
of Maryland are located in Baltimore City.
The Boards of Directors of the Constituent Corporations have adopted
this Agreement as a Plan of Reorganization intended to qualify as such under
the provisions of Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended.
The Board of Directors of the USA Fund and the Board of Directors of
the State Fund have, by resolutions duly adopted, approved this Agreement and
the merger of the State Fund into the USA Fund as being advisable and in the
best interests of their respective corporations and stockholders. The Board of
Directors of the State Fund has director the submission of this Agreement to
stockholders. Under the terms of the Merger, as set forth herein, on the
Effective Date of the Merger, the USA Fund will distribute shares of
<PAGE> 21
the USA Series to the stockholders of the State Fund according to their
respective interests.
NOW THEREFORE, in consideration of the premises and the mutual
covenants and conditions hereinafter contained, and intending to be legally
bound, the parties hereto agree as follows:
ARTICLE I - THE MERGER
1.1 The State Fund and the USA Fund agree that the State Fund shall
be merged into the USA Fund (hereinafter the "Merger"). The USA Fund shall be
the Surviving Corporation and shall be governed by the laws of the State of
Maryland. The terms and conditions of the Merger and the mode of carrying the
same into effect are as herein set forth in this Agreement.
1.2 The Articles of Incorporation of the USA Fund as they shall exist
on the Effective Date of the Merger (as hereinafter defined) shall constitute
the Articles of Incorporation of the Surviving Corporation.
1.3 The By-Laws of the USA Fund as they exist on the Effective Date
of the Merger shall constitute the By-Laws of the Surviving Corporation.
1.4 The Directors of the USA Fund on the Effective Date of the Merger
shall constitute the Board of Directors of the Surviving Corporation and shall
hold office until their terms expire at the annual meeting of stockholders of
the Surviving Corporation following the Effective Date of this Agreement, and
until their successors are elected and shall qualify.
1.5 Arthur Young & Company shall continue as auditors to report upon
the financial statements of the Surviving Corporation.
ARTICLE II - CONVERSION OF SHARES AND EXCHANGE RATIO
2.1 Upon the effective date of the Merger, stockholders of the State
Fund will receive shares of the USA Series in exchange for their shares in the
State Fund. The manner and basis of converting the issued and outstanding
shares of common stock of the State Fund into the shares of common stock of the
USA Series shall be as follows:
(a) Immediately following the Effective Date, as defined in Article
III herein, the USA Fund will establish open accounts on the stock records of
the USA Series in the names of the stockholders of record of the State Fund as
of the close of business on the Effective Date and identify thereon the
respective pro rata number of USA Series shares due such stockholders.
Fractional shares of USA Series
<PAGE> 22
common stock will be carried to the third decimal place. As promptly as
practicable after the Effective Date, each holder of any outstanding
certificate or certificates theretofore representing shares of common stock of
the State Fund may surrender the same to a Transfer Agent designated by the USA
Fund and request in exchange therefor a certificate or certificates
representing the number of whole and fractional shares of common stock of the
USA Series into which the shares of common of the State Fund theretofore
represented by the certificate or certificates so surrendered shall have been
converted. Certificates for fractional shares for the USA Series will not be
issued, however, but shall continue to be carried for the open account of such
stockholder. Until so surrendered, each outstanding certificates which, prior
to the Effective Date represented common stock of the State Fund, shall be
deemed for all corporate purposes to evidence ownership of the number of shares
of common stock of the USA Series into which the common stock of the State Fund
(which, prior to the Effective Date were represented thereby) have been so
converted.
(b) The net asset value of a State Fund share of common stock shall
be determined to the nearest full cent as of the close of business on the
Effective Date, using the valuation set forth in the State Fund's registration
statement under the Securities Act of 1933.
(c) The net asset value of a USA Series share of common stock shall
be determined to the nearest full cent as of the close of business on the
Effective Date, using the valuation set forth in the USA Fund's registration
statement under the Securities Act of 1933.
(d) The net asset value per share for the State Fund as determined in
(b) shall then be divided by the USA Series net asset value per share as
determined in (c) to determine the exchange ratio.
2.2 Each of the shares of the USA Fund common stock issued and
outstanding on the Effective Date of the Merger shall remained issued and
outstanding and unaltered by the terms of this Agreement.
ARTICLE III - EFFECTIVE DATE OF THE MERGER
3.1 The Merger shall become effective when, subject to the terms and
conditions hereof, the following actions shall have in all respects been
completed:
(i) this Agreement shall have been adopted by the stockholders of the
State Fund in accordance with the requirements of the laws of the States of
Maryland, which adoption shall have been certified hereon by the Secretary or
an Assistant Secretary of the State Fund, and
<PAGE> 23
(ii) this Agreement, certified as aforesaid, shall have been
executed, acknowledged and filed in accordance with the requirements of the
laws of the State of Maryland.
The effective time of the Merger shall be the close of business of the
USA Fund on the date this Agreement is filed in accordance with the
requirements of the law of the State of Maryland. The date and time when the
Merger shall become effective as aforesaid is herein referred to as the
"Effective Date of the Merger."
3.2 On the Effective Date of the Merger, the separate existence of
the State Fund shall cease, except to the extent, if any, continued by statute.
All the assets, rights, privileges, powers and franchises of the State Fund and
all debts due on whatever account to it, shall be taken and deemed to be
transferred to and vested in the USA Fund without further act or deed; and all
such assets, rights, privileges, powers and franchises, and all and every other
interest of State Fund shall be thereafter as effectually the property of the
USA Fund as they were of the State Fund; and the title to and interest in any
real estate vested by deed, lease or otherwise, unto either of the Constituent
Corporations, shall not revert or be in any way impaired. The USA Fund shall
be responsible for all the liabilities and obligations of the State Fund, but
the liabilities of the Constituent Corporations or of their stockholders,
directors, or officers shall not be affected by the Merger, nor shall the right
of the creditors thereof or any persons dealing with such corporations, or any
liens upon the property of such corporations, be impaired by the Merger, and
any claim existing or action or proceeding pending by or against either of such
corporations may be prosecuted to judgment as if the Merger had not taken
place, or the USA Fund may be proceeded against or substituted in place of the
State Fund. Except as otherwise specifically set forth in this Agreement, the
identity, existence, purposes, powers, franchise, rights, immunities and
liabilities of the USA Fund and of the State Fund shall continue unaffected and
unimpaired by the Merger.
3.3 Prior to the Effective Date of the Merger, the Constituent
Corporations shall take such action as shall be necessary or appropriate in
order to effect the Merger. In case at any time after the Effective Date of
the Merger the USA Fund shall determine that any further conveyance, assignment
or other documents or any further action is necessary or desirable to vest in
or confirm to the USA Fund full title to all the properties, assets, rights,
privileges, and franchises of the Constituent Corporations, the officers and
directors of the Constituent Corporations, at the expense of the USA Fund,
shall execute and deliver all such instruments and take all such action as the
USA Fund may determine to be necessary or desirable in order to vest in and
confirm to the USA Fund title to and possession of all
<PAGE> 24
such cash and securities and other properties, assets, rights, privileges and
franchises, and otherwise to carry out the purpose of this Agreement.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
4.1 Each of the Constituent Corporations represents and warrants to
the other that:
(a) Such corporation is duly organized and existing in good standing
under the laws of its jurisdiction of incorporation.
(b) Such corporation is duly registered as an open-end management
company under the Investment Company Act of 1940.
(c) It has full power and authority to carry on its business as it is
presently being conducted and to enter into the Merger.
(d) There is no suit, action or legal or administrative proceeding
pending, or to is knowledge threatened, against it which, if adversely
determined, might materially and adversely affect its financial condition or
the conduct of its business.
(e) At the Effective Date of the Merger, consummation of the
transactions contemplated hereby will not result in the breach of or constitute
a default under any agreement or instrument by which it is bound.
(f) All of its presently outstanding shares are validly issued, fully
paid and non-assessable.
(g) Immediately prior to the Effective Date of the Merger such
corporation will have valid and unencumbered title to its cash, securities, and
other assets, if any.
(h) The audited financial statements of such Corporation for its most
recent fiscal year, appearing in its registration statement on Form N-1A, and
interim unaudited financial statements, fairly present the financial position
of such Corporation as of the respective dates indicated thereon, and the
results of its operations and changes in net assets for the respective periods
indicated, in conformity with generally accepted accounting principles applied
on a consistent basis.
ARTICLE V - CONDITIONS
5.1 The obligations of each of the Constituent Corporations to
consummate the Merger shall be subject to the following conditions:
<PAGE> 25
(a) The representations and warranties of the other corporation
contained herein shall be true as of and at the Effective Date of the Merger
with the same effect as though made at such date and such other Constituent
Corporation shall have performed all obligations required by this Agreement to
be performed by it prior to the Effective Date;
(b) Such authority and orders from the Securities and Exchange
Commission (the "Commission") and state securities commissions as may be
necessary to permit the parties to carry out the transactions contemplated by
this Agreement shall have been received;
(c) A Registration Statement on Form N-14 under the Securities Act of
1933, relating to the shares of the USA Series issuable hereunder, shall have
been filed by the USA Fund with the Commission, and such Registration Statement
shall have become effective, and no stop-order suspending the effectiveness of
the Registration Statement shall have been issued, and no proceeding for that
purpose shall have been initiated or threatened by the Commission (other than
any such stop-order, proceeding or threatened proceeding which shall have been
withdrawn or terminated);
(d) The Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the Investment Company Act of 940 nor instituted
any proceeding seeking to enjoin consummation of the reorganization under
Section 25(c) of the Investment Company Act of 1940.
(e) The State Fund has mailed to each stockholder of record of the
State Fund entitled to vote at the meeting of stockholders at which action on
this Agreement is to be considered, a Combined Proxy Statement and Prospectus
which complies in all material respects with the applicable provisions of the
Federal securities laws and the rules and regulations thereunder.
(f) Each party shall have received an opinion from Stradley, Ronon,
Stevens & Young, Philadelphia, Pennsylvania, to effect that the Merger
contemplated by this Agreement qualifies as a "reorganization" under Section
368(a)(1) of the International Revenue Code of 1986, as amended, and as such:
(1) no gain or loss will be recognized by either Constituent Corporation or to
the stockholders thereof; (2) the basis of the shares of the USA Series stock
received by the State Fund stockholders will be the same as the basis of the
shares of the State Fund surrendered in exchange therefor; and (3) the holding
period of the USA Series stock received by the State Fund stockholders will
include the holding period of the State Fund stock surrendered in exchange
therefor, provided that the State Fund stock was held as a capital asset on the
date of the exchange.
<PAGE> 26
(g) Each party shall have received an opinion from Stradley, Ronon,
Stevens & Young in form and substance satisfactory to it, relating to its
authority to engage in the transactions contemplated hereby and to the effect
(i) that this Agreement has been duly authorized, executed and delivered by the
Constituent Corporations and constitutes a legal, valid and binding agreement
of each such party in accordance with its terms; (ii) the shares of common
stock of the USA Series to be issued pursuant to the terms of this Agreement,
have been duly authorized and, when issued and delivered as provided in this
Agreement, will have been validly issued and fully paid and will be
nonassessable; (iii) each of the Constituent Corporations is duly organized and
validly existing under the laws of the State of Maryland.
(h) The shares of common stock of the USA Series shall have been duly
qualified for offering to the public in those states of the United States and
jurisdictions in which they are presently qualified, so as to permit the
transfers contemplated by this Agreement to be consummated.
(i) The holders of at least a majority of the outstanding shares of
common stock of the State Fund shall have each voted in favor of the adoption
of this Agreement and the Merger at an annual or special meeting or any
adjournment thereof.
ARTICLE VI - COVENANTS
6.1 Each of the Constituent Corporations agree that each shall bear
such expenses as have been incurred by it in connection with the Merger.
6.2 The State Fund shall distribute all declared but unpaid dividends
to its shareholders prior to the Effective Date of the Merger.
ARTICLE VII - TERMINATION
7.1 Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated and the Merger abandoned at
any time (whether before or after adoption hereof by the stockholders of the
Constituent Corporations) prior to the Effective Date of the Merger:
(a) by mutual consent of the Constituent Corporations; or
(b) by either of the Constituent Corporations if any condition set
forth in Article V hereof has not been fulfilled or waived by it.
<PAGE> 27
7.2 An election by a Constituent Corporation to terminate this
Agreement and abandon the Merger shall be exercised by a majority of its Board
of Directors.
7.3 At any time prior to the filing of this Agreement, any of the
terms or conditions of this Agreement may be waived by the Constituent
Corporation entitled to the benefit thereof by action taken by its Board of
Directors or its President if, in the judgment of the Board of Directors or
President taking such action, such waiver will not have a material adverse
effect on the benefits intended under this Agreement to the stockholders of the
Constituent Corporation on behalf of which such action is taken.
7.4 The respective representations and warranties of the Constituent
Corporations contained in Article IV hereof shall expire with, and be
terminated by, the Merger and neither the respective Constituent Corporations
nor any of their directors or officers shall be under any liability with
respect to any such representations or warranties after the Effective Date of
the Merger. This provision shall not protect any director or officer of either
of the Constituent Corporations against any liability to such corporation or to
its stockholders to which he would otherwise be subject.
ARTICLE VIII - MISCELLANEOUS
8.1 This Agreement constitutes the entire agreement between the
parties and there are no agreements, understandings, restrictions or warranties
between the parties other than those set forth herein or herein provided
8.2 This Agreement may be executed in any number of counterparts each
of which shall be deemed to be an original but all of such counterparts
together shall constitute but one instrument.
IN WITNESS WHEREOF, each of the Constituent Corporations has caused
this Agreement and Articles of Merger to be executed on its behalf by its
President and its corporate seal to be affixed thereto and attested by its
Secretary all as of the day and year first above written.
DMC TAX-FREE INCOME--USA, INC.,
a Maryland corporation
By:/s/John H. Durham
-----------------
John H. Durham
President
Attest:
<PAGE> 28
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
DELAWARE GROUP STATE TAX-FREE
FUND INC., a Maryland
corporation
By:/s/John H. Durham
-----------------
John H. Durham
President
Attest:
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
<PAGE> 29
CERTIFICATION OF ADOPTION
OF
AGREEMENT AND ARTICLES OF MERGER
The undersigned hereby certify that the terms and conditions of the
merger as set forth in the foregoing Agreement and Articles of Merger were
advised, authorized and approved by each of the Constituent Corporations in the
manner and by the vote required by its charter and the laws of the State of
Maryland, to wit, by the Board of Directors of DMC Tax-Free Income--USA, Inc.
and of Delaware Group State Tax-Free Fund, Inc. and by the stockholders of the
Delaware Group State Tax-Free Fund, Inc.
DMC TAX-FREE INCOME--USA, INC.
a Maryland corporation
By:/s/John H. Durham
-----------------
John H. Durham
President
Attest:
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
DELAWARE GROUP STATE TAX-FREE
FUND, INC., a Maryland
corporation
By:/s/John H. Durham
-----------------
John H. Durham
President
Attest:
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
<PAGE> 30
THE UNDERSIGNED, President of DMC TAX-FREE INCOME--USA, a Maryland
corporation, who executed on behalf of said corporation the foregoing Agreement
and Articles of Merger and the Certification of Adoption of Agreement and
Articles of Merger, hereby acknowledges, in the name and on behalf of said
corporation, the foregoing Agreement and Articles of Merger and the Certificate
of Adoption of Agreement and Articles of Merger to be the corporate act of said
corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein are true in all
material respects, under the penalties of perjury.
/s/John H. Durham
-----------------
John H. Durham
THE UNDERSIGNED, President of DELAWARE GROUP STATE TAX-FREE FUND,
INC., a Maryland corporation, who executed on behalf of said corporation the
foregoing Agreement and Articles of Merger and the Certification of Adoption of
Agreement and Articles of Merger, hereby acknowledges, in the name and on
behalf of said corporation, the foregoing Agreement and Articles of Merger and
the Certificate of Adoption of Agreement and Articles of Merger to be the
corporate act of said corporation and further certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth therein
with respect to the approval thereof are true in all material respects, under
the penalties of perjury.
/s/John H. Durham
-----------------
John H. Durham
<PAGE> 31
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
DMC TAX-FREE INCOME-USA, INC.
DMC TAX-FREE INCOME-USA, INC., a Maryland corporation having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland,
that:
ONE: The first paragraph of ARTICLE FIFTH of the Articles of
Incorporation is hereby amended in its entirety to read as follows:
FIFTH: The total number of shares which the Corporation shall have
authority to issue is Five Hundred Million (500,000,000) shares of
stock, with a par value of One Cent ($.01) per share, to be known and
designated as Common Stock, such shares of Common Stock having an
aggregate par value of Five Million Dollars ($5,000,000).
TWO: The board of directors of the Corporation on December 18, 1986
duly adopted a resolution setting forth the foregoing amendment to the Articles
of Incorporation, declaring said amendment of the Articles of Incorporation
advisable and directing that it be submitted for consideration by the
stockholders of the Corporation at the annual meeting to be held on April 21,
1987.
THREE: Notice setting forth said amendment to the Articles of
Incorporation and stating that a purpose of the meeting of the stockholders
would be to take action thereon, was given, as required by law, to all
stockholders entitled to vote thereon. The amendment to the Articles of
Incorporation was approved by the stockholders of the Corporation at said
meeting by the affirmative vote of a majority of all the votes entitled to be
cast thereon. (Approval by a majority of all the votes entitled to be cast on
the matter is authorized pursuant to the Articles of Incorporation of the
Corporation.)
FOUR: The amendment to the Articles of Incorporation as hereinabove
set forth has been duly advised by the board of directors and approved by the
stockholders of the Corporation.
FIVE: (a) The total number of shares of stock which the Corporation
was heretofore authorized to issue is One Hundred Million (100,000,000) shares,
with a par value of One Cent ($.01) per share, known and designated as Common
Stock, with an aggregate par value of One Million Dollars
<PAGE> 32
($1,000,000). (b) The total number of shares of stock which the Corporation is
authorized to issue is increased by this amendment to Five Hundred Million
(500,000,000) shares, with a par value of One Cent ($.01) per share, and of the
aggregate par value of Five Million Dollars ($5,000,000).
IN WITNESS WHEREOF, DMC Tax-Free Income-USA, Inc. has caused these
Articles of Amendment to be signed by its President or Vice President and
attested by its Secretary or Assistant Secretary on May 21, 1987.
DMC TAX-FREE INCOME-USA, INC.
/s/William P. Brady
- -------------------
William P. Brady
Executive Vice President
Attest:
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
THE UNDERSIGNED, Executive Vice President of DMC TAX-FREE INCOME-USA,
INC., who executed on behalf of said Corporation the foregoing Articles of
Amendment, of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said Corporation, the foregoing Articles of Amendment
to be the corporate act of said Corporation and further certifies that, to the
best of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
/s/William P. Brady
- -------------------
William P. Brady
<PAGE> 33
DMC TAX-FREE INCOME-USA, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
DMC TAX-FREE INCOME-USA, INC., a Maryland corporation having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies, in accordance with the requirements of Section 2-208 of the Maryland
General Corporation Law the Board of Directors of the Corporation, at a meeting
called for such purpose on December 18, 1986 adopted the following:
FIRST: The DMC Tax-Free Income-USA Series has previously been
allocated 10,000,000 shares of Common Stock (par value $.01 per share) and such
allocation is hereby increased by 65,000,000 shares, to a total of 75,000,000
shares.
SECOND: The DMC Tax-Free Income-USA Insured Series has previously
been allocated 10,000,000 shares of Common Stock (par value $.01 per share) and
such allocation is hereby increased by 15,000,000 shares, to a total of
25,000,000 shares.
THIRD: The additional shares of said DMC Tax-Free Income-USA Series
so classified and allocated shall have all the rights and privileges as set
forth in the Corporation's Articles of Incorporation, including such priority
in the assets and liabilities of such Series as may be provided in such
Articles.
FOURTH: The additional shares of DMC Tax-Free Income-USA Insured
Series so classified and allocated shall have all the rights and privileges as
set forth in the Corporations Articles of Incorporation, including such
priority in the assets and liabilities of such Series as may be provided in
such Articles.
FIFTH: The shares of each of such Series have been classified by the
Board of Directors pursuant to authority contained in the Articles of
Incorporation of the Corporation.
IN WITNESS WHEREOF, DMC TAX-FREE INCOME-USA, INC. has caused these
Articles Supplementary to be signed by its President or Vice President and
attested by its Secretary or Assistant Secretary on December 18, 1986
ATTEST: DMC TAX-FREE INCOME-USA, INC.
<PAGE> 34
/s/Carl A. Guarino By:/s/George M. Chamberlain, Jr.
- ------------------ -----------------------------
Carl A. Guarino Its: George M. Chamberlain, Jr.
Secretary Vice President
THE UNDERSIGNED, Vice President of DMC Tax-Free Income-USA, Inc., who
executed on behalf of said Corporation the foregoing Articles Supplementary, of
which this instrument is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, said Articles Supplementary to be the corporate act
of said Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
<PAGE> 35
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
DMC TAX-FREE INCOME-USA, INC.
DMC TAX-FREE INCOME-USA, a Maryland corporation having its principal
office in Baltimore City, Maryland (the "Corporation")1 hereby certifies to the
State Department of Assessments and Taxation of Maryland, that:
ONE: The first paragraph of ARTICLE FIFTH of the Articles of
Incorporation is hereby amended in its entirety to read as follows:
FIFTH: The total number of shares of stock which the Corporation
shall have authority to issue is One Hundred Million (100,000,000)
shares of stock with a par value of One Cent ($.01) per share, to be
known and designated as Common Stock, such shares of Common Stock
having an aggregate par value of One Million Dollars ($1,000,000).
TWO: The Board of Directors of the Corporation on February 20, 1986
duly adopted a resolution setting forth the foregoing amendment to ARTICLE
FIFTH of the Articles of Incorporation, declaring said amendment of the
Articles of Incorporation advisable and directing that it be submitted for
consideration by the stockholders of the Corporation at the annual meeting to
be held on April 15, 1986.
THREE: Notice setting forth a summary of the changes to be effected
by said amendment to ARTICLE FIFTH and stating that a purpose of the annual
meeting of the stockholders would be to take action on said amendment was
given, as required by law, to all stockholders entitled to vote thereon. The
amendment to the Articles of Incorporation was approved by the stockholders of
the Corporation at said meeting by the affirmative vote of a majority of all
the votes entitled to be cast thereon. (Approval by a majority of all the
votes entitled to be cast on said matter is authorized pursuant to the Articles
of Incorporation of the Corporation.)
FOUR: The amendment to the Articles of Incorporation hereinabove set
forth has been declared advisable by the Board of Directors and approved by the
stockholders of the Corporation.
FIVE: (a) The total number of shares of stock which the Corporation
was heretofore authorized to issue is Fifty Million (50,000,000) shares of
stock, with a par value of One Cent ($.01) per share, known and designated as
Common Stock, with an aggregate par value of Five Hundred Thousand Dollars
<PAGE> 36
($500,000). Ten Million (10,000,000) of said shares with a par value of One
Cent ($.01) per share have been classified as the DMC Tax-Free Income-USA
Series, with an aggregate par value of One Hundred Thousand Dollars ($100,000),
and Ten Million (10,000,000) of said shares, with a par value of One-Cent
($.01) per share have been classified as DMC Tax-Free Income-USA Insured
Series, with an aggregate par value of One Hundred Thousand Dollars ($100,000).
(b) The total number of shares of stock which the Corporation is
authorized to issue is increased by this amendment to One Hundred Million
(100,000,000) shares of stock, with a par value of One Cent ($.01) per share,
to be known and designated as Common Stock, with an aggregate par value of One
Million Dollars ($1,000,000). Ten Million (10,000,000) of said shares with a
par value of One Cent ($.01) per share, have been classified as the DMC
Tax-Free Income-USA Series, with an aggregate par value of One Hundred Thousand
Dollars ($100,000), and Ten Million (10,000,000) of said shares, with a par
value of One Cent ($.01) per share, have been classified as DMC Tax-Free
Income-USA Insured Series, with an aggregate par value of One Hundred Thousand
Dollars ($100,000).
IN WITNESS WHEREOF, DMC TAX-FREE INCOME-USA , INC. has caused these
Articles of Amendment to be signed by its president or vice president and
attested to by its secretary or assistant secretary on April 28, 1986.
DMC TAX-FREE INCOME-USA INC.
By:/s/John H. Durham
- --------------------
John H. Durham
President
ATTEST:
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
THE UNDERSIGNED, President of DMC TAX-FREE INCOME-USA, INC., who
executed on behalf of said Corporation the foregoing Articles of Amendment, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles of Amendment to be the
corporate act of said Corporation and further certifies that, to the best of
his knowledge, information and
<PAGE> 37
belief, the matters and facts set forth therein with respect to the approval
thereof are true in all material respects, under the penalties of perjury.
/s/John H. Durham
-----------------
John H. Durham
President
<PAGE> 38
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
DMC TAX-FREE INCOME-USA, INC.
DMC TAX-FREE INCOME-USA, INC., a Maryland corporation having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland,
that:
ONE: The first paragraph of ARTICLE FIFTH of the Articles of
Incorporation is hereby amended in its entirety to read as follows:
FIFTH: The total number of shares of stock which the Corporation
shall have authority to issue is Fifty Million (50,000,000) shares of
stock, with a par value of One Cent ($.01) per share, to be known and
designated as Common Stock, such shares of Common Stock having an
aggregate par value of Five Hundred Thousand Dollars ($500,000).
TWO: The board of directors of the Corporation on December 20, 1984
duly adopted a resolution setting forth the foregoing amendment to ARTICLE
FIFTH of the Articles of Incorporation, declaring said amendment of the
Articles of Incorporation advisable and directing that it be submitted for
consideration by the stockholders of the Corporation at the annual meeting to
be held on April 16, 1985.
THREE: ARTICLE EIGHTH of the Articles of Incorporation is hereby
amended in its entirety to read as follows:
EIGHTH: Subject to the Investment Company Act of 1940, as amended,
each of the following actions, to the extent required to be approved
by the shareholders under the Maryland General Corporation Law, shall
be approved by a majority of all votes entitled to be cast on the
matter:
(i) Amendment or amendment and restatement of the Articles;
(ii) Reduction of stated capital;
(iii) Consolidation, merger, share exchange or transfer of assets;
(iv) Distribution in partial liquidation; or
(v) Voluntary dissolution.
<PAGE> 39
FOUR: The board of directors of the Corporation on February 21, 1985
duly adopted a resolution setting forth the foregoing amendment to ARTICLE
EIGHTH of the Articles of Incorporation, declaring said amendment of the
Articles of Incorporation advisable and directing that it be submitted for
consideration by the stockholders of the Corporation at the annual meeting to
be held on April 16, 1985.
FIVE: Notice setting forth a summary of the changes to be effected by
said amendment to ARTICLE FIFTH and the text and a description of said
amendment to ARTICLE EIGHTH, and stating that a purpose of the meeting of the
stockholders would be to take action on each amendment, was given, as required
by law, to all stockholders entitled to vote thereon. Each of the amendments
to the Articles of Incorporation was approved by the stockholders of the
Corporation at said meeting by the affirmative vote of a majority of all the
votes entitled to be cast thereon. (Approval by a majority of all of the votes
entitled to be cast on each matter is authorized pursuant to the Articles of
Incorporation of the Corporation.)
SIX: Each of the amendments to the Articles of Incorporation as
hereinabove set forth has been duly advised by the board of directors and
approved by the stockholders of the Corporation.
SEVEN: (a) The total number of shares of stock which the Corporation
was heretofore authorized to issue is Twenty Million (20,000,000) shares, all
of one class, of the par value of One Cent ($.01) per share, and of the
aggregate par value of Two Hundred Thousand Dollars ($200,000).
(b) The total number of shares of stock is increased by this
amendment to Fifty Million (50,000,000) shares, all of one class, of the par
value of One Cent ($.01) per share, and of the aggregate par value of Five
Hundred Thousand Dollars ($500,000).
IN WITNESS WHEREOF, DMC Tax-Free Income-USA, Inc. has caused these
Articles of Amendment to be signed by its President or Vice President and
attested by its Secretary or Assistant Secretary on April 26, 1985.
DMC TAX-FREE INCOME-USA, INC.
By:/s/William P. Brady
-------------------
William P. Brady
Executive Vice President
Attest:
<PAGE> 40
/s/Donald M. Allen
- ------------------
Donald M. Allen
Secretary
THE UNDERSIGNED, Executive Vice President of DMC TAX-FREE INCOME-USA,
INC., who executed on behalf of said corporation the foregoing Articles of
Amendment, of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said corporation, the foregoing Articles of Amendment
to be the corporate act of said corporation and further certifies that, to the
best of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
/s/William P. Brady
-------------------
William P. Brady
<PAGE> 41
DMC TAX-FREE INCOME-USA, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
DMC TAX-FREE INCOME USA, Inc., a Maryland corporation having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies that, in accordance with Section 2-208 of the Maryland General
Corporation Law the Board of Directors of the Corporation, at a meeting called
for such purpose on December 20, 1984, adopted the following Articles
Supplementary:
FIRST: DMC Tax-Free Income-USA Series has previously been allocated
20,000,000 shares of Common Stock (par value $.01 per share) of which more than
10,000,000 shares are unissued and such allocation is hereby reduced by
10,000,000 shares.
SECOND: A new series of shares of the Corporation's Common Stock is
designated as the DMC Tax-Free Income-USA Insured Series and is classified and
allocated 10,000,000 shares and unallocated and unissued stock, with the par
value of $.01 per share to such Series.
THIRD: The shares of said DMC Tax-Free Income-USA Insured Series so
classified and allocated shall have all the rights and privileges as set forth
in the Corporations's Articles of Incorporation, including such priority in the
assets and liabilities of such Series as may be provided in such Articles.
FOURTH: The shares of each of such Series have been classified and
reclassified by the Board of Directors pursuant to authority contained in the
Articles of Incorporation for the Corporation.
IN WITNESS WHEREOF, I have hereunto signed and acknowledged that these
Articles Supplementary are the act of the Corporation and under the penalties
of perjury that to the best of my knowledge, information and belief these
matters and facts are true in all material respects.
/s/John H. Durham
- -----------------
John H. Durham
President
Witness:
<PAGE> 42
/s/Donald M. Allen
- ------------------
Donald M. Allen
Secretary
<PAGE> 43
DMC TAX-FREE INCOME-USA, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
DMC TAX-FREE INCOME-USA, INC., a Maryland corporation having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland,
that:
FIRST: The Board of Directors of the Corporation, at a meeting on
October 20, 1983, adopted a resolution designating the first series of shares
of the Corporation's common stock as the DMC Tax-Free Income-USA Series and
classified and allocated Twenty Million (20,000,000) shares of unissued stock,
with a par value of One Cent ($.01) per share to such Series.
SECOND: The shares of said Series so classified and allocated shall
have all the rights and privileges as set forth in the Corporation's Article of
Incorporation.
THIRD: The shares of said Series have been classified by the Board of
Directors pursuant to authority contained in the Articles of Incorporation of
the Corporation.
IN WITNESS WHEREOF, DMC Tax-Free Income-USA, Inc. has caused these
Articles Supplementary to be signed in its name and on its behalf as of the
20th day of October, 1983.
Attest: DMC TAX-FREE INCOME-USA, INC.
/s/Donald M. Allen By:/s/John H. Durham
- ------------------ -----------------
Donald M. Allen John H. Durham
Secretary President
THE UNDERSIGNED, President of DMC TAX-FREE INCOME-USA, INC. who
executed on behalf of said Corporation the foregoing Articles Supplementary, of
which this instrument is made a part, hereby acknowledges, in the name and on
behalf of said corporation, said Articles Supplementary to be the corporate act
of said Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
<PAGE> 44
/s/John H. Durham
-----------------
John H. Durham
<PAGE> 45
DMC TAX-FREE BOND FUND, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
DMC TAX-FREE BOND FUND, INC., a Maryland corporation having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland,
that:
FIRST: Article Second of the Articles of Incorporation of the
Corporation is hereby amended in its entirety to read as follows:
Second: The name of the corporation is "DMC Tax-Free Income-USA, Inc."
SECOND: The foregoing amendment was approved by a majority of the
entire Board of Directors of the Corporation at a meeting held on October 20,
1983; action of shareholders was not required thereon because no shares of
stock of the Corporation were outstanding or subscribed for at the time of said
approval.
IN WITNESS WHEREOF, DMC Tax-Free Bond Fund, Inc. has caused these
Articles of Amendment to be signed in its name and on its behalf as of the 20th
day of October, 1983.
Attest: DMC TAX-FREE BOND FUND, INC.
/s/Donald M. Allen By:/s/John H. Durham
- ------------------ -----------------
Donald M. Allen John H. Durham
Secretary President
THE UNDERSIGNED, President of DMC Tax-Free Bond Fund, Inc., who
executed on behalf of said corporation the foregoing Articles of Amendment, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said corporation, the forgoing Articles of Amendment to be the
corporate act of said corporation and further certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth therein
with respect to the approval thereof are true in all material respects, under
the penalties of perjury.
/s/John H. Durham
-----------------
John H. Durham
<PAGE> 46
ARTICLES OF INCORPORATION
OF
DMC TAX-FREE BOND FUND, INC.
FIRST: The undersigned, Donald M. Allen whose post office address is
Ten Penn Center Plaza, Philadelphia, Pennsylvania 19103, and being at least
eighteen years of age, does hereby cause to be filed these Articles of
Incorporation for the purpose of forming a corporation under the General
Corporation Law of the State of Maryland.
SECOND: The name of the corporation is DMC Tax-Free Bond Fund, Inc.
THIRD: The purpose for which the corporation is formed is to operate
as an investment company and to exercise all of the powers and to do any and
all of the things as fully and to the same extent as any other corporation
incorporated under the laws of the State of Maryland, now or hereinafter in
force, including, without limitation, the following:
1. To purchase, hold, invest and reinvest in, sell, exchange,
transfer, mortgage, and otherwise acquire and dispose of securities of every
kind, character and description.
2. To exercise all rights, powers and privileges with reference to
or incident to ownership, use and enjoyment of any of such securities,
including, but without limitation, the right, power and privilege to own, vote,
hold, purchase, sell, negotiate, assign, exchange, transfer, mortgage, pledge
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 to do any and all acts and things for the preservation,
protection, improvement and enhancement in value of any of such securities.
3. To purchase or otherwise acquire, own, hold, sell, exchange,
assign, transfer, mortgage, pledge or otherwise dispose of, property of all
kinds.
4. 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 situate; and to build, erect, construct, alter and maintain
buildings, structures, and other improvements on real property.
5. To borrow or raise moneys for any of the purposes of the
corporation, and to mortgage or pledge the whole or any part of the property
and franchises of the
<PAGE> 47
corporation, real, personal, and mixed, tangible or intangible, and wheresoever
situate.
6. To enter into, make and perform contracts and undertakings of
every kind for any lawful purpose, without limit as to amount.
7. To issue, purchase, sell and transfer, reacquire, hold, trade and
deal in, to the extent permitted under the General Corporation Law of the State
of Maryland, capital stock, bonds, debentures and other securities of the
corporation, from time to time, to such extent as the Board of Directors shall,
consistent with the provisions of these Articles of Incorporation, determine;
and to repurchase, re-acquire and redeem, to the extent permitted under the
General Corporation Law of the State of Maryland, from time to time, the shares
of its own capital stock, bonds, debentures and other securities.
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 corporation, and that they are in furtherance of,
and in addition to, and not in limitation of, the general powers conferred upon
the corporation by the laws of the State of Maryland or otherwise; nor shall
the enumeration of one thing be deemed to exclude another, although it be of
like nature, not expressed.
FOURTH: The post office address of the principal office of the
corporation in the State of Maryland is:
c/o The Corporation Trust, Incorporated
32 South Street
Baltimore Maryland 21202
The name and post office address of the initial resident agent of the
corporation in the State of Maryland is:
The Corporation Trust, Incorporated
32 South Street
Baltimore, Maryland 21202
FIFTH: The total number of shares of stock which the corporation
shall have authority to issue is Twenty Million (20,000,000) shares of stock,
with a par value of One Cent ($.01) per share, to be known and designated as
Common Stock, such shares of Common stock having an aggregate par value of Two
Hundred Thousand Dollars ($200,000).
Subject to the provisions of these Articles of Incorporation, the
Board of Directors shall have the power to issue shares of Common Stock of the
corporation from time to
<PAGE> 48
time, at prices not less than the net asset value or par value thereof,
whichever is greater, for such consideration as may be fixed from time to time
pursuant to the direction of the Board of Directors.
Pursuant to Section 2-105 of the Maryland General Corporation Law, the
Board of Directors of the corporation shall have the power to designate one or
more series of shares of Common Stock and such series (subject to any
applicable rule, regulation or order of the Securities and Exchange Commission
or other applicable law or regulation) shall have such preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption and other characteristics as
the Board may determine in the absence of contrary determination set forth
herein. At any time when there are no shares outstanding or subscribed for a
particular series previously established and designated by the Board of
Directors, the series may be liquidated by similar means. Each share of a
series shall have equal rights with each other share of that series with
respect to the assets of the corporation pertaining to that series. The
dividends payable to the holders of any series (subject to any applicable rule,
regulation or order of the Securities and Exchange Commission or any other
applicable law or regulation) shall be determined by the Board and need not be
individually declared, but may be declared and paid in accordance with a
formula adopted by the Board. Except as otherwise provided herein, all
references in these Articles of Incorporation to Common Stock or series of
stock shall apply without discrimination to the shares of each series of stock.
The holder of each share of stock of the corporation shall be entitled
to one vote for each full share, and a fractional vote for each fractional
share of stock, irrespective of the series then standing in his or her name in
the books of the corporation. On any matter submitted to a vote of
shareholders, all shares of the corporation then issued and outstanding and
entitled to vote, irrespective of the series, shall be voted in the aggregate
and not by series except (1) when otherwise expressly provided by the Maryland
General Corporation Law, or (2) when required by the Investment Company Act of
1940, as amended, shares shall be voted by individual series; and (3) when the
matter does not affect any interest of a particular series, then only
shareholders of affected series shall be entitled to vote thereon. Holders of
shares of stock of the corporation shall not be entitled to cumulative voting
in the election of directors or on any other matter.
Each series of stock of the corporation shall have the following
powers, preferences and participating, voting, or
<PAGE> 49
other special rights and the qualifications, restrictions, and limitations
thereof shall be as follows:
1. All consideration received by the corporation for the issue or
sale of stock of each series, together with all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall irrevocably belong to the
series of shares of stock with respect to which such assets, payments or funds
were received by the corporation for all purposes, subject only to the rights
of creditors, and shall be so handled upon the books of account of the
corporation. Such assets, income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation thereof
and any assets derived from any reinvestment of such proceeds, in whatever form
the same may be, are herein referred to as "assets belonging to" such series.
2. The Board of Directors may from time to time declare and pay
dividends or distributions, in stock or in cash, on any or all series of stock;
provided, such dividends or distributions on shares of any series of stock
shall be paid only out of earnings, surplus, or other lawfully available assets
belonging to such series.
3. The Board of Directors shall have the power in its discretion to
distribute in any fiscal year as dividends, including dividends designated in
whole or in part as capital gain distributions, amounts sufficient, in the
opinion of the Board of Directors, to enable the corporation to qualify as a
"regulated investment company" under the Internal Revenue Code of 1954, as
amended, or any successor or comparable statute thereto, and regulations
promulgated thereunder, and to avoid liability for the corporation for Federal
income tax in respect of that year and to make other appropriate adjustments in
connection therewith. In furtherance, and not in limitation of the foregoing,
in the event that a series of shares has a net capital loss for a fiscal year,
and to the extent that the net capital loss offsets net capital gains from
another series, the amounts to be deemed available for distribution to the
series with the net capital gain shall be reduced by the amount of offset. The
shareholders of the series with the net capital gain shall be entitled to a
full distribution of the net income and the net capital gain to the extent
earned or realized. If the net capital loss of a series exceeds the net
capital gain from another series, the excess loss shall not reduce the net
investment income available for distribution to the series with the loss, but
shall be carried forward.
4. In the event of the liquidation or dissolution of the corporation,
shareholders of each series shall be
<PAGE> 50
entitled to receive, as a series, out of the assets of the corporation
available for distribution to shareholders, but other than general assets not
belonging to any particular series of stock, the assets belonging to such
series, and the assets so distributable to the shareholders of any series shall
be distributed among such shareholders in proportion to the number of shares of
such series held by them and recorded on the books of the corporation. In the
event that there are any general assets not belonging to any particular series
of stock and available for distribution, such distribution shall be made to the
holders of stock of all series in proportion to the net asset value of the
respective series determined as hereinafter provided.
5. The assets belonging to any series of stock shall be charged with
the liabilities in respect to such series, and shall also be charged with its
share of the general liabilities of the corporation, in proportion to the net
asset value of the respective series determined as hereinafter provided. The
determination of the Board of Directors shall be conclusive as to the amount of
iabilities, including accrued expenses and reserves, as to the allocation of
the same as to a given series, and as to whether the same or general assets of
the corporation are allocable to one or more series.
The Board of Directors may provide for a holder of any series of stock
of the corporation, who surrenders his certificate in good form for transfer to
the corporation or, if the shares in question are not represented by
certificates, who delivers to the corporation a written request in good order
signed by the shareholder, to convert the shares in question on such basis as
the Board may provide, into shares of stock of any other series of the
corporation.
The net asset value per share of a series of the corporation's common
stock shall be determined in accordance with the Investment Company Act of
1940, as amended, and with generally accepted accounting principles, by adding
the market or appraised value of all securities, cash and other assets of the
corporation pertaining to that series, subtracting the liabilities determined
by the Board of Directors to be applicable to that series, allocating any
general assets and general liabilities to that series, and dividing the net
result by the number of shares of that series outstanding. Securities and
other investments and assets will be valued at the current market value, and in
the absence of a readily available market value, will be valued at fair value
as determined in good faith by the Board of Directors.
The holders of the shares of Common Stock or other securities of the
corporation shall have no preemptive rights
<PAGE> 51
to subscribe to new or additional shares of its Common Stock or other
securities.
SIXTH: The number of directors of the Corporation shall be three, or
such other number of directors as may from time to time be fixed by the By-Laws
of the corporation or pursuant to authorization contained in such By-Laws;
provided, notwithstanding anything herein to the contrary, the board of
directors shall initially consist of three directors. The name of the
directors who shall act as such until successors are duly chosen and qualify
are: James P. Schellenger, John H. Durham and W. Linton Nelson.
SEVENTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the corporation:
1. The Board of Directors shall have power to fix an initial offering
price which shall yield to the corporation not less than the par value thereof,
at which the shares of the Common Stock of the corporation shall be offered for
sale, and to determine from time to time thereafter the offering price which
shall yield to the corporation not less than the par value thereof, of the
shares of its Common Stock; provided, however, that no shares of the Common
Stock of the corporation shall be issued or sold for a consideration which
shall yield to the corporation less than the net asset value of such shares,
determined as hereinafter provided, as of the close of business on the business
day on which such shares are sold, or at such other times set by the Board of
Directors, except in the case of shares of such Common Stock issued in payment
of a dividend properly declared and payable.
The net asset value of the property and assets of the corporation
shall be determined as of the close of business on each business day, and at
such other times as the Board of Directors may direct, by deducting from the
total appraised value of all of the property and assets of the corporation,
determined in the manner hereinafter provided, all debts, obligations and
liabilities of the corporation (including, but without limitation of the
generality of any of the foregoing, any or all debts, obligations, liabilities
or claims of any and every kind and nature, whether fixed, accrued, or
unmatured, and any reserves or charges, determined in accordance with generally
accepted accounting principles, for any or all thereof, whether for taxes,
including estimated taxes or unrealized book profits, expenses, contingencies
or otherwise).
In determining the total appraised value of all the property and
assets of the corporation:
<PAGE> 52
(a) Securities owned shall be valued at market value or, in the
absence of readily available market quotations, at fair value as determined in
good faith by or as directed by the Board of Directors in accordance with
applicable statutes and regulations.
(b) Dividends declared but not yet received, or rights, in respect of
securities which are quoted ex-dividend or ex-rights, shall be included in the
value of such securities as determined by or pursuant to the direction of the
Board of Directors on the day the particular securities are first quoted
ex-dividend or ex-rights, and on each succeeding day until the said dividends
or rights are received and become part of the assets of the corporation.
(c) The value of any other assets of the corporation (and any of the
assets mentioned in paragraphs (a) or (b), in the discretion of the Board of
Directors in the event of a national financial emergency, as hereinafter
defined) shall be determined in such manner as may be approved from time to
time by or pursuant to the direction of the Board of Directors.
The net asset value of each share of the Common Stock of the
corporation shall be determined by dividing the total market value of the
property and assets of the corporation by the total number of shares of its
Common Stock then issued and outstanding, including any shares sold by the
corporation up to and including the date as of which such net asset value is to
be determined whether or not certificates therefor have actually been issued.
In case the net asset value of each share so determined shall include a
fraction of one cent, such net asset value of each share shall be adjusted to
the nearest full cent.
For the purposes of these Articles of Incorporation, a "national
financial emergency" is defined as the whole or any part of any period (i)
during which the New York Stock Exchange is closed other than customary weekend
and holiday closings, (ii) during which trading on the New York Stock Exchange
is restricted, (iii) during which an emergency exists as a result of which
disposal by the corporation of securities owned by such series is not
reasonably practicable or it is not reasonably practicable for the corporation
fairly to determine the value of the net assets of such series, or (iv) during
any other period when the Securities and Exchange Commission (or any succeeding
governmental authority) may for the protection of security holders of the
corporation by order permit suspension of the right of redemption or
postponement of the date of payment on redemption; provided that applicable
rules and regulations of the Securities and Exchange Commission (or any
succeeding governmental authority) shall govern as to whether the conditions
prescribed in (ii), (iii), or (iv) exist. The
<PAGE> 53
Board of Directors may, in its discretion, declare the suspension described in
(iv) above at an end, and such other suspension relating to a natural financial
emergency shall terminate as the case may be on the first business day on which
said Stock Exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired (as to which in the absence of an official ruling by
said Commission or succeeding authority, the determination of the Board of
Directors shall be conclusive):
2. To the extent permitted by law, and except in the case of a
national financial emergency, the corporation shall redeem shares of its Common
Stock from its stockholders upon request of the holder thereof received by the
corporation or its designated agent during business hours of any business day,
provided that such request must be accompanied by surrender of 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 (or, on such request in the event no certificate is outstanding)
by, or pursuant to the direction of the Board of Directors of the corporation,
and accompanied by proper stock transfer stamps. Shares redeemed upon any such
request shall be purchased by the corporation at the net asset value of such
shares determined in the manner provided in Paragraph (l) of this Article
Seventh, as of the close of business on the business day during which such
request was received in good order by the corporation.
Payments for shares of its Common Stock so redeemed by the corporation
shall be made in cash, except payment for such shares may, at the option of the
Board of Directors, or such officer or officers as they may duly authorize for
the purpose in their complete discretion, be made from the assets of that
series in kind or partially in cash and partially in kind. In case of any
payment in kind the Board of Directors, or their delegate, shall have absolute
discretion as to what security or securities of such series 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 current net asset value of the series of the Fund's shares,
provided that any stockholder who cannot legally acquire securities so
distributed in kind by reason of the prohibitions of the Investment Company Act
of 1940 shall receive cash.
Payment for shares of its Common Stock so redeemed by the corporation
shall be made by the corporation as provided above within seven days after the
date which such shares are deposited; provided, however, that if payment shall
be made by delivery of assets of the corporation, as provided above, 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
<PAGE> 54
securities are to be delivered may be made, but not necessarily within such
seven day period.
The right of any holder of shares of the Common Stock of the
corporation to receive dividends thereon and all other rights of such
stockholder with respect to the shares so redeemed by the corporation shall
cease and determine from and after the time as of which the purchase price of
such shares shall be fixed, as provided above, except the right of such
stockholder to receive payment for such shares as provided for herein.
3. The Board of Directors, may from time to time, without the vote or
consent of stockholders, establish uniform standards with respect to the
minimum net asset value of a stockholder account or a minimum investment which
may be made by a stockholder. The Board of Directors may authorize the closing
of those stockholder accounts not meeting the specified minimum standards of
net asset value by redeeming all of the shares in such accounts, provided there
is mailed to each affected stockholder account, at least thirty (30) days prior
to the planned redemption date, a notice setting forth the minimum account size
requirement and the date on which the account will be closed if the minimum
size requirement is not met prior to said closing date.
EIGHTH: Subject to the Investment Company Act of 1940, as amended,
the corporation may take or authorize any action upon the concurrence of such
proportion of votes entitled to be cast thereon as specified in the by-laws of
the corporation, notwithstanding any provision of the Maryland General
Corporation Law requiring a greater proportion, provided that such provisions
of law allow a corporation to act by a lesser proportion.
NINTH: The corporation expressly reserves the right to amend, alter,
change or repeal any provision contained in these Articles of Incorporation,
and all rights, contract and otherwise, conferred herein upon the stockholders
are granted subject to such reservation.
IN WITNESS WHEREOF, the undersigned incorporator of DMC Tax-Free Bond
Fund, Inc. who executed the foregoing Articles of Incorporation hereby
acknowledged the same to be his act and further acknowledge that, to the best
of his knowledge the matters and facts set forth therein are true and all
material respects under the penalties of perjury.
Dated the 16th day of August, 1983.
/s/Donald M. Allen
------------------
Donald M. Allen
<PAGE> 1
DELAWARE GROUP TAX-FREE FUND, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Group Tax-Free Fund, Inc., a Maryland corporation
having its principal office in Baltimore, Maryland (the "Corporation"), hereby
certifies, in accordance with Section 2-208 of the Maryland General Corporation
Law, to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Corporation has authority to issue a total of
Five Hundred Million (500,000,000) shares of common stock with a par value of
One Cent ($.01) per share of the Corporation (the "Common Stock"), having an
aggregate par value of Five Million Dollars ($5,000,000). Of such Five Hundred
Million (500,000,000) shares of Common Stock, Two Hundred Twenty-Five Million
(225,000,000) shares have been allocated to the Tax-Free USA Fund series of the
Common Stock, One Hundred Seventy-Five Million (175,000,000) shares have been
allocated to the Tax-Free Insured Fund series of the Common Stock and One
Hundred Million (100,000,000) shares have been allocated to the Tax-Free USA
Intermediate Fund series of the Common Stock. The Two Hundred Twenty-Five
Million (225,000,000) shares of the Tax-Free USA Fund series of the Common
Stock have been allocated between two classes as follows: (1) Fifty Million
(50,000,000) shares have been allocated to the Tax-Free USA Fund B Class and
(2) One Hundred Seventy-Five Million (175,000,000) shares have been allocated
to the other class of such series (the "USA Fund A Class"). The One Hundred
Seventy-Five Million (175,000,000) shares of the Tax-Free Insured Fund series
of the Common Stock have been allocated between two classes as follows: (1)
Fifty Million (50,000,000) shares have been allocated to the Tax-Free Insured
Fund B Class and (2) One Hundred Twenty-Five Million (125,000,000) shares have
been allocated to the other class of such series (the "Insured Fund A Class").
The One Hundred Million (100,000,000) shares of the Tax-Free USA Intermediate
Fund series of the Common Stock have been allocated between two classes as
follows: (1) Fifty Million (50,000,000) shares have been allocated to the
Tax-Free USA Intermediate Fund B Class and (2) Fifty Million (50,000,000)
shares have been allocated to the other class of such series (the "Intermediate
Fund A Class").
<PAGE> 2
SECOND: The Board of Directors of the Corporation, at a
meeting held on July 20, 1995, adopted a resolution taking the following
actions:
1. Classifying a third class of shares of the Tax-Free
USA Fund series of the Common Stock as the Tax-Free USA Fund C
Class (the "USA Fund C Class") and reclassifying and
allocating Twenty-Five Million (25,000,000) shares of the
authorized and unissued Common Stock, previously classified
and allocated to the Tax-Free USA Fund B Class of the Tax-Free
USA Fund series of the Common Stock, to the USA Fund C Class.
2. Classifying a third class of shares of the Tax-Free
Insured Fund series of the Common Stock as the Tax-Free
Insured Fund C Class (the "Insured Fund C Class") and
reclassifying and allocating Twenty-Five Million (25,000,000)
shares of authorized and unissued Common Stock, previously
classified and allocated to the Tax-Free Insured Fund B Class
of the Tax-Free Insured Fund series of the Common Stock, to
the Insured Fund C Class.
3. Classifying a third class of shares of the Tax-Free
USA Intermediate Fund series of the Common Stock as the
Tax-Free USA Intermediate Fund C Class (the "Intermediate Fund
C Class") and reclassifying and allocating Twenty- Five
Million (25,000,000) shares of authorized and unissued Common
Stock, previously classified and allocated to the Tax-Free USA
Intermediate Fund B Class of the Tax-Free USA Intermediate
Fund series of the Common Stock, to the Intermediate Fund C
Class.
THIRD: The shares of the USA Fund C Class shall represent
proportionate interests in the same portfolio of investments as the shares of
the USA Fund A Class and Tax-Free USA Fund B Class of the Tax-Free USA Fund
series of the Common Stock. The shares of the USA Fund C Class shall have the
same preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption as the shares of the USA Fund A Class and Tax-Free USA Fund B Class
of the Tax-Free USA Fund series of the Common Stock, all as set forth in the
Articles of Incorporation of the Corporation, except for the differences
hereinafter set forth:
1. The dividends and distributions of investment income
and capital gains with respect to shares of the USA Fund C
Class shall be in such amounts as may be declared from time to
time by the Board of Directors, and such dividends and
distributions may vary with
-2-
<PAGE> 3
respect to such class from the dividends and distributions of
investment income and capital gains with respect to shares of
the other classes of the Tax-Free USA Fund series of the
Common Stock to reflect differing allocations of the expenses
of the Corporation among the shares of such classes and any
resultant difference among the net asset values per share of
the shares of such classes, to such extent and for such
purposes as the Board of Directors may deem appropriate. The
allocation of investment income and capital gains and expenses
and liabilities of the Corporation among the three classes of
the Tax-Free USA Fund series of the Common Stock shall be
determined by the Board of Directors in a manner that is
consistent with the order, as applicable, dated September 6,
1994 (Investment Company Act of 1940 Release No. 20529) issued
by the Securities and Exchange Commission, and any amendments
to such order, any future order or any Multiple Class Plan
adopted by the Corporation in accordance with Rule 18f-3 under
the Investment Company Act of 1940, as amended, that modifies
or supersedes such order.
2. Except as may otherwise be required by law pursuant
to any applicable order, rule or interpretation issued by the
Securities and Exchange Commission, or otherwise, the holders
of shares of the USA Fund C Class shall have (i) exclusive
voting rights with respect to any matter submitted to a vote
of stockholders that affects only holders of shares of the USA
Fund C Class, including without limitation the provisions of
any Distribution Plan adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (a "Distribution
Plan") applicable to shares of the USA Fund C Class, and (ii)
no voting rights with respect to the provisions of any
Distribution Plan applicable to any other class of Common
Stock or with regard to any other matter submitted to a vote
of stockholders which does not affect holders of the shares of
the USA Fund C Class.
3. The shares of the USA Fund C Class shall not
automatically convert into shares of the USA Fund A Class as
do the shares of the Tax-Free USA Fund B Class of the Tax-Free
USA Fund series of the Common Stock.
FOURTH: The shares of the Insured Fund C Class shall
represent proportionate interests in the same portfolio of investments as the
shares of the Insured Fund A Class and Tax-Free Insured Fund B Class of the
Tax-Free Insured Fund series of the Common Stock. The shares of the Insured
Fund C Class shall have the same preferences, conversion or other rights,
voting
-3-
<PAGE> 4
powers, restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption as the shares of the Insured Fund A Class and Tax-Free
Insured Fund B Class of the Tax-Free Insured Fund series of the Common Stock,
all as set forth in the Articles of Incorporation of the Corporation, except
for the differences hereinafter set forth:
1. The dividends and distributions of investment income
and capital gains with respect to shares of the Insured Fund C
Class shall be in such amounts as may be declared from time to
time by the Board of Directors, and such dividends and
distributions may vary with respect to such class from the
dividends and distributions of investment income and capital
gains with respect to shares of the other classes of the
Tax-Free Insured Fund series of the Common Stock to reflect
differing allocations of the expenses of the Corporation among
the shares of such classes and any resultant difference among
the net asset values per share of the shares of such classes,
to such extent and for such purposes as the Board of Directors
may deem appropriate. The allocation of investment income and
capital gains and expenses and liabilities of the Corporation
among the three classes of the Tax-Free Insured Fund series of
the Common Stock shall be determined by the Board of Directors
in a manner that is consistent with the order, as applicable,
dated September 6, 1994 (Investment Company Act of 1940
Release No. 20529) issued by the Securities and Exchange
Commission, and any amendments to such order, any future order
or any Multiple Class Plan adopted by the Corporation in
accordance with Rule 18f-3 under the Investment Company Act of
1940, as amended, that modifies or supersedes such order.
2. Except as may otherwise be required by law pursuant
to any applicable order, rule or interpretation issued by the
Securities and Exchange Commission, or otherwise, the holders
of shares of the Insured Fund C Class shall have (i) exclusive
voting rights with respect to any matter submitted to a vote
of stockholders that affects only holders of shares of the
Insured Fund C Class, including without limitation the
provisions of any Distribution Plan applicable to shares of
the Insured Fund C Class, and (ii) no voting rights with
respect to the provisions of any Distribution Plan applicable
to any other class of Common Stock or with regard to any other
matter submitted to a vote of stockholders which does not
affect holders of the shares of the Insured Fund C Class.
-4-
<PAGE> 5
3. The shares of the Insured Fund C Class shall not
automatically convert into shares of the Insured Fund A Class
as do the shares of the Tax-Free Insured Fund B Class of the
Tax-Free Insured Fund series of the Common Stock.
FIFTH: The shares of the Intermediate Fund C Class shall
represent proportionate interests in the same portfolio of investments as the
shares of the Intermediate Fund A Class and Tax-Free USA Intermediate Fund B
Class of the Tax-Free USA Intermediate Fund series of the Common Stock. The
shares of the Intermediate Fund C Class shall have the same preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption as the shares
of the Intermediate Fund A Class and Tax-Free USA Intermediate Fund B Class of
the Tax-Free USA Intermediate Fund series of the Common Stock, all as set forth
in the Articles of Incorporation of the Corporation, except for the differences
hereinafter set forth:
1. The dividends and distributions of investment income
and capital gains with respect to shares of the Intermediate
Fund C Class shall be in such amounts as may be declared from
time to time by the Board of Directors, and such dividends and
distributions may vary with respect to such class from the
dividends and distributions of investment income and capital
gains with respect to shares of the other classes of the
Tax-Free USA Intermediate Fund series of the Common Stock to
reflect differing allocations of the expenses of the
Corporation among the shares of such classes and any resultant
difference among the net asset values per share of the shares
of such classes, to such extent and for such purposes as the
Board of Directors may deem appropriate. The allocation of
investment income and capital gains and expenses and
liabilities of the Corporation among the three classes of the
Tax-Free USA Intermediate Fund series of the Common Stock
shall be determined by the Board of Directors in a manner that
is consistent with the order, as applicable, dated September
6, 1994 (Investment Company Act of 1940 Release No. 20529)
issued by the Securities and Exchange Commission, and any
amendments to such order, any future order or any Multiple
Class Plan adopted by the Corporation in accordance with Rule
18f-3 under the Investment Company Act of 1940, as amended,
that modifies or supersedes such order.
2. Except as may otherwise be required by law pursuant
to any applicable order, rule or interpretation issued by the
Securities and Exchange Commission, or otherwise, the holders
of shares of the
-5-
<PAGE> 6
Intermediate Fund C Class shall have (i) exclusive voting
rights with respect to any matter submitted to a vote of
stockholders that affects only holders of shares of the
Intermediate Fund C Class, including without limitation the
provisions of any Distribution Plan applicable to shares of
the Intermediate Fund C Class, and (ii) no voting rights with
respect to the provisions of any Distribution Plan applicable
to any other class of Common Stock or with regard to any other
matter submitted to a vote of stockholders which does not
affect holders of the shares of the Intermediate Fund C Class.
3. The shares of the Intermediate Fund C Class shall not
automatically convert into shares of the Intermediate Fund A
Class as do the shares of the Tax-Free Intermediate Fund B
Class of the Tax-Free Intermediate Fund series of the Common
Stock.
SIXTH: The shares of the Tax-Free USA Fund B Class of the
Tax-Free USA Fund series of the Common Stock, the Tax-Free Insured Fund B Class
of the Tax-Free Insured Fund Series of the Common Stock and the Tax-Free USA
Intermediate Fund B Class of the Tax-Free USA Intermediate Fund Series of the
Common Stock reclassified as shares of the USA Fund C Class, the Insured Fund C
Class and the Intermediate Fund C Class, respectively, pursuant to these
Articles Supplementary have been reclassified by the Board of Directors
pursuant to authority contained in the Articles of Incorporation of the
Corporation.
SEVENTH: These Articles Supplementary shall become
effective on November 28, 1995.
IN WITNESS WHEREOF, Delaware Group Tax-Free Fund, Inc. has
caused these Articles Supplementary to be signed in its name and on its behalf
this ____ day of November, 1995.
DELAWARE GROUP TAX-FREE FUND, INC.
By:
-------------------------------
George M. Chamberlain, Jr.
Senior Vice President
ATTEST:
- -------------------------------
Assistant Secretary
-6-
<PAGE> 7
THE UNDERSIGNED, Senior Vice President of DELAWARE GROUP
TAX-FREE FUND, INC., who executed on behalf of the said Corporation the
foregoing Articles Supplementary, of which this instrument is made a part,
hereby acknowledges, in the name of and on behalf of said Corporation, said
Articles Supplementary to be the corporate act of said Corporation and further
certifies that, to the best of his knowledge, information and belief, the
matters and facts set forth therein with respect to the authorization and
approval thereof are true in all material respects, under the penalties of
perjury.
-----------------------------------
George M. Chamberlain, Jr.
Senior Vice President
-7-
<PAGE> 1
DELAWARE GROUP TAX-FREE FUND, INC.
CERTIFICATION OF AMENDMENT TO BY-LAWS
AMENDING SECTION 7 OF ARTICLE III
JANUARY 28, 1995
The Undersigned Secretary of Delaware Group Tax-Free
Fund, Inc. does hereby certify that at the Board of Directors of the Fund at a
meeting duly called and held on January 28, 1995 did adopt the following
resolution amending Section 7 of Article III of the Fund's by-laws:
RESOLVED, that Article III,
Section 7, be amended in its
entirely to read as follows:
Section 7. At any meeting of
the stockholders of the
Corporation every stockholder
having the right to vote shall
be entitled, in person or by
proxy appointed by an
instrument in writing
subscribed by such stockholder
or by his duly authorized
attorney-in-fact and bearing a
date not more than eleven
months prior to said meeting
unless such instrument
provides for a longer period,
to one vote for each share of
stock having voting power
registered in his name on the
books of the Corporation.
IN WITNESS WHEREOF, I have hereto subscribed my name
this 28th day of January, 1995.
<PAGE> 2
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
<PAGE> 3
DELAWARE GROUP TAX-FREE FUND, INC.
CERTIFICATION OF AMENDMENT TO BY-LAWS
AMENDING SECTION 2 OF ARTICLE VI
NOVEMBER 21, 1991
The Undersigned Secretary of Delaware Group Tax-Free
Fund, Inc. does hereby certify that at the Board of Directors of the Fund at a
meeting duly called and held on November 21, 1991 did adopt the following
resolution amending Section 2 of Article VI of the Fund's by-laws:
RESOLVED, that Article VI,
Section 2 of the Fund's by-
laws be amended to read in its
entirely as follows:
Section 2. The Chairman of
the Board shall be elected
from the membership of the
Board of Directors, but other
officers need not be members
of the Board of Directors.
Any two or more offices may be
held by the same person except
the offices of President and
Vice President. All officers
of the Corporation shall serve
for one year and until their
successors shall have been
duly elected and shall have
qualified; provided, however,
that any officer may be
removed at any time, either
with our without cause, by
action by the Board of
Directors.
AND FURTHER RESOLVED, that the
appropriate officers of the
Fund are hereby authorized to
take such other steps as may
be necessary to implement the
aforesaid amendment.
<PAGE> 4
IN WITNESS WHEREOF, I have hereto subscribed my name
this 21st day of November, 1991.
/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
<PAGE> 5
DELAWARE GROUP TAX-FREE FUND, INC.
CERTIFICATION OF AMENDMENT TO BY-LAWS
AMENDING SECTION 8 OF ARTICLE IV
JULY 22, 1991
The Undersigned Secretary of Delaware Group Tax-Free
Fund, Inc. does hereby certify that at the Board of Directors of the Fund at a
meeting duly called and held on July 22, 1991 did adopt the following
resolution amending Section 8 of Article IV of the Fund's by-laws:
RESOLVED, that Article IV,
Section 8, be amended in its
entirely to read as follows:
Section 8. The Board of
Directors may hold their
meetings and keep the books of
the Corporation outside of the
State of Maryland at such
place or places as it may from
time to time determine.
AND FURTHER RESOLVED, that the
Secretary of the Fund is
hereby authorized and directed
to include a certified copy of
this Amendment with the
corporate records of the Fund;
and further
RESOLVED, that the books and
records of the Fund shall be
maintained at the offices of
the Fund in the City of
Philadelphia.
IN WITNESS WHEREOF, I have hereto subscribed my
name this 22nd day of July, 1991.
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
<PAGE> 6
DELAWARE GROUP TAX-FREE FUND, INC.
CERTIFICATION OF AMENDMENT TO BY-LAWS
AMENDING SECTION 2 OF ARTICLE III
JANUARY 17, 1991
The Undersigned Secretary of Delaware Group Tax-Free
Fund, Inc. does hereby certify that at the Board of Directors of the Fund at a
meeting duly called and held on January 17, 1991 did adopt the following
resolution amending Section 2 of ARTICLE III of the Fund's by-laws:
WHEREAS, the Board of
Directors of the Fund deems it
to be in the best interests of
the Fund to amend the By-Laws
of the Fund to provide that
holders of at least 10% of the
Fund's shares be permitted, at
the Fund's cost, to call a
special stockholders meeting
for any purpose, in order to
enable the Fund's shares to be
qualified and sold in the
State of California; and
therefore be it
RESOLVED, that the By-Laws of
the Fund are hereby amended by
inserting, as amended Section
2 of ARTICLE III, the
following:
Section 2. Special meetings
of the stockholders may be
called at any time by the
Chairman, President or a
majority of the members of the
Board of Directors and shall
be called by the Secretary
upon the written request of
the holders of at least ten
percent of the shares of the
capital stock of the
Corporation issued and
<PAGE> 7
outstanding and entitled to
vote at such meeting. Upon
receipt of a written request
from such holders entitled to
call a special meeting, which
shall state the purpose of the
meeting and the matter
proposed to be acted on at it,
the Secretary shall issue
notice of such meeting. The
cost of preparing and mailing
the notice of a special
meeting of stockholders shall
be borne by the Corporation.
Special meetings of the
stockholders shall be held at
the principal office of the
Corporation, or at such other
place within or without the
State of Maryland as the Board
of Directors may from time to
time direct, or at such place
within or without the State of
Maryland as shall be specified
in the notice of such meeting.
IN WITNESS WHEREOF, I have hereto subscribed my
name this 17th day of January, 1991.
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
<PAGE> 8
DELAWARE GROUP TAX FREE FUND, INC.
CERTIFICATION OF AMENDMENT TO BY-LAWS
INSERTING A NEW ARTICLE VII AND RENUMBERING THE SUBSEQUENT
ARTICLES
FEBRUARY 16, 1989
The Undersigned Secretary of Delaware
Group Tax Free Fund, Inc. does hereby certify that the Board of Directors of
the Fund at a meeting duly called and held on February 16, 1989 did adopt the
following resolutions inserting a new Article VII and renumbering the
subsequent articles of the Fund's by-laws:
WHEREAS, the Board of Directors of the
Fund deems it to be in the best interests of the Fund to amend the By-Laws of
the Fund to allow indemnification of officers and directors to the full extent
provided by Maryland law;
NOW THEREFORE, BE IT RESOLVED, that the
By-Laws of the Fund are hereby amended by renumbering ARTICLES VIII, IX, X, XI,
XII AND XIII as ARTICLES IX, X, XI, XII, XIII AND XIV, and by inserting as
ARTICLE VII, the following:
"INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. The Corporation shall
indemnify each Officer and
Director made party to a
proceeding, by reason of
service in such capacity, to
the fullest extent, and in
the manner provided, under
Section 2-418 of the Maryland
General Corporation Law: (i)
unless it is proved that the
person seeking
indemnification did not meet
the standard of conduct set
forth in subsection (b) (1)
of such section; and (ii)
provided, that the
Corporation shall not
indemnify any Officer or
Director for any liability to
the Corporation or its
security holders arising from
the wilful misfeasance, bad
faith, gross negligence or
reckless disregard of the
duties involved in the
conduct of such person's
office.
Section 2. The provisions of clause
(i) of Section 1 herein
notwithstanding, the
Corporation shall indemnify
each Officer and Director
against reasonable expenses
incurred in connection with
the successful defense of any
proceeding to which each
<PAGE> 9
such Officer or Director is
a party by reason of service
in such capacity.
Section 3. The Corporation, in the
manner and to the extent
provided by applicable law,
shall advance to each Officer
and Director who is made
party to a proceeding by
reason of service in such
capacity the reasonable
expenses incurred by such
person in connection
therewith."
IN WITNESS WHEREOF, I have hereto
subscribed my name this 16th day of February, 1989.
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
<PAGE> 10
DMC TAX FREE FUND, INC.
CERTIFICATION OF AMENDMENT TO BY-LAWS
ARTICLE 3, SECTION 2
JUNE 16,1988
The Undersigned Secretary of DMC Tax-Free Fund, Inc.
does hereby certify that the Board of Directors of the Fund at a meeting duly
called and held on June 16, 1988 did adopt the following resolution amending
Article 3, Section 2 of the Fund's by-laws:
RESOLVED, that Article III,
Section 2 of the By-laws of
the Fund be amended to read as
follows:
Section 2. Special meetings
of the stockholders may be
called at any time by the
Chairman, President or a
majority of the members of the
Board of Directors and shall
be called by the Secretary
upon the written request of
the holders of at least
twenty-five percent of the
shares of the capital stock of
the Corporation issued and
outstanding and entitled to
vote at such meeting;
provided, if the matter
proposed to be acted on is
substantially the same as a
matter voted on at any special
meeting held during the
preceding twelve months, such
written request shall be made
by holders of at least a
majority of the capital stock
of the Corporation issued and
outstanding and entitled to
vote at such meetings. A
special meeting of the
stockholders shall also
<PAGE> 11
be called by the Secretary
upon the written request of at
least ten percent of the
shares of the capital stock of
the Corporation issued and
outstanding and entitled to
vote at such meeting, for the
express purpose of voting upon
the question of removal of a
director or directors. Upon
receipt of a written request
from such holders entitled to
call a special meeting, which
shall state the purpose of the
meeting and the matter
proposed to be acted on at it,
the Secretary shall inform the
holders who made such request
of the reasonably estimated
cost of preparing and mailing
a notice of a meeting and upon
payment of such costs to the
Corporation the Secretary
shall issue notice of such
meeting. Special meetings of
the stockholders shall be held
at the principal office of the
Corporation, or at such other
place within or without the
State of Maryland as the Board
of Directors may from time to
time direct, or at such place
within or without the State of
Maryland as shall be specified
in the notice of such meeting.
IN WITNESS WHEREOF, I have hereto subscribed my
name this 16th day of June, 1988.
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
<PAGE> 12
DELAWARE GROUP TAX-FREE FUND, INC.
CERTIFICATION OF AMENDMENT TO BY-LAWS
ARTICLE 3, SECTION 1
AND
ARTICLE 4, SECTION 2 AND 4
JUNE 14, 1988
The Undersigned Secretary of Delaware
Group Tax-Free Fund, Inc. does hereby certify that the Shareholders of the Fund
at a meeting duly called and held on June 14, 1988 did adopt the following
resolution amending Article 3, Section 1 and Article 4, Section 2 and 4 of the
Fund's by-laws:
ARTICLE III
Section 1. An annual meeting of the
shareholders of the
Corporation for the election
of directors and for the
transaction of general
business shall not be
required to be held in any
year except that an annual
meeting must be held in any
year if any of the following
items is required to be acted
upon by shareholders under
the Investment Company Act of
1940; election of directors,
approval of the investment
advisory agreement,
ratification of the selection
of independent public
accountants, or approval of a
distribution agreement. Any
such meeting shall be held at
the principal office of the
Corporation, or at such other
place within or without the
State of Maryland as the
Board of Directors may from
time to time prescribe, on
the third Tuesday in April at
10:00 am. or at such other
date and time as the Board of
Directors may from time to
time prescribe. A notice of
any change in the place of
the annual meeting shall be
given to each shareholder not
less than ten days before the
election is held.
ARTICLE IV
* * *
Section 2. The directors shall be
elected by the shareholders
of the Corporation at an
annual meeting, if held, or
at a special meeting called
for such purpose, and shall
<PAGE> 13
hold office until their successors
shall be duly elected and qualified.
* * *
<PAGE> 14
Section 4. The Board of Directors
shall have power to fill
vacancies occurring on the
Board, whether by death,
resignation or otherwise. A
vacancy on the Board of
Directors resulting from any
cause except an increase in
the number of directors may
be filled by a vote of the
majority of the remaining
members of the Board, though
less than a quorum. A vacancy
on the Board of Directors
resulting from an increase in
the number of directors may
be filled by a majority of
the entire Board of
Directors. A director elected
by the Board of Directors to
fill a vacancy shall serve
until the next annual
meeting, whenever held, or
special meeting called for
that purpose, and until his
successor is elected and
qualifies.
IN WITNESS WHEREOF, I have hereto
subscribed my name this 14th day of June, 1988.
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
<PAGE> 15
DMC TAX-FREE INCOME - USA, INC.
BY-LAWS
ARTICLE I
OFFICES
Section 1. The principal office of the
Corporation shall be in the City of Baltimore, State of Maryland. The
Corporation shall also have offices at such other places as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
STOCKHOLDERS AND STOCK CERTIFICATES
Section 1. Every stockholder of record
shall be entitled to a stock certificate representing the shares owned by him.
Stock certificates shall be in such form as may be required by law and as the
Board of Directors shall prescribe. Every stock certificate shall be signed by
the Chairman or the President or a Vice President and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary, and sealed
with the corporate seal, which may be a facsimile, either engraved or printed.
Stock certificates may bear the facsimile signatures of the officers authorized
to sign such certificates.
Section 2. Shares of the capital stock
of the Corporation shall be transferable only on the books of the Corporation
by the person in whose name such shares are registered, or by his 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 Corporation or its duly
authorized transfer 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 Corporation or its duly authorized transfer agent. No transfer shall
be made unless and until the certificate issued to the transferor shall be
delivered to the Corporation or its duly authorized transfer agent, properly
endorsed.
Section 3. Any person desiring a
certificate for shares of the capital stock of the Corporation to be issued in
lieu of one lost or destroyed shall make an affidavit or affirmation setting
forth the loss or destruction of such stock certificate, and shall advertise
such loss or destruction in such manner as the Board of Directors may require,
and shall, if the Board of Directors
<PAGE> 16
shall so require, give the Corporation a bond or indemnity, in such form and
with such security as may be satisfactory to the Board, indemnifying the
Corporation against any loss that may result upon the issuance of a new stock
certificate. Upon receipt of such affidavit and proof of publication of the
advertisement of such loss or destruction, and the bond, if any, required by
the Board of Directors, a new stock certificate may be issued of the same tenor
and for the number of shares as the one alleged to have been lost or destroyed.
Section 4. The Corporation shall be
entitled to treat the holder of record of any share or shares of its capital
stock 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 Corporation shall have express or other
notice thereof.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. The annual meeting of the
stockholders of the Corporation for the election of Directors and for the
transaction of general business shall be held at the principal office of the
Corporation, or at such other place within or without the State of Maryland as
the Board of Directors may from time to time prescribe, on the third Tuesday in
April at 10:00 a.m. in each year after the year 1985, unless that day shall be
duly designated as a legal holiday, in which event the annual meeting of the
stockholders shall be held on the first day following which is not a legal
holiday. A notice of any change in the place of the annual meeting shall be
given to each stockholder not less than ten days before the election is held.
Section 2. Special meetings of the
stockholders may be called at any time by the Chairman, President or a majority
of the members of the Board of Directors and shall be called by the Secretary
upon "the written request of the holders of at least twenty-five percent of the
shares of the capital stock of the Corporation issued and outstanding and
entitled to vote at such meeting; provided, if the matter proposed to be acted
on is substantially the same as a matter voted on at any special meeting held
during the preceding twelve months, such written request shall be made by
holders of at least a majority of the capital stock of the Corporation issued
and outstanding and entitled to vote at such meetings. Upon receipt of a
written request from such holders entitled to call a special meeting, which
shall state the purpose of the meeting and the matter proposed to be acted on
at it, the Secretary shall inform the holders who made such request of the
reasonably
<PAGE> 17
estimated cost of preparing and mailing a notice of a meeting and upon payment
of such costs to the Corporation the Secretary shall issue notice of such
meeting. Special meetings of the stockholders shall be held at the principal
office of the Corporation, or at such other place within or without the State
of Maryland as the Board of Directors may from time to time direct, or at such
place within or without the State of Maryland as shall be specified in the
notice of such meeting.
Section 3. Notice of the time and
place of the annual or any special meeting of the stockholders shall be given
to each stockholder entitled to notice of such meeting not less than ten days
nor more than ninety days prior to the date of such meeting. In the case of
special meetings of the stockholders, the notice shall specify the object or
objects of such meeting, and no business shall be transacted at such meeting
other than that mentioned in the call.
Section 4. The Board of Directors may
close the stock transfer books of the Corporation for a period not exceeding
twenty days preceding the date of any meeting of stockholders, or the date for
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into
effect, or for a period of not exceeding twenty days in connection with the
obtaining of the consent of stockholders for any purpose; provided, however,
that in lieu of closing the stock transfer books as aforesaid, the Board of
Directors may fix in advance a date, not exceeding ninety days preceding the
date of any meeting of stockholders, or the date for payment of any dividend,
or the date for the allotment of rights, or the date when any change or
conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent, as a record date for the determination
of the stockholders entitled to notice of, and to vote at any such meeting and
any adjournment thereof, or entitled to receive payment of any such dividend,
or to any such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of capital stock or to give such consent,
and in such case such stockholders and only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to such notice
of, and to vote at, such meeting and any adjournment thereof, or to receive
payment of such dividend or to receive such allotment of rights or to exercise
such rights, or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record
date fixed as aforesaid.
Section 5. At all meetings of the
stockholders a quorum shall consist of the holders of a
<PAGE> 18
majority of the outstanding shares of the capital stock of the Corporation
entitled to vote at such meeting. In the absence of a quorum no business shall
be transacted except that the stockholders present in person or by proxy and
entitled to vote at such meeting shall have power to adjourn the meeting from
time to time to a date not more than one hundred twenty days after the original
record date without further notice other than announcement-at the meeting. At
any such adjourned meeting at which a quorum shall be present any business may
be transacted which might have been transacted at the meeting on the date
specified in the original notice. If a quorum is present at any meeting, the
holders of a majority of the shares of capital stock of the Corporation issued
and outstanding and entitled to vote at the meeting who shall be present in
person or by proxy at such meeting shall have power to approve any matter
properly before the meeting, except a plurality of all votes cast at a meeting
at which a quorum is present shall be sufficient for the election of a
director. The holders of such majority shall also have power to adjourn the
meeting to any specific time or times, and no notice of any such adjourned
meeting need be given to stockholders absent or otherwise.
Section 6. At all meetings of the
stockholders the following order of business shall be substantially observed,
as far as it is consistent with the purpose of the meeting:
Election of Directors;
Ratification of Selection of Auditors;
New business.
Section 7. At any meeting of the
stockholders of the Corporation every stockholder having the right to vote
shall be entitled, in person or by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than eleven months
prior to said meeting unless such instrument provides for a longer period, to
one vote for each share of stock having voting power registered in his name on
the books of the Corporation.
ARTICLE IV
DIRECTORS
Section 1. The Board of Directors
shall consist of not less than three nor more than twelve members. The Board
of Directors may by a vote of the entire board increase or decrease the number
of directors without a vote of the stockholders; provided, that any such
decrease shall not affect the tenure of office of any director. Directors need
not hold any shares of the capital stock of the Corporation.
<PAGE> 19
Section 2. The directors shall be
elected annually by the stockholders of the Corporation at their annual
meeting, and shall hold office for the term of one year and until their
successors shall be duly elected and shall qualify.
Section 3. The Board of Directors
shall have the control and management of the business of the Corporation, and
in addition to the powers and authority by these By-Laws expressly conferred
upon them, may exercise, subject to the provisions of the laws of the State of
Maryland and of the Articles of Incorporation of the Corporation, all such
powers of the Corporation and do all such acts and things as are not required
by law or by the Articles of Incorporation to be exercised or done by the
stockholders.
Section 4. The Board of Directors
shall have power to fill vacancies occurring on the Board, whether by death,
resignation or otherwise. A vacancy on the Board of Directors resulting from
any cause except an increase in the number of directors may be filled by a vote
of the majority of the remaining members of the Board, though less than a
quorum. A vacancy on the Board of Directors resulting from an increase in the
number of directors may be filled by a majority of the entire Board of
Directors. A director elected by the Board of Directors to fill a vacancy
shall serve until the next annual meeting of stockholders and until his
successor is elected and qualifies. If less than a majority of the directors
in office shall have been elected by the stockholders, a meeting of the
stockholders shall be called as required under the Investment Company Act of
1940, as amended.
Section 5. The Board of Directors
shall have power to appoint, and at its discretion to remove or suspend, any
officers, managers, superintendents, subordinates, assistants, clerks, agents
and employees, permanently or temporarily, as the Board may think fit, and to
determine their duties and to fix, and from time to time to change, their
salaries or emoluments, and to require security in such instances and in such
amounts as it may deem proper.
Section 6. In case of the absence of
an officer of the Corporation, or for any other reason which may seem
sufficient to the Board of Directors, the Board may delegate his powers and
duties for the time being to any other officer of the Corporation or to any
director.
Section 7. The Board of Directors may,
by resolution or resolutions passed by a majority of the whole Board, designate
one or more committees, each committee to consist of two or more of the
directors of the Corporation
<PAGE> 20
which, to the extent provided in such resolution or resolutions and by
applicable law, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Directors. Any such
committee shall keep regular minutes of its proceedings, and shall report the
same to the Board when required.
Section 8. The Board of Directors may
hold their meetings and keep the books of the Corporation, except the original
or a duplicate stock ledger and the original or a certified copy of these
By-Laws, outside of the State of Maryland, at such place or places as they may
from time to time determine.
Section 9. The Board of Directors
shall have power to fix, and from time to time to change the compensation, if
any, of the directors of the Corporation.
Section 10. Upon retirement of a
Director, the Board may elect him or her to the position of Director Emeritus.
Said Director Emeritus shall serve for one year and may be re-elected by the
Board from year to year thereafter. Said Director Emeritus shall not vote at
meetings of Directors and shall not be held responsible for actions of the
Board but shall receive fees paid to Board members for serving as such.
ARTICLE V
DIRECTORS MEETINGS
Section 1. The first regular meeting
of the Board of Directors shall be held each year within seven business days
following the annual meeting of stockholders at which the Directors are
elected. Regular meetings of the Board of Directors shall also be held without
notice at such times and places as may be from time to time prescribed by the
Board.
Section 2. Special meetings of the
Board of Directors may be called at any time by the Chairman, and shall be
called by the Chairman upon the written request of a majority of the members of
the Board of Directors. Unless notice is waived by all the members of the
Board of Directors, notice of any special meeting shall be given to each
director at least twenty-four hours prior to the date of such meeting, and such
notice shall provide the time and place of such special meeting.
Section 3. One-third of the entire
Board of Directors shall constitute a quorum for the transaction of business at
any meeting; except that if the number of
<PAGE> 21
directors on the Board is less than six, two members shall constitute a quorum
for the transaction of business at any meeting. The act of a majority of the
directors present at any meeting where there is a quorum shall be the act of
the Board of Directors except as may be otherwise
Section 4. The order of business at
meetings of the Board of Directors shall be prescribed from time to time by the
Board.
ARTICLE VI
OFFICERS AND AGENTS
Section 1. At the first meeting of the
Board of Directors after the election of Directors in each year, the Board
shall elect a Chairman, a President and Chief Executive Officer, one or more
Vice Presidents, a Secretary and a Treasurer and may elect or appoint one or
more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers and agents as the Board may deem necessary and as the business of the
Corporation may require.
Section 2. The Chairman of the Board
and the President shall be elected from the membership of the Board of
Directors, but other officers need not be members of the Board of Directors.
Any two or more offices may be held by the same person except the offices of
President and Vice President. All officers of the Corporation shall serve for
one year and until their successors shall have been duly elected and shall have
qualified; provided, however, that any officer may be removed at any time,
either with or without cause, by action by the Board of Directors.
ARTICLE VII
DUTIES OF OFFICERS
CHAIRMAN OF THE BOARD
Section 1. The Chairman of the Board
shall preside at all meetings of the stockholders and the Board of Directors
and shall be a member ex officio of all standing committees. He shall have
those duties and responsibilities as shall be assigned to him by the Board of
Directors. In the absence, resignation, disability or death of the President,
the Chairman shall exercise all the powers and perform all the duties of the
President until his return, or until such disability shall be removed or until
a new President shall have been elected.
PRESIDENT
Section 2. The President shall be the
Chief Executive Officer and head of the Corporation, and in the recess of the
Board of Directors shall have the general
<PAGE> 22
control and management of its business and affairs, subject, however to the
regulations of the Board of Directors.
The President shall, in the absence
of the Chairman, preside at all meetings of the stockholders and the Board of
Directors. In the event of the absence, resignation, disability or death of the
Chairman, the President shall exercise all powers and perform all duties of the
Chairman until his return, or until such disability shall have been removed or
until a new Chairman shall have been elected.
VICE PRESIDENTS
Section 3. The Executive Vice
President, and the Vice Presidents, shall have those duties and
responsibilities as shall be assigned to them by the Chairman or the President.
In the event of the absence, resignation, disability or death of the Chairman
and President, the Executive Vice President shall exercise all the powers and
perform all the duties of the President until his return, or until such
disability shall be removed or until a new President shall have been elected.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 4. The Secretary shall attend
all meetings of the stockholders and shall record all the proceedings thereof
in a book to be kept for that purpose, and he shall be the custodian of the
corporate seal of the Corporation. In the absence of the Secretary, an
Assistant Secretary or any other person appointed or elected by the Board of
Directors, as is elsewhere in these Bylaws provided, may exercise the rights
and perform the duties of the Secretary.
Section 5. The Assistant Secretary,
or, if there be more than one Assistant Secretary, then the Assistant
Secretaries in the order of their seniority, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
secretary. Any Assistant Secretary elected by the Board shall also perform
such other duties and exercise such other powers as the Board of Directors
shall from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 6. The Treasurer shall keep
full and correct accounts of the receipts and expenditures of the Corporation
in books belonging to the Corporation, and shall deposit all monies and
valuable effects in the name and to the credit of the Corporation and in such
depositories as may
<PAGE> 23
be designated by the Board of Directors, and shall, if the Board shall so
direct, give bond with sufficient security and in such amount as may be
required by the Board of Directors for the faithful performance of his duties.
He shall disburse funds of the
Corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the President and Board of
Directors at the regular meetings of the Board, or whenever they may require
it, an account of all his transactions as the chief fiscal officer of the
Corporation and of the financial condition of the Corporation, and shall
present each year before the annual meeting of the stockholders a full
financial report of the preceding fiscal year.
Section 7. The Assistant Treasurer,
or, if there be more than one Assistant Treasurer, then the Assistant
Treasurers in the order of their seniority, shall, in the absence or disability
of the Treasurer, perform the duties and exercise the powers of the Treasurer.
Any Assistant Treasurer elected by the board shall also perform such duties and
exercise such powers as the Board of Directors shall from time to time
prescribe.
ARTICLE VIII
CHECKS, DRAFTS, NOTES, ETC.
Section 1. All checks shall bear the
signature of such person or persons as the Board of Directors may from time to
time direct.
Section 2. All notes and other similar
obligations and acceptances of drafts by the Corporation shall be signed by
such person or persons as the Board of Directors may from time to time direct.
Section 3. Any officer of the
Corporation or any other employee, as the Board of Directors may from time to
time direct, shall have full power to endorse for deposit all checks and all
negotiable paper drawn payable to his or their order or to the order of the
Corporation.
ARTICLE IX
CORPORATE SEAL
Section 1. The corporate seal of the
Corporation shall have inscribed thereon the name of the Corporation, the year
of its organization, and the words "Corporate Seal, Maryland." Such seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
<PAGE> 24
ARTICLE X
DIVIDENDS
Section 1. Dividends upon the shares
of the capital stock of the Corporation may, subject to the provisions of the
Articles of Incorporation of the Corporation, if any, be declared by the Board
of Directors at any regular or special meeting, pursuant to law. Dividends may
be paid in cash, in property, or in shares of the capital stock of the
Corporation.
Section 2. Before payment of any
dividend there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors may, from time to
time, in their absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the Board of
Directors shall deem to be for the best interests of the Corporation, and the
Board of Directors may abolish any such reserve in the manner in which it was
created.
ARTICLE XI
FISCAL YEAR
Section 1. The fiscal year of the
Corporation shall begin on September 1 of each year, and end on August 31 of
each year.
ARTICLE XII
NOTICES
Section 1. Whenever under the
provisions of these By-Laws notice is required to be given to any director or
stockholder, such notice is deemed given when it is personally delivered, left
at the residence or usual place of business of the director or stockholder, or
mailed to such director or stockholder at such address as shall appear on the
books of the Corporation and such notice, if mailed, shall be deemed to be
given at the time it shall be so deposited in the United States mail postage
prepaid. In the case of directors, such notice may also be given orally by
telephone or by telegraph or cable.
Section 2. Any notice required to be
given under these ByLaws may be waived in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein.
<PAGE> 25
ARTICLE XIII
AMENDMENTS
Section 1. These By-Laws may be
amended, altered or repealed by the affirmative vote of the holders of a
majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote thereon, or by a majority of the Board of
Directors, as the case may be.
<PAGE> 26
AMENDMENT TO BY-LAWS
DMC TAX-FREE INCOME-USA, INC.
At the meeting of the Board of
Directors held September 20, 1984 the following Resolutions amending the
By-Laws were adopted:
RESOLVED, that Article VI, Section 1 be
amended as of September 30,
1984 to read as follows:
Section 1. At the first meeting of the
Board of Directors after the
election of Directors in each
year the Board shall elect a
Chairman, a President and
Chief Executive Officer, one
or more Vice Presidents, a
Secretary and a Treasurer,
and may elect or appoint one
or more Assistant
Secretaries, one or more
Assistant Treasurers, and
such other officers and
agents as the Board may deem
necessary and as the business
of the Corporation may
require.
RESOLVED, that Article VII, Section 1
be amended as of September
30, 1984 to read as follows:
Section 1. The Chairman of the Board
shall preside at all meetings
of the stockholders and the
Board of Directors and shall
be a member ex-officio of all
standing committees. He
shall have those duties and
responsibilities as shall be
assigned to him by the Board
of Directors. In the
absence, resignation,
disability or death of the
President, the Chairman shall
exercise all the powers and
perform all the duties of the
President until his return,
or until such disability
shall be moved or until a new
President shall have been
elected.
FURTHER RESOLVED, that Article VII,
Section 3 be amended as of
September 30, 1984 to read as
follows:
Section 3. The President shall be the
Chief Executive Officer and
head of the Corporation, and
in the recess of the Board of
Directors shall have the
general control
<PAGE> 27
and management of its business and
affairs, subject, however, to
the regulations of the Board
of Directors.
The President shall, in the absence of
the Chairman, preside at all
meetings of the stockholders
and the Board of Directors.
In the event of the absence,
resignation, disability or
death of the Chairman, the
President shall exercise all
powers and perform all duties
of the Chairman until his
return, or until such
disability shall have been
removed or until a new
chairman shall have been
elected.
FURTHER RESOLVED, that Article VII,
Section 4 be amended as of
September 30, 1984 to read as
follows:
Section 4. The Executive Vice
President, and the Vice
Presidents, shall have those
duties and responsibilities
as shall be assigned to them
by the Chairman or the
President. In the event of
the absence, resignation,
disability or death of the
Chairman and President, the
Executive Vice President
shall exercise all the powers
and perform all the duties of
the President until his
return, or until such
disability shall be removed
or until a new President
shall have been elected.
I, Donald M. Allen, Secretary of DMC
Tax-Free Income-USA, Inc., do hereby certify that the foregoing is a true and
correct copy of the Resolutions adopted by the Board of Directors at their
meeting held September 20, 1984.
/s/Donald M. Allen
- ------------------
Donald M. Allen
<PAGE> 28
DMC TAX-FREE BOND FUND, INC.
BY-LAWS
ARTICLE I
OFFICES
Section 1. The principal office of the
Corporation shall be in the City of Baltimore, State of Maryland. The
Corporation shall also have offices at such other places as the Board of
Directors may from time to time determine and the business of the Corporation
may require.
ARTICLE II
STOCKHOLDERS AND STOCK CERTIFICATES
Section 1. Every stockholder of record
shall be entitled to a stock certificate representing the shares owned by him.
Stock certificates shall be in such form as may be required by law and as the
Board of Directors shall prescribe. Every stock certificate shall be signed by
the Chairman or the President or a Vice President and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary, and sealed
with the corporate seal, which may be a facsimile, either engraved or printed.
Whenever permitted by law, the Board of Directors may authorize the issuance of
stock certificates bearing the facsimile signatures of the officers authorized
to sign such certificates.
Section 2. Shares of the capital stock
of the Corporation shall be transferable only on the books of the Corporation
by the person in whose name such shares are registered, or by his duly
authorized attorney or representative. In all cases of transfer by an
attorney, the original letter of attorney, or an official copy thereof duly
certified, shall be deposited and remain with the Corporation or its duly
authorized transfer 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 Corporation or its duly authorized transfer agent. No transfer shall
be made unless and until the certificate issued to the transferor shall be
delivered to the Corporation or its duly authorized transfer agent, properly
endorsed.
Section 3. Any person desiring a
certificate for shares of the capital stock of the Corporation to be issued in
lieu of one lost or destroyed shall make an affidavit or affirmation setting
forth the loss or destruction of such stock certificate, and shall advertise
<PAGE> 29
such loss or destruction in such manner as the Board of Directors may require,
and shall, if the Board of Directors shall so require, give the Corporation a
bond of indemnity, in such form and with such security as may be satisfactory
to the Board, indemnifying the Corporation against any loss that may result
upon the issuance of a new stock certificate. Upon receipt of such affidavit
and proof of publication of the advertisement of such loss or destruction, and
the bond, if any, required by the Board of Directors, a new stock certificate
may be issued of the same tenor and for the number of shares as the one alleged
to have been lost or destroyed.
Section 4. The Corporation shall be
entitled to treat the holder of record of any share or shares of its capital
stock 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 Corporation shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. The annual meeting of the
stockholders of the Corporation for the election of Directors and for the
transaction of general business shall be held at the principal office of the
Corporation, or at such other place within or without the State of Maryland as
the Board of Directors may from time to time prescribe, on the third Tuesday in
April at 10:00 a.m. in each year after the year 1983, unless that day shall be
duly designated as a legal holiday, in which event the annual meeting of the
stockholders shall be held on the first day following which is not a legal
holiday. The place of the annual meeting of the stockholders of the
Corporation shall be changed within sixty days next before the day on which
such meeting is to be held. A notice of any change in the place of the annual
meeting shall be given to each stockholder twenty days before the election is
held.
Section 2. Special meetings of the
stockholders may be called at any time by the Chairman and shall be called at
any time by the Chairman, or by the Secretary, upon the written request of a
majority of the members of the Board of Directors, or upon the written request
of the holders of a majority of the shares of the capital stock of the
Corporation issued and outstanding and entitled to vote at such meeting. Upon
receipt of a written request from any person or persons entitled to call a
special meeting, which shall state the object of the meeting, it shall be the
duty of the Chairman, or, in his absence, the
<PAGE> 30
Secretary, to call such meeting to be held not less than ten days nor more than
sixty days after the receipt of such request. Special meetings of the
stockholders shall be held at the principal office of the Corporation, or at
such other place within or without the State of Maryland as the Board of
Directors may from time to time direct, or at such place within or without the
State of Maryland as shall be specified in the notice of such meeting.
Section 3. Notice of the time and
place of the annual or any special meeting of the stockholders shall be given
to each stockholder entitled to notice of such meeting at least ten days prior
to the date of such meeting. In the case of special meetings of the
stockholders, the notice shall specify the object or objects of such meeting,
and no business shall be transacted at such meeting other than that mentioned
in the call.
Section 4. The Board of Directors may
close the stock transfer books of the Corporation for a period not exceeding
sixty days preceding the date of any meeting of stockholders, or the date for
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into
effect, or for a period of not exceeding sixty days in connection with the
obtaining of the consent of stockholders for any purpose; provided, however,
that in lieu of closing the stock transfer books as aforesaid, the Board of
Directors may fix in advance a date, not exceeding sixty days preceding the
date of any meeting of stockholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent, as a record date for the determination
of the stockholders entitled to notice of, and to vote any such meeting and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock or to give such consent, and in
such case such stockholders and only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting and any adjournment thereof, or to receive payment of such
dividend or to receive such allotment of rights or to exercise such rights, or
to give such consent, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
Section 5. At least ten days before
every election of directors of the Corporation, the Secretary shall prepare and
file in the office where the election is to be held a complete list of the
stockholders entitled to vote at
<PAGE> 31
the ensuing election, arranged in alphabetical order, with the residence of
each stockholder and the number of voting shares held by him, and such list
shall at all times, during the usual hours for business and during the whole
time of said election, be open to the examination of any stockholder.
Section 6. At all meetings of the
stockholders a quorum shall consist of the persons representing a majority of
the outstanding shares of the capital stock of the Corporation entitled to vote
at such meeting. In the absence of a quorum no business shall be transacted
except that the stockholders present in person or by proxy and entitled to vote
at such meeting shall have power to adjourn the meeting from time to time
without notice other than announcement at the meeting until a quorum shall be
present. At any such adjourned meeting at which a quorum shall be present any
business may be transacted which might have been transacted at the meeting on
the date specified in the original notice. If a quorum is present at any
meeting, the holder of the majority of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote at the meeting who
shall be present in person or by proxy at the meeting shall have power to act
upon all matters properly before the meeting, and shall also have power to
adjourn the meeting to any specific time or times, and no notice of any such
adjourned meeting need be given to stockholders absent or otherwise.
Section 7. At all meetings of the
stockholders the following order of business shall be substantially observed,
as far as it is consistent with the purpose of the meeting:
Election of Directors;
Ratification of Selection of Auditors;
New Business.
Section 8. At any meeting of the
stockholders of the Corporation every stockholder having the right to vote
shall be entitled, in person or by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting unless such instrument provides for a longer period, to
one vote for each share of stock having voting power registered in his name on
the books of the Corporation. Except where the transfer books of the
Corporation shall have been closed, or a date shall have been fixed as a record
date for the determination of the stockholders entitled to vote at such
meeting, no share of stock shall be voted on at any election of the Directors
which shall have been transferred on the books of the Corporation with twenty
days next preceding such election of Directors.
<PAGE> 32
ARTICLE IV
DIRECTORS
Section 1. The Board of Directors
shall consist of not less than three nor more than twelve members, who may be
any persons, whether or not they hold any shares of the capital stock of the
Corporation.
Section 2. The directors shall be
elected annually by the stockholders of the Corporation at their annual
meeting, and shall hold office for the term of one year and until their
successors shall be duly elected and shall qualify.
Section 3. The Board of Directors
shall have the control and management of the business of the Corporation, and
in addition to the powers and authority by these By-Laws expressly conferred
upon them, may subject to the provisions of the laws of the State of Maryland
and of the Certificate of Incorporation of the Corporation, exercise all such
powers of the Corporation and do all such acts and things as are not required
by law or by the Certificate of Incorporation to be exercised or done by the
stockholders.
Section 4. The Board of Directors
shall have power to fill vacancies occurring on the Board, whether by death,
resignation or otherwise. A vacancy on the Board of Directors may be filled by
a vote of the majority of the remaining members of the Board, though less than
a quorum, but such election shall be deemed to be only for the balance of the
unexpired term.
Section 5. The Board of Directors
shall have power to appoint, and at its discretion to remove or suspend, any
officer, officers, manager, superintendents, subordinates, assistants, clerks,
agents and employees, permanently or temporarily, as the Board may think fit,
and to determine their duties and to fix, and from time to time to change,
their salaries or emolument, and to require security in such instances and in
such amounts as it may deem proper. No contract of employment for services to
be rendered to the Corporation shall be of longer duration than two weeks,
unless such contract of employment shall be in writing, signed by the officers
of the Corporation and approved by the Board of Directors.
Section 6. In case of the absence of
an officer of the Corporation, or for any other reason which may seem
sufficient to the Board of Directors, the Board may delegate his powers and
duties for the time being to any other office of the Corporation or to any
director.
Section 7. The Board of Directors may,
by resolution or resolutions passed by a majority of the whole
<PAGE> 33
Board, designate one or more committees, each committee to consist of two or
more of the directors of the Corporation which, to the extent provided in such
resolution or resolutions, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the Corporation,
and may have power to authorize the seal of the Corporation to be affixed to
all papers which may require it. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors. Any such committee shall keep regular minutes of its
proceedings, and shall report the same to the Board when required.
Section 8. The Board of Directors may
hold their meetings and keep the books of the Corporation, except the original
or duplicate stock ledger, outside of the State of Maryland, at such place or
places as they may from time to time determine.
Section 9. The Board of Directors
shall have power to fix, and from time to time to change the compensation if
any, of the directors of the Corporation.
Section 10. Upon the retirement of a
Director, the Board may elect him or her to the position of Director Emeritus.
Said Director Emeritus shall serve for one year and may be re-elected by the
Board from year to year thereafter. Said Director Emeritus shall not vote at
meetings of Directors and shall not be held responsible for actions of the
Board but shall receive fees paid to Board members for serving as such.
ARTICLE V
DIRECTORS MEETINGS
Section 1. The first regular meeting
of the Board of Directors shall be held each year within seven business days
following the annual meeting of stockholders at which the Directors are
elected. Regular meetings of the Board of Directors shall also be held without
notice at such times and places as may be from time to time prescribed by the
Board.
Section 2. Special meetings of the
Board of Directors may be called at any time by the Chairman, and shall be
called by the Chairman upon the written request of a majority of the members of
the Board of Directors. Unless notice is waived by all the members of the
Board of Directors, notice of any special meeting shall be sent to each
director at least twenty-for hours prior to the date of such meeting, and such
notice shall state the time, place and object or objects of such special
meeting.
<PAGE> 34
Section 3. Three members of the Board
of Directors shall constitute a quorum, except that if the number of Directors
on the Board is less than five, two members shall constitute a quorum for the
transaction of business at any meeting. The act of a majority of the directors
present at any meeting where there is a quorum shall be the act of the Board of
Directors except as may be otherwise specifically provided by statute or by the
Certificate of Incorporation or by these By-Laws.
Section 4. The order of business at
meetings of the Board of Directors shall be prescribed from time to time by the
Board.
ARTICLE VI
OFFICERS AND AGENTS
Section 1. At the first meeting of the
Board of Directors after the election of directors in each year, the Board
shall elect a Chairman and Chief Executive Officer, a President, a Secretary
and a Treasurer and may elect or appoint one or more Assistant Secretaries, one
or more Assistant Treasurers, and such other officers and agents as the Board
may deem necessary and as the business of the Corporation may require.
Section 2. The President and the
Chairman of the Board shall be elected from the membership of the Board of
Directors, but other officers need not be members of the Board of Directors.
Any two or more offices may be held by the same person except the offices of
President and Vice President. All officers of the Corporation shall serve for
one year and until their successors shall have been duly elected and shall have
qualified; provided, however, that any officer may be removed at any time,
either with or without cause, by action by the Board of Directors.
ARTICLE VII
DUTIES OF OFFICERS
CHAIRMAN OF THE BOARD
Section 1. The Chairman of the Board
shall be the Chief Executive Officer and head of the Corporation, and in the
recess of the Board of Directors shall have the general control and management
of its business and affairs, subject, however, to the regulations of the Board
of Directors. He shall preside at all meetings of the stockholders and the
Board of Directors and shall be a member ex officio of all standing committees.
<PAGE> 35
Section 2. The Chairman shall call all
special or other meetings of the stockholders and Board of Directors.
In case the Chairman shall at any time
neglect or refuse to call a special meeting of the stockholders when requested
so to do by a majority of the directors, or by the stockholders representing a
majority of the stock of the Corporation, as is elsewhere in these By-Laws
provided, then and in such case, such special meeting shall be called by the
Secretary, or in the event of his neglect or refusal to call such meeting, may
be called by a majority of the directors or by the stockholders representing a
majority of the stock of the corporation, who desire such special meeting, as
the case may be, upon notice as hereinbefore provided.
PRESIDENT
Section 3. The President shall have
those duties and responsibilities as shall be assigned to him by the Chairman
or the Board of Directors, and those not specifically reserved to the Chairman
by law or by the Board of Directors.
The President shall, in the absence of
the Chairman, preside at all meetings of the stockholders and the Board of
Directors. In the event of the absence, resignation, disability or death of
the chairman, the President shall exercise all powers and perform all duties of
the Chairman until his return, or until such disability shall have been removed
or until a new Chairman shall have been elected.
VICE PRESIDENTS
Section 4. The Executive Vice
President, and the Vice Presidents, shall have those duties and
responsibilities as shall be assigned to them by the Chairman or the President.
In the event of the absence, resignation, disability or death of the President,
the Executive Vice President shall exercise all the powers and perform all the
duties of the President until his return, or until such disability shall be
removed or until a new President shall have been elected.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 5. The Secretary shall attend
all meetings of the stockholders and shall record all the proceedings thereof
in a book to be kept for that purpose, and he shall be the custodian of the
corporate seal of the Corporation. In the absence of the Secretary, an
Assistant
<PAGE> 36
Secretary or any other person appointed or elected by the Board of Directors,
as is elsewhere in these By-laws provided, may exercise the rights and perform
the duties of the Secretary.
Section 6. The Assistant Secretary,
or, if there be more than one Assistant Secretary, then the Assistant
Secretaries in the order of their seniority, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
secretary. Any Assistant Secretary elected by the Board shall also perform
such other duties and exercise such other powers as the Board of Directors
shall from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 7. The Treasurer shall keep
full and correct accounts of the receipts and expenditures of the Corporation
in books belonging to the Corporation, and shall deposit all monies and
valuable effects in the name and to the credit of the Corporation and in such
depositories as may be designated by the Board of Directors, and shall, if the
Board shall so direct, give bond with sufficient security and in such amount as
may be required by the Board of Directors for the faithful performance of his
duties.
He shall disburse funds of the
Corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the President and Board of
Directors at the regular meetings of the Board, or whenever they may require
it, an account of all his transactions as the chief fiscal officer of the
Corporation and of the financial condition of the Corporation, and shall
present each year before the annual meeting of the stockholders a full
financial report of the preceding fiscal year.
Section 8. The Assistant Treasurer,
or, if there be more than one Assistant Treasurer, then the Assistant
Treasurers in the order of their seniority, shall, in the absence or disability
of the Treasurer, perform the duties and exercise the powers of the Treasurer.
Any Assistant Treasurer elected by the board shall also perform such duties and
exercise the powers of the Treasurer. Any Assistant Treasurer elected by the
board shall perform such duties and exercise such powers as the Board of
Directors shall from time to time prescribe.
ARTICLE VIII
CHECKS, DRAFTS, NOTES, ETC.
<PAGE> 37
Section 1. All checks shall bear the
signature of such person or persons as the Board of Directors may from time to
time direct.
Section 2. All notes and other similar
obligations and acceptances of drafts by the Corporation shall be signed by
such person or persons as the Board of Directors may from time to time direct.
Section 3. Any officer of the
Corporation or any other employee, as the Board of Directors may from time to
time direct, shall have full power to endorse for deposit all checks and all
negotiable paper drawn payable to his or their order or to the order of the
Corporation.
ARTICLE IX
CORPORATE SEAL
Section 1. The Corporate seal of the
Corporation shall have inscribed thereon the name of the Corporation, the year
of its organization, and the words "Corporate Seal, Maryland". Such seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 2. Before payment of any
dividend there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors may, from time to
time, in their absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the Board of
Directors shall deem to be for the best interests of the Corporation, and the
Board of Directors may abolish any such reserve in the manner in which it was
created.
ARTICLE X
DIVIDENDS
Section 1. Dividends upon the shares
of the capital stock of the Corporation may, subject to the provisions of the
Certificate of Incorporation of the Corporation, if any, be declared by the
Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock
of the Corporation.
ARTICLE XI
FISCAL YEAR
<PAGE> 38
Section 1. The fiscal year of the
Corporation shall begin on September 1 of each year, and end on August 31 of
each year.
ARTICLE XII
NOTICES
Section 1. Whenever under the
provisions of these By-Laws notice is required to be given to any director or
stockholder, it shall not be construed to mean personal notice, and such notice
may be given in writing, by mail, by depositing the same in the post office or
letter box, in a postpaid sealed wrapper, addressed to such director or
stockholder at such address as shall appear on the books of the Corporation,
or, if the address of such director or stockholder does not appear on the books
of the Corporation, to such director or stockholder at the General Post Office
in the City of Baltimore, Maryland, and such notice shall be deemed to be given
at the time it shall be so deposited in the post office or letter box. In the
case of directors, such notice may also be given by telephone, telegraph or
cable.
Section 2. Any notice required to be
given under these By-Laws may be waived in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein.
Each director and officer (and his
heirs, executors and administrators) may be indemnified by the Corporation
against reasonable costs and expenses incurred by him in connection with any
action, suit or proceeding to which he may be made a party by reason of his
being or having been a director or officer of the Corporation, except in
relation to any actions, suits or proceedings, in which he has been adjudged
liable because of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties in the conduct of his office. In the absence of an
adjudication which expressly absolves the director or officer of liability to
the Corporation or its stockholders for willful misfeasance, bad faith, gross
negligence or reckless disregard of the conduct of his office, or in the event
of a settlement, each director and officer (and his heirs, executors and
administrators) may be indemnified by the Corporation against payments made,
including reasonable costs and expenses, provided that such indemnity shall be
conditioned upon the prior determination by two thirds of the members of the
Board of Directors of the Corporation that the director or officer has no
liability by reason of willful misfeasance, bad faith, gross negligence in the
performance of duties or the reckless disregard of the duties involved in the
conduct of his office. Such payments in settlement, including reasonable costs
and expenses incident to
<PAGE> 39
settlement, shall not exceed costs and expenses which would have been
reasonably incurred if the action, suit or proceeding would have been litigated
and concluded. Such a determination by the Board of Directors and the payments
of amounts by the Corporation on the basis thereof shall not prevent a
stockholder from challenging such indemnification by appropriate legal
proceedings. The foregoing rights and indemnification shall not be exclusive
of any other rights to which officers and directors may be entitled to
according to law.
ARTICLE XIII
AMENDMENTS
Section 1. These By-Laws may be
amended, altered, repealed or added to at the annual meeting of the
stockholders of the Corporation or of the Board of Directors, or at any special
meeting of the stockholders or of the Board of Directors called for that
purpose, by the affirmative vote of the holders of a majority of the shares of
capital stock of the Corporation then issued and outstanding and entitled to
vote, or by a majority of the whole Board of Directors, as the case may be.
<PAGE> 1
DELAWARE GROUP TAX-FREE FUND, INC.
TAX-FREE USA FUND SERIES
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP TAX-FREE FUND, INC.
(the "Fund"), a Maryland corporation, for the TAX-FREE USA FUND SERIES (the
"Series"), and DELAWARE MANAGEMENT COMPANY, INC. (the "Investment Manager"), a
Delaware corporation.
W I T N E S S E T H:
WHEREAS, the Fund has been organized
and operates as an investment company registered under the Investment Company
Act of 1940 and engages in the business of investing and reinvesting its assets
in securities; and
WHEREAS, the Investment Manager is a
registered Investment Adviser under the Investment Advisers Act of 1940 and
engages in the business of providing investment management services; and
WHEREAS, the indirect parent company of
the Investment Manager completed on the date of this Agreement a merger
transaction which resulted in a change of control of the Investment Manager and
an automatic termination of the
<PAGE> 2
previous Investment Management Agreement for the Series dated as of the 29th
day of June, 1988; and
WHEREAS, the Board of Directors of the
Fund and shareholders of the Series have determined to enter into a new
Investment Management Agreement with the Investment Manager to be effective as
of the date hereof.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Fund hereby employs the
Investment Manager to manage the investment and reinvestment of the Series'
assets and to administer its affairs, subject to the direction of the Board of
Directors and officers of the Fund for the period and on the terms hereinafter
set forth. The Investment Manager hereby accepts such employment and agrees
during such period to render the services and assume the obligations herein set
forth for the compensation herein provided. The Investment Manager shall, for
all purposes herein, be deemed to be an independent contractor, and shall,
unless otherwise expressly provided and authorized, have no authority to act
for or represent the Fund in any way, or in any way be deemed an agent of the
Fund. The Investment Manager shall regularly make decisions as to what
securities to purchase and sell on behalf of the Series, shall effect the
purchase and sale of investments in furtherance of the Series' objectives and
policies and shall furnish the Board of Directors of the Fund with such
information and reports regarding the Series' investments as the Investment
Manager deems appropriate or as the Directors of the Fund may reasonably
request.
<PAGE> 3
2. The Fund shall conduct its own
business and affairs and shall bear the expenses and salaries necessary and
incidental thereto including, but not in limitation of the foregoing, the costs
incurred in: the maintenance of its corporate existence; the maintenance of its
own books, records and procedures; dealing with its own shareholders; the
payment of dividends; transfer of stock, including issuance, redemption and
repurchase of shares; preparation of share certificates; reports and notices to
shareholders; calling and holding of shareholders' meetings; miscellaneous
office expenses; brokerage commissions; custodian fees; legal and accounting
fees; and taxes. The Fund shall bear all of its own organizational costs.
Directors, officers and employees of
the Investment Manager may be directors, officers and employees of the funds of
which Delaware Management Company, Inc. is Investment Manager. Directors,
officers and employees of the Investment Manager who are directors, officers
and/or employees of the funds shall not receive any compensation from the funds
for acting in such dual capacity.
In the conduct of the respective
businesses of the parties hereto and in the performance of this Agreement, the
Fund and Investment Manager may share facilities common to each, with
appropriate proration of expenses between them, except that all executive
salaries and executive expenses and office rent of the Fund shall be paid by
the Investment Manager.
3. (a) The Fund shall place and
execute its own orders for the purchase and sale of portfolio securities with
broker/dealers. Subject to the primary objective of obtaining the best
available prices and execution, the Fund will place orders for the purchase and
sale of portfolio securities with such broker/dealers selected from
<PAGE> 4
among those designated from time to time by the Investment Manager, who provide
statistical, factual and financial information and services to the Fund, to the
Investment Manager, or to any other fund for which the Investment Manager
provides investment advisory services and/or with broker/dealers who sell
shares of the Fund or who sell shares of any other fund for which the
Investment Manager provides investment advisory services. Broker/dealers, who
sell shares of the funds of which Delaware Management Company, Inc. is
Investment Manager, shall only receive orders for the purchase or sale of
portfolio securities to the extent that the placing of such orders is in
compliance with the Rules of the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc.
(b) Notwithstanding the provisions of
subparagraph (a) above and subject to such policies and procedures as may be
adopted by the Board of Directors and officers of the Fund, the Investment
Manager may ask the Fund, and the Fund may agree, to pay a member of an
exchange, broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of an
exchange, broker or dealer would have charged for effecting that transaction,
in such instances where it, and the Investment Manager, have determined in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member, broker or dealer,
viewed in terms of either that particular transaction or the Investment
Manager's overall responsibilities with respect to the Fund and to other funds
for which the Investment Manager exercises investment discretion.
<PAGE> 5
4. As compensation for the services to
be rendered to the Fund by the Investment Manager under the provisions of this
Agreement, the Fund shall pay to the Investment Manager monthly from the
Series' assets a fee based on the daily average net assets of the Series during
the month. Such fee shall be calculated in accordance with the following
schedule, less the Series' proportionate part of all fees paid to members of
the Board of Directors of the Fund during the same period based on the number
of publicly offered series of the Fund.
<TABLE>
<CAPTION>
Monthly Rate Equivalent Annual Rate Average Daily Net Assets
- ------------ ---------------------- ------------------------
<S> <C> <C>
6/120 of 1% .600% on the first $500,000,000
5.75/120 of 1% .575% on the next $250,000,000
5.5/120 of 1% .550% on assets over $750,000,000
</TABLE>
If this Agreement is terminated prior to the
end of any calendar month, the management fee shall be prorated for the portion
of any month in which this Agreement is in effect according to the proportion
which the number of calendar days during which the Agreement is in effect bears
to the number of calendar days in the month, and shall be payable within 10
days after the date of termination.
5. The services to be rendered by the
Investment Manager to the Fund under the provisions of this Agreement are not
to be deemed to be exclusive, and the Investment Manager shall be free to
render similar or different services to others so long as its ability to render
the services provided for in this Agreement shall not be impaired thereby.
<PAGE> 6
6. The Investment Manager, its
directors, officers, employees, agents and shareholders may engage in other
businesses, may render investment advisory services to other investment
companies, or to any other corporation, association, firm or individual, and
may render underwriting services to the Fund or to any other investment
company, corporation, association, firm or individual.
7. In the absence of willful
misfeasance, bad faith, gross negligence, or a reckless disregard of the
performance of duties of the Investment Manager to the Fund, the Investment
Manager shall not be subject to liabilities to the Fund or to any shareholder
of the Fund for any action or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security, or otherwise.
8. This Agreement shall be executed and
become effective as of the date written below if approved by the vote of a
majority of the outstanding voting securities of the Fund. It shall continue in
effect for a period of two years from such date and may be renewed thereafter
only so long as such renewal and continuance is specifically approved at least
annually by the Board of Directors or by vote of a majority of the outstanding
voting securities of the Series and only if the terms and the renewal hereof
have been approved by the vote of a majority of the Directors of the Fund who
are not parties hereto or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval. No amendment to
this Agreement shall be effective unless the terms thereof have been approved
by the vote of a majority of the outstanding voting securities of the Series
and by the vote of a majority of Directors of the Fund who are not parties to
the Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval.
<PAGE> 7
Notwithstanding the foregoing, this Agreement may be terminated by the Fund at
any time, without the payment of a penalty, on sixty days' written notice to
the Investment Manager of the Fund's intention to do so, pursuant to action by
the Board of Directors of the Fund or pursuant to vote of a majority of the
outstanding voting securities of the Series. The Investment Manager may
terminate this Agreement at any time, without the payment of penalty on sixty
days' written notice to the Fund of its intention to do so. Upon termination of
this Agreement, the obligations of all the parties hereunder shall cease and
terminate as of the date of such termination, except for any obligation to
respond for a breach of this Agreement committed prior to such termination, and
except for the obligation of the Fund to pay to the Investment Manager the fee
provided in Paragraph 4 hereof, prorated to the date of termination. This
Agreement shall automatically terminate in the event of its assignment.
9. This Agreement shall extend to and
bind the heirs, executors, administrators and successors of the parties hereto.
10. For the purposes of this Agreement,
the terms "vote of a majority of the outstanding voting securities";
"interested persons"; and "assignment" shall have the meanings defined in the
Investment Company Act of 1940.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement by having it signed by their duly authorized officers
as of the 3rd day of April, 1995.
DELAWARE GROUP TAX-FREE FUND, INC.
for the TAX-FREE USA FUND SERIES
Attest: /s/Eric E. Miller By: /s/Brian F. Wruble
-------------- ------------------
Eric E. Miller Brian F. Wruble
DELAWARE MANAGEMENT COMPANY, INC.
<PAGE> 8
Attest: /s/Richelle S. Maestro By: /s/Wayne A. Stork
---------------------- -----------------
Richelle S. Maestro Wayne A. Stork
<PAGE> 9
DELAWARE GROUP TAX-FREE FUND, INC.
INSURED SERIES
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE
GROUP TAX-FREE FUND, INC., a Maryland corporation (the "Fund"), for the INSURED
SERIES (the "Series") and DELAWARE MANAGEMENT COMPANY, INC., a Delaware
corporation (the "Investment Manager").
W I T N E S S E T H:
WHEREAS, the Fund has been organized and
operates as an investment company registered under the Investment Company Act
of 1940 and engages in the business of investing and reinvesting its assets in
securities; and
WHEREAS, the Investment Manager is a
registered Investment Adviser under the Investment Advisers Act of 1940 and
engages in the business of providing investment management services; and
WHEREAS, the indirect parent company of the
Investment Manager completed on the date of this Agreement a merger transaction
which resulted in a change of control of the Investment Manager and an
automatic termination of the previous Investment Management Agreement for the
Series dated as of the 29th day of June, 1988; and
WHEREAS, the Board of Directors of the Fund
and shareholders of the Series have determined to enter into a new
<PAGE> 10
Investment Management Agreement with the Investment Manager to be effective as
of the date hereof.
NOW, THEREFORE, in consideration of the
mutual covenants herein contained, and each of the parties hereto intending to
be legally bound hereby, it is agreed as follows:
1. The Fund hereby employs the Investment
Manager to manage the investment and reinvestment of Series' assets and to
administer its affairs, subject to the direction of the Board of Directors and
officers of the Fund for the period and on the terms hereinafter set forth.
The Investment Manager hereby accepts such employment and agrees during such
period to render the services and assume the obligations herein set forth for
the compensation herein provided. The Investment Manager shall, for all
purposes herein, be deemed to be an independent contractor, shall not in any
way be deemed an agent of the Fund, and shall, unless otherwise expressly
provided and authorized, have no authority to act for or represent the Fund in
any way. The Investment Manager shall regularly make decisions as to what
securities to purchase and sell on behalf of the Series, shall effect the
purchase and sale of investments in furtherance of the Series' objectives and
policies and shall furnish the Board of Directors of the Fund with such
information and reports regarding the Series' investments as the Investment
Manager deems appropriate or as the Directors of the Fund may reasonably
request.
2. The Fund shall conduct its own
business and affairs and shall bear the expenses and salaries necessary and
incidental thereto including, but not in limitation of the foregoing, the
<PAGE> 11
costs incurred in: the maintenance of its corporate existence; the maintenance
of its own books, records and procedures; dealing with its own shareholders;
the payment of dividends; transfer of stock; issue, sale, redemption and
repurchases of shares, including costs and fees of federal and state
registrations; preparation of share certificates; reports and notices to
shareholders; calling and holding of shareholders' meetings; miscellaneous
office expenses; brokerage commissions; custodian fees; legal and accounting
fees; and taxes. The Fund shall bear all of its own organizational costs.
Directors, officers and employees of the
Investment Manager may be directors, officers and employees of other funds
which have the same Investment Manager. Directors, officers and employees of
the Investment Manager who are directors, officers and/or employees of the Fund
shall not receive any compensation from the Fund for acting in such dual
capacity.
In the conduct of the respective business
of the parties hereto and in the performance of this Agreement, the Fund and
Investment Manager may share facilities common to each, with appropriate
proration of expenses between them, except that all executive salaries and
executive expenses and office rent of the Fund shall be paid by the
Investment Manager.
3. (a) Subject to the primary objective of
obtaining the best available prices and execution, the Investment Manager may
place orders for the purchase and sale of portfolio securities with
broker/dealers who provide statistical, factual and financial information and
services to the Fund, to the Investment Manager, or
<PAGE> 12
to any other fund for which the Investment Manager provides investment advisory
services. Broker/dealers who sell shares of the funds of which Delaware
Management Company, Inc. is Investment Manager, shall only receive orders for
the purchase or sale of portfolio securities to the extent that the placing of
such orders is in compliance with the Rules of the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc.
(b) Notwithstanding the provisions of
subparagraph (a) above and subject to such policies and procedures as may be
adopted by the Board of Directors and officers of the Fund, the Investment
Manager may ask the Fund, and the Fund may agree, to pay a member of an
exchange, broker or dealer, an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of an
exchange, broker or dealer would have charged for effecting that transaction,
in such instances where it, and the Investment Manager, have determined in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member, broker or dealer,
viewed in terms of either that particular transaction or the Investment
Manager's overall responsibilities with respect to the Fund and to other funds
for which the Investment Manager exercises investment discretion.
4. As compensation for the services to be rendered to the Fund by
the Investment Manager under the provisions of this Agreement, the Fund shall
pay to the Investment Manager monthly from the Series' assets a fee equal to
one-twentieth of one percent (the equivalent of six-tenths of one percent per
annum) of the
<PAGE> 13
daily average net assets of the Series during the month, less the Series
proportionate part of all fees paid to members of the Board of Directors of the
Fund during the same period based on the number of publicly offered Series of
the Fund.
If this Agreement is terminated prior to the end of the calendar
month, the management fee shall be prorated for the portion of any month in
which this Agreement is in effect according to the proportion which the number
of calendar days during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within 10 days after the date
of termination.
5. The services to be rendered by the Investment Manager to the Fund
under the provisions of this Agreement are not to be deemed to be exclusive,
and the Investment Manager shall be free to render similar or different
services to others so long as its ability to render the services provided for
in this Agreement shall not be impaired thereby.
6. The Investment Manager, its directors, officers, employees,
agents and shareholders may engage in other businesses, may render investment
advisory services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.
7. In the absence of willful misfeasance, bad faith, gross
negligence, or a reckless disregard of the performance of duties of the
Investment Manager to the Fund, the Investment
<PAGE> 14
Manager shall not be subject to liabilities to the Fund or to any shareholder
of the Fund for any action or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security, or otherwise.
8. This Agreement shall be executed and become effective as of the
date written below if approved by the vote of a majority of the outstanding
voting securities of the Series. It will continue in effect for a period of
two years. It shall be renewed thereafter only so long as such renewal and
continuance is specifically approved at least annually by the Board of
Directors or by vote of a majority of the outstanding voting securities of the
Series and only if the terms and the renewal hereof have been approved by the
vote of a majority of the Directors of the Fund who are not parties hereto or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. No amendment to this Agreement shall
be effective unless the terms thereof have been approved by the vote of a
majority of the outstanding voting securities of the Series and by the vote of
a majority of Directors of the Fund who are not parties to the Agreement or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. Notwithstanding the foregoing, this
Agreement may be terminated by the Fund at any time, without the payment of a
penalty, on sixty days' written notice to the Investment Manager of the Fund's
intention to do so, pursuant to action by the Board of Directors of the Fund or
pursuant to vote of a majority of the
<PAGE> 15
outstanding voting securities of the Series. The Investment Manager may
terminate this Agreement at any time, without the payment of penalty on sixty
days' written notice to the Fund of its intention to do so. Upon termination of
this Agreement, the obligations of all the parties hereunder shall cease and
terminate as of the date of such termination, except for any obligation to
respond for a breach of this Agreement committed prior to such termination, and
except for the obligation of the Fund to pay to the Investment Manager the fee
provided in Paragraph 4 hereof, prorated to the date of termination. This
Agreement shall automatically terminate in the event of its assignment.
9. The Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
10. For the purposes of this Agreement, the terms "vote of a
majority of the outstanding voting securities"; "interested persons"; and
"assignment" shall have the meanings defined in the Investment Company Act of
1940.
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement by having it signed by their duly authorized
officers as of the 3rd day of April, 1995.
DELAWARE GROUP TAX-FREE FUND, INC.
for the INSURED SERIES
Attest:/s/Eric E. Miller By: /s/Brian F. Wruble
----------------- ------------------
Eric E. Miller Brian F. Wruble
DELAWARE MANAGEMENT COMPANY, INC.
Attest:/s/Richelle S. Maestro By: /s/Wayne A. Stork
---------------------- -----------------
Richelle S. Maestro Wayne A. Stork
<PAGE> 16
DELAWARE GROUP TAX-FREE FUND, INC.
TAX-FREE USA INTERMEDIATE FUND SERIES
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE
GROUP TAX-FREE FUND, INC., a Maryland corporation (the "Fund"), for the
TAX-FREE USA INTERMEDIATE FUND SERIES (the "Series"), and DELAWARE MANAGEMENT
COMPANY, INC. (the "Investment "Manager"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the Fund has been organized
and operates as an investment company registered under the Investment Company
Act of 1940 and engages in the business of investing and reinvesting its assets
in securities; and
WHEREAS, the Investment Manager is a
registered Investment Adviser under the Investment Advisers Act of 1940 and
engages in the business of providing investment management services; and
WHEREAS, the indirect parent company of
the Investment Manager completed on the date of this Agreement a merger
transaction which resulted in a change of control of the Investment Manager and
an automatic termination of the previous Investment Management Agreement for
the Series dated as of the 10th day of November, 1992; and
WHEREAS, the Board of Directors of the
Fund and shareholders of the Series have determined to enter into a new
<PAGE> 17
Investment Management Agreement with the Investment Manager to be effective as
of the date hereof.
NOW, THEREFORE, in consideration of the
mutual covenants herein contained, and each of the parties hereto intending to
be legally bound, it is agreed as follows:
1. The Fund hereby employs the
Investment Manager to manage the investment and reinvestment of the Series'
assets and to administer its affairs, subject to the direction of the Board and
officers of the Fund for the period and on the terms hereinafter set forth.
The Investment Manager hereby accepts such employment and agrees during such
period to render the services and assume the obligations herein set forth for
the compensation herein provided. The Investment Manager shall, for all
purposes herein, be deemed to be an independent contractor, and shall, unless
otherwise expressly provided and authorized, have no authority to act for or
represent the Fund in any way, or in any way be deemed an agent of the Fund.
The Investment Manager shall regularly make decisions as to what securities to
purchase and sell on behalf of the Series, shall effect the purchase and sale
of investments in furtherance of the Series' objectives and policies and shall
furnish the Board of Directors of the Fund with such information and reports
regarding the Series' investments as the Investment Manager deems appropriate
or as the Directors of the Fund may reasonably request.
2. The Fund shall conduct its own
business and affairs and shall bear the expenses and salaries necessary and
incidental thereto including, but not in limitation of the
<PAGE> 18
foregoing, the costs incurred in: the maintenance of its corporate existence;
the maintenance of its own books, records and procedures; dealing with its own
shareholders; the payment of dividends; transfer of stock, including issuance,
redemption and repurchase of shares; preparation of share certificates; reports
and notices to shareholders; calling and holding of shareholders' meetings;
miscellaneous office expenses; brokerage commissions; custodian fees; legal and
accounting fees; and taxes. The Fund shall bear all of its own organizational
costs.
Directors, officers and employees of
the Investment Manager may be directors, officers and employees of the funds of
which Delaware Management Company, Inc. is Investment Manager. Directors,
officers and employees of the Investment Manager who are directors, officers
and/or employees of the funds shall not receive any compensation from the funds
for acting in such dual capacity.
In the conduct of the respective
businesses of the parties hereto and in the performance of this Agreement, the
Fund and Investment Manager may share facilities common to each, with
appropriate proration of expenses between them, except that all executive
salaries and executive expenses and office rent of the Fund shall be paid by
the Investment Manager.
3. (a) The Fund shall place
and execute its own orders for the purchase and sale of portfolio securities
with broker/dealers. Subject to the primary objective of obtaining the best
available prices and execution, the Fund will place orders for the purchase
and sale of portfolio securities with such broker/dealers selected from among
those designated from time to
<PAGE> 19
time by the Investment Manager, who provide statistical, factual and financial
information and services to the Fund, to the Investment Manager, or to any
other Fund for which the Investment Manager provides investment advisory
services and/or with broker/dealers who sell shares of the Fund or who sell
shares of any other fund for which the Investment Manager provides investment
advisory services. Broker/dealers who sell shares of the funds of which
Delaware Management Company, Inc. is Investment Manager, shall only receive
orders for the purchase or sale of portfolio securities to the extent that the
placing of such orders is in compliance with the Rules of the Securities and
Exchange Commission and the National Association of Securities Dealers, Inc.
(b) Notwithstanding the provisions
of subparagraph (a) above and subject to such policies and procedures as may be
adopted by the Board of Directors and officers of the Fund, the Investment
Manager may ask the Fund, and the Fund may agree, to pay a member of an
exchange, broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of an
exchange, broker or dealer would have charged for effecting that transaction,
in such instances where it, and the Investment Manager, have determined in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member, broker or dealer,
viewed in terms of either that particular transaction or the Investment
Manager's overall responsibilities with respect to the Fund and to other funds
for which the Investment Manager exercises investment discretion.
<PAGE> 20
4. As compensation for the
services to be rendered to the Fund by the Investment Manager under the
provisions of this Agreement, the Fund shall pay to the Investment Manager
monthly from the Series' assets a fee based on the daily average net assets of
the Series during the month. Such fee shall be calculated in accordance with
the following schedule, less the Series' proportionate part of all fees paid to
members of the Board of Directors of the Fund during the same period based on
the number of publicly offered series of the Fund.
<TABLE>
<Capiton>
Monthly Rate Equivalent Annual Rate Average Daily Net Assets
- ------------ ---------------------- ------------------------
<S> <C> <C>
5/120 of 1% .500% All Series Assets
</TABLE>
If this Agreement is terminated prior
to the end of any calendar month, the management fee shall be prorated for the
portion of any month in which this Agreement is in effect according to the
proportion which the number of calendar days during which the Agreement is in
effect bears to the number of calendar days in the month, and shall be payable
within 10 days after the date of termination.
5. The services to be rendered by
the Investment Manager to the Fund under the provisions of this Agreement are
not to be deemed to be exclusive, and the Investment Manager shall be free to
render similar or different services to others so long as its ability to render
the services provided for in this Agreement shall not be impaired thereby.
6. The Investment Manager, its
directors, officers, employees, agents and shareholders may engage in other
businesses, may render investment advisory services to other investment
<PAGE> 21
companies, or to any other corporation, association, firm or individual, and
may render underwriting services to the Fund or to any other investment
company, corporation, association, firm or individual.
7. In the absence of willful
misfeasance, bad faith, gross negligence, or a reckless disregard of the
performance of duties of the Investment Manager to the Fund, the Investment
Manager shall not be subject to liabilities to the Fund or to any shareholder
of the Fund for any action or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security, or otherwise.
8. This Agreement shall be
executed and become effective as of the date written below if approved by the
vote of a majority of the outstanding voting securities of the Fund. It shall
continue in effect for a period of two years from such date and may be renewed
thereafter only so long as such renewal and continuance is specifically
approved at least annually by the Board of Directors or by vote of a majority
of the outstanding voting securities of the Series and only if the terms and
the renewal hereof have been approved by the vote of a majority of the
Directors of the Fund who are not parties hereto or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval. No amendment to this Agreement shall be effective unless the
terms thereof have been approved by the vote of a majority of the outstanding
voting securities of the Series and by the vote of a majority of Directors
<PAGE> 22
of the Fund who are not parties to the Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval. Notwithstanding the foregoing, this Agreement may be terminated
by the Fund at any time, without the payment of a penalty, on sixty days'
written notice to the Investment Manager of the Fund's intention to do so,
pursuant to action by the Board of Directors of the Fund or pursuant to vote of
a majority of the outstanding voting securities of the Series. The Investment
Manager may terminate this Agreement at any time, without the payment of
penalty on sixty days' written notice to the Fund of its intention to do so.
Upon termination of this Agreement, the obligations of all the parties
hereunder shall cease and terminate as of the date of such termination, except
for any obligation to respond for a breach of this Agreement committed prior to
such termination, and except for the obligation of the Fund to pay to the
Investment Manager the fee provided in Paragraph 4 hereof, prorated to the date
of termination. This Agreement shall automatically terminate in the event of
its assignment.
9. This Agreement shall extend to
and bind the heirs, executors, administrators and successors of the parties
hereto.
10. For the purposes of this
Agreement, the terms "vote of a majority of the outstanding voting securities";
"interested persons"; and "assignment" shall have the meanings defined in the
Investment Company Act of 1940.
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement by having it signed by their duly authorized
<PAGE> 23
officers as of the 3rd day of April, 1995.
DELAWARE GROUP TAX-FREE FUND, INC. for the TAX-FREE
USA INTERMEDIATE FUND SERIES
Attest: /s/Eric E. Miller By:/s/Brian F. Wruble
------------------- -----------------------
Eric E. Miller Brian F. Wruble
DELAWARE MANAGEMENT COMPANY, INC.
Attest:/s/Richelle S. Maestro By:/s/Wayne A. Stork
---------------------- -----------------
Richelle S. Maestro Wayne A. Stork
<PAGE> 1
<PAGE>
[FORM OF DISTRIBUTION AGREEMENT]
[FUND NAME]
[SERIES NAME, IF APPLICABLE]
DISTRIBUTION AGREEMENT
Distribution Agreement (the "Agreement") made as of this 3rd
day of April, 1995 by and between [FUND NAME], a [Maryland
corporation/Pennsylvania common law trust] (the "Fund")[, for the [SERIES NAME]
(the "Series")] and DELAWARE DISTRIBUTORS, L.P. (the "Distributor"), a Delaware
limited partnership.
WITNESSETH
WHEREAS, the Fund is an investment company regulated by
Federal and State regulatory bodies, and
WHEREAS, the Distributor is engaged in the business of
promoting the distribution of the securities of investment companies and, in
connection therewith and acting solely as agent for such investment companies
and not as principal, advertising, promoting, offering and selling their
securities to the public, and
WHEREAS, the Fund and the Distributor (or its predecessor)
were the parties to a contract under which the Distributor acted as the national
distributor of the shares of the [Fund/Series], which contract was amended and
restated as of the [date] and subsequently readopted as of January 3, 1995 (the
"Prior Distribution Agreement"), and
WHEREAS, Delaware Management Holdings, Inc. ("Holdings"),
the indirect parent company of the Distributor, completed on the
date of this Agreement a merger transaction with a newly-formed
subsidiary of Lincoln National Corporation, pursuant to which
Holdings became a wholly-owned subsidiary of Lincoln National
Corporation, and
<PAGE>
WHEREAS, the merger transaction resulted in a change of
control of the Distributor and an automatic termination of the Prior
Distribution Agreement, and
WHEREAS, the Board of [Directors/Trustees] of the Fund has
determined to enter into a new agreement with the Distributor as of the date
hereof, pursuant to which the Distributor shall continue to be the national
distributor of the [Fund's/Series'] ____________ class (now doing business as
___________ A Class and hereinafter referred to as the "Class A Shares"), the
Fund's ___________ B Class (the "Class B Shares") and the Fund's ______________
(Institutional) class (now doing business as _____________ Institutional Class
and hereinafter referred to as the "Institutional Class Shares"), which classes
may do business under these or such other names as the Board of
[Directors/Trustees] may designate from time to time, on the terms and
conditions set forth below,
NOW, THEREFORE, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. The Fund hereby engages the Distributor to promote the distribution of
the [Fund's/Series'] shares and, in connection therewith and as agent
for the Fund and not as principal, to advertise, promote, offer and
sell the [Fund's/Series'] shares to the public.
<PAGE>
2. (a) The Distributor agrees to serve as distributor of the
[Fund's/Series'] shares and, as agent for the Fund and
not as principal, to advertise, promote and use its best
efforts to sell the [Fund's/Series'] shares wherever
their sale is legal, either through dealers or otherwise,
in such places and in such manner, not inconsistent with
the law and the provisions of this Agreement and the
Fund's Registration Statement under the Securities Act of
1933, including the Prospectus contained therein and the
Statement of Additional Information contained therein, as
may be mutually determined by the Fund and the
Distributor from time to time.
(b) For the Institutional Class Shares, the Distributor will bear
all costs of financing any activity which is primarily
intended to result in the sale of that class of shares,
including, but not necessarily limited to, advertising,
compensation of underwriters, dealers and sales personnel, the
printing and mailing of sales literature and distribution of
that class of shares.
(c) For its services as agent for the Class A Shares and Class B
Shares, the Distributor shall be entitled to compensation on
each sale or redemption, as appropriate, of shares of such
classes equal to any front-end or deferred sales charge
described in the Prospectus from time to time and may allow
concessions to dealers in such amounts and on such terms as
are therein set forth.
<PAGE>
(d) For the Class A Shares and Class B Shares, the Fund
shall, in addition, compensate the Distributor for its
services as provided in the Distribution Plan as adopted
on behalf of the Class A Shares and Class B Shares,
respectively, pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Plans"), copies of
which as presently in force are attached hereto as,
respectively, Exhibit "A" and "B".
3. (a) The Fund agrees to make available for sale by the Fund
through the Distributor all or such part of the authorized but
unissued shares [of the Series] as the Distributor shall
require from time to time, and except as provided in Paragraph
3(b) hereof, the Fund will not sell [its/the Series'] shares
other than through the efforts of the Distributor.
(b) The Fund reserves the right from time to time (1) to sell
and issue shares other than for cash; (2) to issue shares
in exchange for substantially all of the assets of any
corporation or trust, or in exchange of shares of any
corporation or trust; (3) to pay stock dividends to its
shareholders, or to pay dividends in cash or stock at the
option of its stockholders, or to sell stock to existing
stockholders to the extent of dividends payable from time
to time in cash, or to split up or combine its
outstanding shares of common stock; (4) to offer shares
for cash to its stockholders as a whole, by the use of
transferable rights or otherwise, and to sell and issue shares
pursuant to such offers; and (5) to act as its own distributor
in any jurisdiction in which the Distributor is not registered
as a broker-dealer.
<PAGE>
4. The Fund warrants the following:
(a) The Fund is, or will be, a properly registered investment
company, and any and all [Series] shares which it will sell
through the Distributor are, or will be, properly registered
with the Securities and Exchange Commission ("SEC").
(b) The provisions of this Agreement do not violate the terms of
any instrument by which the Fund is bound, nor do they violate
any law or regulation of any body having jurisdiction over the
Fund or its property.
5. (a) The Fund will supply to the Distributor a conformed copy
of the Registration Statement, all amendments thereto,
all exhibits, and each Prospectus and Statement of
Additional Information.
(b) The Fund will register or qualify the shares for sale in
such states as is deemed desirable.
(c) The Fund, without expense to the Distributor,
(1) will give and continue to give such financial
statements and other information as may be required
by the SEC or the proper public bodies of the
states in which the [Fund's/Series'] shares may be
qualified;
(2) from time to time, will furnish the Distributor as
soon as reasonably practicable true copies of its
periodic reports to stockholders;
<PAGE>
(3) will promptly advise the Distributor in person or by
telephone or telegraph, and promptly confirm such
advice in writing, (a) when any amendment or
supplement to the Registration Statement becomes
effective, (b) of any request by the SEC for
amendments or supplements to the Registration
Statement or the Prospectus or for additional
information, and (c) of the issuance by the SEC of
any Stop Order suspending the effectiveness of the
Registration Statement, or the initiation of any
proceedings for that purpose;
(4) if at any time the SEC shall issue any Stop Order
suspending the effectiveness of the Registration
Statement, will make every reasonable effort to
obtain the lifting of such order at the earliest
possible moment;
(5) will from time to time, use its best effort to keep a
sufficient supply of [Series] shares authorized, any
increases being subject to approval of the Fund's
shareholders as may be required;
(6) before filing any further amendment to the
Registration Statement or to the Prospectus, will
furnish the Distributor copies of the proposed
amendment and will not, at any time, whether before
or after the effective date of the Registration
Statement, file any amendment to the Registration
Statement or supplement to the Prospectus of which
the Distributor shall not previously have been
advised or to which the Distributor shall reasonably
object (based upon the accuracy or completeness
thereof) in writing;
(7) will continue to make available to its stockholders
(and forward copies to the Distributor) of such
periodic, interim and any other reports as are now,
or as hereafter may be, required by the provisions of
the Investment Company Act of 1940; and
(8) will, for the purpose of computing the offering price
of [its/the Series'] shares, advise the Distributor
within one hour after the close of the New York Stock
Exchange (or as soon as practicable thereafter) on
each business day upon which the New York Stock
Exchange may be open of the net asset value per share
of [its/the Series'] shares of common stock outstand-
ing, determined in accordance with any applicable
provisions of law and the provisions of the Articles
of Incorporation, as amended, of the Fund as of the
close of business on such business day. In the event
that prices are to be calculated more than once
daily, the Fund will promptly advise the Distributor
of the time of each calculation and the price
computed at each such time.
<PAGE>
6. The Distributor agrees to submit to the Fund, prior to its
use, the form of all sales literature proposed to be generally
disseminated by or for the Distributor, all advertisements
proposed to be used by the Distributor, all sales literature
or advertisements prepared by or for the Distributor for such
dissemination or for use by others in connection with the sale
of the [Fund's/Series'] shares, and the form of dealers' sales
contract the Distributor intends to use in connection with
sales of the [Fund's/Series'] shares. The Distributor also
agrees that the Distributor will submit such sales literature
and advertisements to the NASD, SEC or other regulatory agency
as from time to time may be appropriate, considering practices
then current in the industry. The Distributor agrees not to
use such form of dealers' sales contract or to use or to
permit others to use such sales literature or advertisements
without the written consent of the Fund if any regulatory
agency expresses objection thereto or if the Fund delivers to
the Distributor a written objection thereto.
7. The purchase price of each share sold hereunder shall be the offering
price per share mutually agreed upon by the parties hereto, and as
described in the Fund's Prospectus, as amended from time to time,
determined in accordance with any applicable provision of law, the
provisions of its Articles of Incorporation and the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
<PAGE>
8. The responsibility of the Distributor hereunder shall be
limited to the promotion of sales of [Fund/Series] shares. The
Distributor shall undertake to promote such sales solely as
agent of the Fund, and shall not purchase or sell such shares
as principal. Orders for [Series] shares and payment for such
orders shall be directed to the Fund's agent, Delaware Service
Company, Inc. for acceptance on behalf of the Fund. The
Distributor is not empowered to approve orders for sales of
shares or accept payment for such orders. Sales of [Fund/
Series] shares shall be deemed to be made when and where
accepted by Delaware Service Company, Inc. on behalf of the
Fund.
9. With respect to the apportionment of costs between the Fund
and the Distributor of activities with which both are
concerned, the following will apply:
(a) The Fund and the Distributor will cooperate in preparing
the Registration Statements, the Prospectus, the
Statement of Additional Information, and all amendments,
supplements and replacements thereto. The Fund will pay
all costs incurred in the preparation of the Fund's
Registration Statement, including typesetting, the costs
incurred in printing and mailing Prospectuses and Annual,
Semi-Annual and other financial reports to its own
shareholders and fees and expenses of counsel and
accountants.
<PAGE>
(b) The Distributor will pay the costs incurred in printing
and mailing copies of Prospectuses to prospective
investors.
(c) The Distributor will pay advertising and promotional
expenses, including the costs of literature sent to
prospective investors.
(d) The Fund will pay the costs and fees incurred in
registering or qualifying the shares with the various
states and with the SEC.
(e) The Distributor will pay the costs of any additional copies of
Fund financial and other reports and other Fund literature
supplied to the Distributor by the Fund for sales promotion
purposes.
10. The Distributor may engage in other business, provided such other
business does not interfere with the performance by the Distributor of
its obligations under this Agreement.
11. The Fund agrees to indemnify, defend and hold harmless the
Distributor and each person, if any, who controls the
Distributor within the meaning of Section 15 of the Securities
Act of 1933, from and against any and all losses, damages, or
liabilities to which, jointly or severally, the Distributor or
such controlling person may become subject, insofar as the
losses, damages or liabilities arise out of the performance of
its duties hereunder except that the Fund shall not be liable
<PAGE>
for indemnification of the Distributor or any controlling person
thereof for any liability to the Fund or its security holders to which
they would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of their duties under
this Agreement.
12. Copies of financial reports, Registration Statements and
Prospectuses, as well as demands, notices, requests, consents,
waivers, and other communications in writing which it may be
necessary or desirable for either party to deliver or furnish
to the other will be duly delivered or furnished, if delivered
to such party at its address shown below during regular
business hours, or if sent to that party by registered mail or
by prepaid telegram filed with an office or with an agent of
Western Union or another nationally recognized telegraph
service, in all cases within the time or times herein
prescribed, addressed to the recipient at 1818 Market Street,
Philadelphia, Pennsylvania 19103, or at such other address as
the Fund or the Distributor may designate in writing and
furnish to the other.
13. This Agreement shall not be assigned, as that term is defined in the
Investment Company Act of 1940, by the Distributor and shall terminate
automatically in the event of its attempted assignment by the
Distributor. This Agreement shall not be assigned by the Fund without
the written consent of the Distributor signed by its duly authorized
officers and delivered to the Fund. Except as specifically provided in
<PAGE>
the indemnification provision contained in Paragraph 11 herein, this
Agreement and all conditions and provisions hereof are for the sole and
exclusive benefit of the parties hereto and their legal successors and
no express or implied provision of this Agreement is intended or shall
be construed to give any person other than the parties hereto and their
legal successors any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provisions herein contained.
14. (a) This Agreement shall remain in force for a period of two
years from the date hereof and from year to year
thereafter, but only so long as such continuance is
specifically approved at least annually by the Board of
[Directors/Trustees] or by vote of a majority of the
outstanding voting securities of the Fund and only if the
terms and the renewal thereof have been approved by the
vote of a majority of the [Directors/Trustees] of the
Fund, who are not parties hereto or interested persons of
any such party, cast in person at a meeting called for
the purpose of voting on such approval.
(b) The Distributor may terminate this Agreement on written notice
to the Fund at any time in case the effectiveness of the
Registration Statement shall be suspended, or in case Stop
Order proceedings are initiated by the SEC in respect of the
Registration Statement and such proceedings are not withdrawn
or terminated within thirty days. The Distributor may also
<PAGE>
terminate this Agreement at any time by giving the Fund
written notice of its intention to terminate the Agreement at
the expiration of three months from the date of delivery of
such written notice of intention to the Fund.
(c) The Fund may terminate this Agreement at any time on at
least thirty days prior written notice to the Distributor
(1) if proceedings are commenced by the Distributor or
any of its stockholders for the Distributor's liquidation
or dissolution or the winding up of the Distributor's
affairs; (2) if a receiver or trustee of the Distributor
or any of its property is appointed and such appointment
is not vacated within thirty days thereafter; (3) if, due
to any action by or before any court or any federal or
state commission, regulatory body, or administrative
agency or other governmental body, the Distributor shall
be prevented from selling securities in the United States
or because of any action or conduct on the Distributor's
part, sales of the shares are not qualified for sale. The
Fund may also terminate this Agreement at any time upon
prior written notice to the Distributor of its intention
to so terminate at the expiration of three months from
the date of the delivery of such written notice to the
Distributor.
<PAGE>
15. The validity, interpretation and construction of this
Agreement, and of each part hereof, will be governed by the
laws of the Commonwealth of Pennsylvania.
16. In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect
the remainder of the Agreement, which shall continue to be in
force.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
----------------------------------------
General Partner
Attest:
By:
- -------------------------------- --------------------------------------
Name: Name:
Title: Title:
[FUND NAME]
[for the SERIES NAME]
Attest:
By:
- -------------------------------- --------------------------------------
Name: Name:
Title: Title:
<PAGE>
[FORM OF 12b-1 PLAN FOR CLASS A SHARES]
Exhibit A
12b-1 PLAN
----------
The following Distribution Plan (the "Plan") has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by [FUND NAME]
(the "Fund")[, for the [SERIES NAME] (the "Series")] on behalf of the _________
class [(now doing business as __________ A Class and] hereinafter referred to as
the "Class"), which Fund[, Series] and Class may do business under these or such
other names as the Board of [Directors/Trustees] of the Fund may designate from
time to time. The Plan has been approved by a majority of the Board of
[Directors/Trustees], including a majority of the [Directors/Trustees] who are
not interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related thereto, cast
in person at a meeting called for the purpose of voting on such Plan. Such
approval by the [Directors/Trustees] included a determination that in the
exercise of reasonable business judgment and in light of their fiduciary duties,
there is a reasonable likelihood that the Plan will benefit the Class and its
shareholders. If the Plan has not yet been approved by a majority of the
outstanding voting securities as required in the Act, the Plan will be presented
to the public shareholders at the next regular annual or special meeting.
<PAGE>
The Fund is a [corporation/common law trust] organized under the laws of
the [State of Maryland/Commonwealth of Pennsylvania], is authorized to issue
different series and classes of securities and is an open-end management
investment company registered under the Act. [Delaware Management Company, Inc.
("DMC")/Delaware International Advisers Ltd. ("DIA Ltd.")] serves as the
[Fund's/Series'] investment adviser and manager pursuant to an Investment
Management Agreement. Delaware Service Company, Inc. serves as the
[Fund's/Series'] shareholder servicing, dividend disbursing and transfer agent.
Delaware Distributors, L.P. ("the Distributor") is the principal underwriter and
national distributor for the [Fund's/Series'] shares, including shares of the
Class, pursuant to the Distribution Agreement between the Distributor and the
[Fund/Series] ("Distribution Agreement").
The Distributor may enter into agreements with other registered
broker-dealers substantially in the form of the Dealer Agreement approved by the
Fund in the implementation of this Plan and of the Distribution Agreement
between it and the [Fund/Series]. The [Fund/Series] may, in addition, enter into
arrangements with persons other than broker-dealers which are not "affiliated
persons" or "interested persons" of the Fund, [DMC/DIA Ltd.] or the Distributor
to provide to the [Fund/Series] services in the [Fund's/Series'] marketing of
the shares of the Class, such arrangements to be reflected by Service
Agreements.
<PAGE>
The Plan provides that:
l. The Fund shall pay a monthly fee not to exceed 0.3% (3/10
of 1%) per annum of the [Fund's/Series'] average daily net assets represented by
shares of the Class (the "Maximum Amount") as may be determined by the Fund's
Board of [Directors/Trustees] from time to time. Such monthly fee shall be
reduced by the aggregate sums paid by the Fund to persons other than
broker-dealers (the "Service Providers") pursuant to Service Agreements referred
to above.
2. (a) The Distributor shall use the monies paid to it
pursuant to paragraph l above to furnish, or cause or encourage others to
furnish, services and incentives in connection with the promotion, offering and
sale of Class shares and, where suitable and appropriate, the retention of Class
shares by shareholders.
(b) The Service Providers shall use the monies paid
respectively to them to reimburse themselves for the actual costs they have
incurred in confirming that their customers have received the Prospectus and
Statement of Additional Information, if applicable, and as a fee for (l)
assisting such customers in maintaining proper records with the Fund (2)
answering questions relating to their respective accounts and (3) aiding in
maintaining the investment of their respective customers in the Class.
3. The Distributor shall report to the Fund at least monthly
on the amount and the use of the monies paid to it under the Plan. The Service
Providers shall inform the Fund monthly and in writing of the amounts each
claims under the Service Agreements and the Plan; both the Distributor and the
<PAGE>
Service Providers shall furnish the Board of [Directors/Trustees] of the Fund
with such other information as the Board may reasonably request in connection
with the payments made under the Plan and the use thereof by the Distributor and
the Service Providers, respectively, in order to enable the Board to make an
informed determination of the amount of the Fund's payments and whether the Plan
should be continued.
4. The officers of the Fund shall furnish to the Board of
[Directors/Trustees] of the Fund, for their review, on a quarterly basis, a
written report of the amounts expended under the Plan and the purposes for which
such expenditures were made.
5. This Plan shall take effect at such time as the Distributor
shall notify the Fund in writing of the commencement of the Plan, which time
shall not be before the first annual or special meeting of the public
shareholders at which the Plan is or was approved by the vote of a majority of
the outstanding voting securities as required in the Act (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more than
one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of
[Directors/Trustees] of the Fund, and of the [Directors/Trustees] who are not
interested persons of the Fund and have no direct or indirect financial interest
in the operation of the Plan or in any agreements related to the Plan
("non-interested [Directors/Trustees]"), cast in person at a meeting called for
the purpose of voting on such Plan.
<PAGE>
6. (a) The Plan may be terminated at any time by vote
of a majority of the non-interested [Directors/Trustees] or by vote
of a majority of the outstanding voting securities of the Class.
(b) The Plan may not be amended to increase
materially the amount to be spent for distribution pursuant to paragraph l
thereof without approval by the shareholders of the Class.
7. The Distribution Agreement between the [Fund/Series] and
the Distributor, and the Service Agreements between the [Fund/ Series] and the
Service Providers, shall specifically have a copy of this Plan attached to, and
its terms and provisions incorporated respectively by reference in, such
agreements.
8. All material amendments to this Plan shall be approved by
the non-interested [Directors/Trustees] in the manner described in paragraph 5
above.
9. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested [Directors/Trustees] shall be committed
to the discretion of such non-interested [Directors/Trustees].
10. The definitions contained in Sections 2(a)(3), 2(a)(4),
2(a)(l9) and 2(a)(42) of the Act shall govern the meaning of "affiliated
person," "assignment," "interested person(s)" and "vote of a majority of the
outstanding voting securities," respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as
previously defined.
<PAGE>
[FORM OF 12b-1 PLAN FOR CLASS B SHARES]
Exhibit B
12b-1 Plan
----------
The following Distribution Plan (the "Plan") has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by [FUND NAME]
(the "Fund"), [for the [SERIES NAME] (the "Series")] on behalf of the _________
B Class (the "Class"), which Fund[, Series] and Class may do business under
these or such other names as the Board of [Directors/Trustees] of the Fund may
designate from time to time. The Plan has been approved by a majority of the
Board of [Directors/Trustees], including a majority of the [Directors/Trustees]
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements related
thereto, cast in person at a meeting called for the purpose of voting on such
Plan. Such approval by the [Directors/Trustees] included a determination that in
the exercise of reasonable business judgment and in light of their fiduciary
duties, there is a reasonable likelihood that the Plan will benefit the Class
and its shareholders. The Plan has been approved by a vote of the holders of a
majority of the outstanding voting securities of the Class, as defined in the
Act.
The Fund is a [corporation/common law trust] organized under the laws of
the [State of Maryland/Commonwealth of Pennsylvania], is authorized to issue
different series and classes of securities and is an open-end management
investment company registered under the Act. [Delaware Management Company,
Inc./Delaware International Advisers Ltd.] serves as the [Fund's/Series']
investment adviser and manager pursuant to an Investment Management Agreement.
Delaware Service Company, Inc. serves as the [Fund's/Series'] shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the [Fund's/Series'] shares, including shares of the Class, pursuant to the
Distribution Agreement between the Distributor and the [Fund/Series]
("Distribution Agreement").
<PAGE>
The Plan provides that:
1. (a) The Fund shall pay to the Distributor a monthly fee not
to exceed 0.75% (3/4 of 1%) per annum of the [Fund's/ Series'] average daily net
assets represented by shares of the Class as may be determined by the Fund's
Board of [Directors/Trustees] from time to time.
(b) In addition to the amounts described in (a) above, the
Fund shall pay (i) to the Distributor for payment to dealers or others, or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
[Fund's/Series'] average daily net assets represented by shares of the Class, as
a service fee pursuant to dealer or servicing agreements, the forms of which
have been approved from time to time by the Fund's Board of
[Directors/Trustees].
2. (a) The Distributor shall use the monies paid to it
pursuant to paragraph 1(a) above to assist in the distribution and
promotion of shares of the Class. Payments made to the Distributor under the
Plan may be used for, among other things, preparation and distribution of
advertisements, sales literature and prospectuses and reports used for sales
purposes, as well as compensation related to sales and marketing personnel, and
holding special promotions. In addition, such fees may be used to pay for
advancing the commission costs to dealers with respect to the sale of Class
shares.
<PAGE>
(b) The monies to be paid pursuant to paragraph 1(b) above
shall be used to pay dealers or others for, among other things, furnishing
personal services and maintaining shareholder accounts, which services include
confirming that customers have received the Prospectus and Statement of
Additional Information, if applicable; assisting such customers in maintaining
proper records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Fund at least monthly
on the amount and the use of the monies paid to it under paragraph 1(a) above.
In addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of
[Directors/Trustees] of the Fund with such other information as the Board may
reasonably request in connection with the payments made under the Plan and the
use thereof by the Distributor and others in order to enable the Board to make
an informed determination of the amount of the Fund's payments and whether the
Plan should be continued.
<PAGE>
4. The officers of the Fund shall furnish to the Board of
[Directors/Trustees] of the Fund, for their review, on a quarterly basis, a
written report of the amounts expended under the Plan and the purposes for which
such expenditures were made.
5. This Plan shall take effect at such time as the Distributor
shall notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of [Directors/Trustees] of the
Fund, and of the [Directors/Trustees] who are not interested persons of the Fund
and have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to the Plan ("non-interested
[Directors/Trustees]"), cast in person at a meeting called for the purpose of
voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a
majority of the non-interested [Directors/Trustees] or by vote of a majority of
the outstanding voting securities of the Class.
(b) The Plan may not be amended to increase materially the
amount to be spent for distribution pursuant to paragraph 1 thereof without
approval by the shareholders of the Class.
<PAGE>
7. The Distribution Agreement between the [Fund/Series] and
the Distributor, and any dealers or servicing agreements between the Distributor
and brokers or others or between the [Fund/Series] and others receiving a
servicing fee, shall specifically have a copy of this Plan attached to, and its
terms and provisions incorporated respectively by reference in, such agreements.
8. All material amendments to this Plan shall be approved by
the non-interested [Directors/Trustees] in the manner described in paragraph 5
above.
9. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested [Directors/Trustees] shall be committed
to the discretion of such non-interested [Directors/Trustees].
10. The definitions contained in Sections 2(a)(3), 2(a)(4),
2(a)(19) and 2(a)(42) of the Act shall govern the meaning of "affiliated
person," "assignment," "interested person(s)" and "vote of a majority of the
outstanding voting securities," respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
<PAGE> 1
<PAGE>
[Form of Amendment to Distribution Agreement]
[FUND NAME]
[SERIES NAME, IF APPLICABLE]
AMENDMENT NO. 1 TO DISTRIBUTION AGREEMENT
This Amendment No. 1 to Distribution Agreement (this "Agreement") is
made as of the_____day of___________, 1995, by and between____________(the
"Fund"),[for the____________(the "Series"),] and DELAWARE DISTRIBUTORS, L.P.
(the "Distributor").
WITNESSETH
WHEREAS, the Fund[, for the Series,] and the Distributor are parties to
that certain Distribution Agreement made as of the 3rd day of April, 1995 (the
"Distribution Agreement"); and
WHEREAS, the Board of Directors of the Fund has established [CLASS C
SHARES NAME] (the "Class C Shares") as an additional class of [the Series]
[shares of the Fund] and the Fund and the Distributor desire to amend the
Distribution Agreement to provide that the Distributor shall act as the national
distributor of the Class C Shares pursuant thereto;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. The Class C Shares are hereby included among the shares to which the
Distribution Agreement relates and the Distributor shall act as distributor for
the Class C Shares pursuant to and in accordance with the Distribution
Agreement, as amended hereby.
2. Hereafter, each reference to "Class A Shares and Class B Shares" in
Section 2 (c) and (d) of the Distribution Agreement [compensation of the
Distributor] shall be deemed to include the Class C Shares, provided that the
<PAGE>
Distribution Plan adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940 for the Class C Shares and presently in force is attached hereto as
Exhibit "A."
DELAWARE DISTRIBUTORS, L.P.
By: Delaware Distributors, Inc.,
General Partner
ATTEST:
By:
- ------------------------------ --------------------------------
Name: Name:
Title: Title:
[FUND NAME][,for the [SERIES NAME]]
ATTEST:
By:
- ------------------------------ ---------------------------------
Name: Name:
Title: Title:
<PAGE>
EXHIBIT A
[FORM OF 12b-1 PLAN
C CLASS SHARES]
DISTRIBUTION PLAN
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by the Fund
(the "Fund"), on behalf of the Fund's C Class (the "Class"). The Plan has been
approved by a majority of the Board of Directors, including a majority of the
Directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related thereto, cast in person at a meeting called for the purpose of voting on
such Plan. Such approval by the Directors included a determination that in the
exercise of reasonable business judgment and in light of their fiduciary duties,
there is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. The Plan has been approved by a vote of the holders of a majority
of the outstanding voting securities of the Class, as defined in the Act.
The Fund is a [corporation/business trust] organized under the laws of
the [State of Maryland/Commonwealth of Pennsylvania], is authorized to issue
different series and classes of securities and is an open-end management
investment company registered under the Act. [Delaware Management Company, Inc.
A-1
<PAGE>
("DMC") or Delaware International Advisers Ltd. ("Delaware International"), an
affiliate of DMC,] serves as the Fund's investment adviser and manager pursuant
to an Investment Management Agreement. Delaware Service Company, Inc. serves as
the Fund's shareholder servicing, dividend disbursing and transfer agent.
Delaware Distributors, L.P. (the "Distributor") is the principal underwriter and
national distributor for the Fund's shares, including shares of the Class,
pursuant to the Distribution Agreement between the Distributor and the Fund
("Distribution Agreement").
The Plan provides that:
1.(a) The Fund shall pay to the Distributor a monthly fee not to exceed
0.75% (3/4 of 1%) per annum of the Fund's average daily net assets represented
by shares of the Class as may be determined by the Fund's Board of Directors
from time to time.
(b) In addition to the amounts described in paragraph 1(a) above, the
Fund shall pay: (i) to the Distributor for payment to dealers or others; or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Fund's average daily net assets represented by shares of the Class, as a service
fee pursuant to dealer or servicing agreements.
2.(a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
A-2
<PAGE>
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Fund.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.
A-3
<PAGE>
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, and the Directors shall review, on a quarterly basis, a written report
of the amounts expended under the Plan and the purposes for which such
expenditures were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the fund in writing of the commencement of the Plan (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more than
one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Directors of
the Fund, and of the Directors who are not interested persons of the Fund and
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan ("non-interested Directors"), cast in person
at a meeting called for the purpose of voting on such Plan.
6.(a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 thereof without approval by
the shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
A-4
<PAGE>
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
9. The definitions contained in Sections 2(a)(3), 2(a)(19) and
2(a)(42) of the Act shall govern the meaning of "affiliated person,"
"interested person(s)" and "vote of a majority of the outstanding voting
securities," respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
November 29, 1995
A-5
<PAGE> 1
<PAGE>
DELAWARE GROUP
Administration and Service Agreement
Gentlemen:
We are the national distributor of the shares of all of the classes
(now existing or hereafter added) of all of the Funds in the Delaware Group of
Funds. The term "Fund" as used in this Agreement refers to each fund in the
Delaware Group which retains the Distributor to promote and sell its shares, and
any fund which may hereafter be added to the Delaware Group and retain us as
national distributor. You have indicated that you wish to provide certain
services to your customers relating to their ownership of Fund shares, in
accordance with the terms of this Agreement.
TERMS
1. With respect to any Fund that offers shares of classes for which
Distribution Plans have been adopted under Rule 12b-1 (individually a "12b-1
Plan") of the Investment Company Act of 1940 (the "1940 Act"), which 12b-1 Plans
provide for the payment of service fees, we expect you to provide administrative
and other services, including, but not limited to, furnishing personal and other
services and assistance to your customers who own Fund shares, answering routine
inquiries regarding a Fund, assisting in changing dividend options, account
designations and addresses, maintaining such accounts, or such other services as
a Fund may require, to the extent permitted by applicable statutes, rules, or
regulations. For such services, we shall pay you a fee, as established by us
from time to time, based on the value of the shares of each class of each Fund
which are attributable to customers of your firm. We are permitted to make this
payment under the terms of the 12b-1 Plans adopted by certain of the Funds, as
such Plans may be in effect from time to time.
2. You shall furnish us and each Fund with such information as shall
reasonably be requested by the Board of Directors or Trustees with respect to
the fees paid to you pursuant to this Agreement.
3. We shall furnish to the Board of Directors or Trustees, for their
review, on a quarterly basis, a written report of the amounts expended under
<PAGE>
the Plan by us with respect to the relevant Fund and the purposes for which
such expenditures were made.
4. This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon any act of
insolvency by you. Notwithstanding the termination of this Agreement, you shall
remain liable for any amounts otherwise owing to the Distributor or the Funds
and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Distributor or the Fund, or upon any one or
more of the Distributor's dealers, based upon a claim that you and such dealers
or any of them constitute a partnership, an unincorporated business or other
separate entity.
5. Any obligation assumed by a Fund pursuant to this Agreement shall be
limited in all cases to the assets of such Fund and no person shall seek
satisfaction thereof from shareholders of a Fund.
6. The 12b-1 Plans in effect on the date of this Agreement are
described in the Funds' Prospectuses. Each Fund reserves the right to terminate
or suspend its 12b-1 Plan(s) at any time as specified in such Plan(s) and we
reserve the right, at any time, without notice, to modify, suspend or terminate
payments hereunder in connection with such 12b-1 Plan(s).
7. This Agreement shall take effect on the date set forth below.
8. The terms and provisions of the current Prospectus and Statement of
Additional Information for each relevant Fund are hereby accepted and agreed to
by the parties hereto as evidenced by our execution hereof.
GENERAL
9. Governing Law. This Agreement will be governed by and construed in
accordance with the law of the State of Pennsylvania, without reference to that
state's choice of law doctrine.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one Agreement.
11. Severability. In the event that any provision of this Agreement,
or the application of any such provision to any person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
<PAGE>
to persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
12. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto and supersedes all prior agreements and
understandings between the parties hereto relating to the subject matter hereof.
13. Headings. The underlined headings contained herein are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the interpretation
hereof.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
General Partner
By:
--------------------------------
Agreed and Accepted:
- ------------------------------
(Name)
By:
---------------------------
(Authorized Officer)
Date:
-------------------------
<PAGE> 1
<PAGE>
DEALER'S AGREEMENT
We invite you, as a selected dealer, to participate as principal in the
distribution of the shares of all of the classes (now existing or hereafter
added) of all of the Funds in the Delaware Group of Investment Companies which
retain us, Delaware Distributors, L.P., to act as exclusive national
distributor. The term "Fund" as used in this Agreement, refers to each Fund in
the Delaware Group which retains us to promote and sell its shares, and any Fund
which may hereafter be added to the Delaware Group and retain us as national
distributor. Such additional Funds will be included in this Agreement upon our
providing you with written notice of such inclusion.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by a
Fund or its agent, Delaware Service Company, Inc., will be at the public
offering price applicable to each order as set forth in that Fund's Prospectus.
The manner of computing the net asset value of shares, the public offering price
and the effective time of orders received from you are described in the
Prospectus for each Fund. We reserve the right, at any time and without notice,
to suspend the sale of Fund shares.
CONCESSIONS TO YOU: You will be entitled to deduct the applicable concession as
set forth in the then current Prospectus of a Fund from the purchase price of
certain purchase orders placed by you for shares of a Fund having a sales
charge. We reserve the right from time to time, without prior notice, to modify,
suspend or eliminate such concessions by amendment, sticker or supplement to the
Prospectus for the Fund. If any shares confirmed to you under the terms of this
Agreement are redeemed or repurchased by the Fund or by us as agent for the
Fund, or are tendered for redemption or repurchase, within seven business days
after the date of our confirmation of the original purchase order, you shall
promptly refund to us the concession allowed to you on such shares.
PURCHASE PLANS: The purchase price on all orders placed by you and any
concessions or other fees otherwise due to you under this Agreement will be
subject to the then current terms and provisions of any applicable special plans
and accounts (e.g., volume purchases, letters of intent, rights of accumulation,
combined purchases privilege, exchange and reinvestment privileges and
<PAGE>
retirement plan accounts) as set forth from time to time in the Prospectus. We
must be notified when an order is placed if it qualifies for a reduced sales
charge under any of these plans. We reserve the right, at any time, without
prior notice, to modify, suspend or eliminate any such plans or accounts by
amendment, sticker or supplement to the Prospectus for the Fund.
SALES, ORDERS AND CONFIRMATIONS: In offering Fund shares to the public or
otherwise, you shall act as dealer for your own account, and in no transaction
shall you have any authority to act as agent for the Fund, for any other
selected dealer or for us. No person is authorized to make any representations
concerning the shares to the Fund except those contained in the Prospectus and
in written information issued by the Fund or by us as a supplement to such
Prospectus. In purchasing Fund shares, you shall rely only on such
representations.
All sales must be made subject to confirmation and orders are subject
to acceptance or rejection by the Fund in its sole discretion. Your orders must
be wired, telephoned or written to the Fund or its agent. You agree to place
orders for the same number of shares sold by you at the price at which such
shares are sold. You agree that you will not purchase Fund shares except for
investment or for the purpose of covering purchase orders already received and
that you will not, as principal, sell Fund shares unless purchased by you from
the Fund under the terms hereof. You also agree that you will not withhold
placing with us orders received from your customers so as to profit yourself
from such withholding. Each of your orders shall be confirmed by you in writing
on the same day.
PAYMENT AND ISSUANCE OF CERTIFICATES: The shares purchased by you hereunder
shall be paid for in full at the public offering price, less any concession to
you as set forth above, by check payable to the Fund, at its office, within
three business days after our acceptance of your order. If not so paid, we
reserve the right to cancel the sale and to hold you responsible for any loss
sustained by us or the Fund (including lost profit) in consequence. Certificates
representing the Fund's shares will not be issued unless (i) the Fund's
Prospectus indicates that certificates may be issued for the class of shares
being purchased, and (ii) a specific request is received from the purchaser.
Certificates, if requested, will be issued in the names indicated by
registration instructions accompanying your payment.
-2-
<PAGE>
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will redeem shares held by shareholders on demand. You
agree that you will not make any representations to shareholders relating to the
redemption of their shares other than the statements contained in the Prospectus
and the underlying organizational documents of the Fund, to which it refers, and
that you will quote as the redemption price only the price determined by the
Fund. You shall not repurchase any shares from your customers at a price below
that next quoted by the Fund for redemption. You may charge a reasonable fee for
services in connection with the repurchase by you from your customers of shares.
You may hold such repurchased shares only for investment purposes or submit such
shares to the Fund for redemption.
12b-1 PLAN: With respect to any Fund that offers shares of classes for which
Distribution Plans have been adopted under Rule 12b-1 (individually a "12b-1
Plan") of the Investment Company Act of 1940 (the "1940 Act"), we expect you to
provide distribution and marketing services in the promotion of the Fund's
shares. In connection with the receipt of distribution fees and/or the receipt
of service fees as set forth under the 12b-1 Plan(s) applicable to the class or
classes of Fund shares purchased by your customers, we expect you to provide
administrative and other services to your customers who own Fund shares,
including, but not limited to, furnishing personal and other services and
assistance, answering routine inquiries regarding a Fund, assisting in changing
dividend options, account designations and addresses, maintaining such accounts,
or such other services as the Fund may require, to the extent permitted by
applicable statutes, rules, or regulations. For such services we will pay you a
fee, as established by us from time to time, based on a portion of the net asset
value of the accounts of your clients in the Fund. We are permitted to make this
payment under the terms of the 12b-1 Plans adopted by certain of the Funds, as
such Plans may be in effect from time to time. The 12b-1 Plans in effect on the
date of this Agreement are described in the Funds' Prospectuses. Each Fund
reserves the right to terminate or suspend its 12b-1 Plan at any time as
specified in the Plan and we reserve the right, at any time, without notice, to
modify, suspend or terminate payments hereunder in connection with such 12b-1
Plan. You will furnish the Fund and us with such information as may be
-3-
<PAGE>
reasonably requested by the Fund or its directors or trustees or by us with
respect to such fees paid to you pursuant to this Agreement.
LEGAL COMPLIANCE: This Agreement and any transaction with, or payment to, you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are, and at all times during its
effectiveness you will be: (a) a registered broker/dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws in
each jurisdiction in which you are required to be qualified to act as a
broker/dealer in securities, and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); or (b) a foreign
broker/dealer not eligible for membership in the NASD and otherwise in
compliance with applicable U.S. federal and state securities laws. You agree to
notify us promptly in writing and immediately suspend sales of Fund shares if
this representation ceases to be true. You also agree that, whether you are a
member of the NASD or a foreign broker/dealer not eligible for such membership,
you will comply with the rules of the NASD including, in particular, Sections 2
and 26 of Article III thereof, and that you will maintain adequate records with
respect to your transactions with the Funds.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we may furnish you with information identifying the states and jurisdictions
under the securities laws of which it is believed a Fund's shares may be sold.
You will not transact orders for Fund shares in states or jurisdictions in which
we indicate Fund shares may not be sold. You agree to offer and sell Fund shares
outside the United States only in compliance with all applicable laws, rules and
regulations of any foreign government having jurisdiction over such transactions
in addition to any applicable laws, rules and regulations of the United States.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicity available by the Fund, in
reasonable quantities upon your request. You agree to deliver a copy of the
current Prospectus in accordance with the provisions of the Securities Act of
1933 to each purchaser of Fund shares for whom you act as broker. We shall file
Fund sales literature and promotional material with the NASD and SEC as
required.
-4-
<PAGE>
You may not publish or use any sales literature or promotional materials with
respect to the Funds without our prior review and written approval.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at One Commerce Square, 2005 Market Street, Philadelphia, PA 19103. Any
notice from us to you shall be deemed to have been duly given if mailed or
telegraphed to you at the address set forth below. Each of us may change the
address to which notices shall be sent by notice to the other in accordance with
the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon the
appointment of a trustee for you under the Securities Investor Protection Act,
or any other act of insolvency by you. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Funds and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, or us, or upon any one or more of the
selected dealers based upon the claim that the selected dealers or any of them
constitute a partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you notify us in writing to the contrary, you will be
deemed to have accepted such modifications.
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach and we may offset any
such damages, losses, costs and expenses against any amounts due to you
hereunder. Nothing contained herein shall constitute you, us and any dealers an
association or partnership. All references in this Agreement to the "Prospectus"
refer to the then current version of the Prospectus and include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto. This Agreement supercedes and replaces any prior agreement
-5-
<PAGE>
between us and you with respect to your purchase and sale of Fund shares and is
to be construed in accordance with the laws of the State of Delaware.
Please confirm this Agreement by executing one copy of this Agreement
below and returning it to us. Keep the enclosed duplicate copy for your records.
DELAWARE DISTRIBUTORS, L.P.
By: Delaware Distributors, Inc.,
General Partner
By:/s/Keith E. Mitchell
----------------------
Name: Keith E. Mitchell
Title: President/Chief Executive Officer
-6-
<PAGE>
DEALER'S AGREEMENT ACCEPTANCE
DELAWARE DISTRIBUTORS, L.P.
The undersigned hereby confirms the Dealer's Agreement and acknowledges
that any purchase of Fund shares made during the effectiveness of this Agreement
is subject to all the applicable terms and conditions set forth in this
Agreement, and agrees to pay for the shares at the price and upon the terms and
conditions stated in the Agreement. The undersigned hereby acknowledges receipt
of Prospectuses relating to the Fund shares and confirms that, in executing the
Dealer's Agreement, it has relied on such Prospectuses and not on any other
statement whatsoever, written or oral.
INVESTMENT DEALER PLEASE SIGN HERE AND COMPLETE BELOW
By: DATE
------------------------------- ----------------------------
Name:
-----------------------------
Title:
----------------------------
- ----------------------------------
FIRM
- ----------------------------------
FIRM'S TAX IDENTIFICATION NUMBER
- ----------------------------------
STREET ADDRESS
- ----------------------------------
CITY/STATE/ZIP
<PAGE>
MUTUAL FUND AGREEMENT
FOR THE DELAWARE GROUP OF FUNDS
Gentlemen:
We are the national distributor for the Delaware Group of Funds with exclusive
right to sell and distribute Fund shares. (The term "Funds" in this Agreement
refers to each or any of the Funds that from time to time comprise the Delaware
Group and for whom we act as distributor.) You have indicated that you wish to
act as agent for your customers in connection with the purchase, sale and
redemption of Fund shares and desire to provide certain services to your
customers relating to their ownership of Fund shares, all in accordance with the
terms of this Agreement.
AGENT FOR CUSTOMERS: In placing orders for the purchase and sale of Fund shares,
you will be acting as agent for your customers and will not have any authority
to act as agent for us, any of the Funds or any of our affiliates or
representatives. Neither you nor any of your employees or agents are authorized
to make any representations concerning the Funds or Fund shares except those
contained in the then current "Prospectus" and in written information issued by
the Fund or by us as a supplement to the Prospectus. In purchasing Fund shares
your customers may rely only on such authorized information.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by
the Fund or its agent, Delaware Service Co. Inc., will be at the public offering
price applicable to each order as set forth in the Prospectus. The manner of
computing the net asset value, the public offering price and the effective time
of orders received from you are described in the Prospectus for each Fund. We
reserve the right at any time, without notice, to suspend the sale of Fund
shares or withdraw the public offering.
SALES, ORDERS AND CONFIRMATIONS: All orders must be made subject to
confirmation. Your orders must be wired, telephoned or written to the Fund or
its agent. You agree to place orders on behalf of your customers for the number
of shares, and at the price, as in bona fide orders from your customers. We will
not accept any conditional orders. We will send a written confirmation of each
trade indicating that the trade was on a fully disclosed basis to your customer.
It is agreed and understood that, whether shares are registered in the
purchaser's name, in your name or in the name of your nominee, your customer
will have full beneficial ownership of the Fund shares.
AGENCY FEES: On each order accepted by us for a Fund with a sales charge, we
understand that you will charge your customer an agency commission or agency
transaction fee ("agency fee") as set forth in the schedule of sales concessions
and agency fees set forth in that Fund's Prospectus, as it may be amended from
time to time. This fee shall be subject to the provisions of all terms set forth
in the Prospectus for volume purchases and special plans and accounts (e.g.
retirement plans, letters of intent, etc.) You will not receive from us a
dealer's concession or similar allowance out of the sales charge. In accordance
with interpretations by the Staff of the Securities and Exchange Commission (the
"Commission"), the agency fee will be your sole charge to your customers for
placing such orders. You may elect to make payments in either of two ways: (a)
you may send us the public offering price for the Fund shares purchased less the
amount of the agency fee due you or (b) you or your customer may send us the
entire public offering price for the Fund shares and we will, on a periodic
basis, remit to you the agency fee due. You will notify us in writing of which
method of payment you elect. If any shares sold to your customer under the terms
of this Agreement are repurchased by the Fund or by us, or are tendered to a
Fund for redemption or repurchase, within seven (7) business days after the date
of the confirmation of the original purchase order, you will promptly refund to
us full agency fee paid or allowed to you on such shares.
<PAGE>
PAYMENT AND ISSUANCE OF CERTIFICATES: Regardless of the payment method elected,
Fund shares purchased by you for your customers hereunder shall be paid for in
fully by check payable to the Fund at its office within five business days after
our acceptance of your order. If not so paid, the Fund reserves the right,
without notice, to cancel the sale and to hold you responsible for any loss,
including lost profit, sustained by us or the Fund in consequence. Certificates
representing Fund shares will not be issued unless a specific request is
received from you or your customer. Certificates, if requested, will be issued
in the names indicated by registration instructions accompanying payment.
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will repurchase its shares from shareholders on demand.
You agree that you will not make any representations to shareholders relating to
the purchase of their Fund shares other than the statements contained in the
Prospectus and the underlying organizational documents of the Fund, to which it
refers, and that you will quote to your customers as the redemption price only
the price determined by the Fund.
12b-1 PLAN: With respect to any Fund that has a Distribution Plan under Rule
12b-1 (a "12b-1 Plan") of the Investment Company Act of 1940 (the "1940 Act"),
we expect you will provide shareholder and administrative services to your
customers, such as: answering inquiries regarding the Fund; assisting in
changing dividend options, account designations and addresses; performing
sub-accounting; establishing and maintaining shareholder accounts and records;
processing purchase and redemption transactions; providing periodic statements
and/or updates showing a customer's account balance and integrating such
statements with those of other transactions and balances in the customer's other
accounts serviced by you; and arranging for bank wires. You will transmit
promptly to customers all communications sent to you for transmittal to clients
by or on behalf of us, any Fund or such Fund's investment advisor, custodian or
transfer or dividend disbursing agent. You will promptly answer all written
complaints received by you relating to Fund accounts or promptly forward such
complaints to us and assist us in answering such complaints. For such services
we will pay you a fee as set by us from time to time, based on a portion of the
net asset value of the accounts of your clients in the Fund. We are permitted to
make this payment under the terms of the 12b-1 Plan adopted by certain of the
Funds, as such 12b-1 Plans may be in effect from time to time, provided,
however, that no payments shall be due and paid to you hereunder with respect to
a Fund unless and until the form of this Agreement shall have been approved by a
majority of the Board of Directors or Trustees of that Fund and by a majority of
the directors or trustees who are not "interested persons" of us, the Fund or
its investment manager, as such term is defined in the 1940 Act (i.e., non-
interested directors) by vote cast in person at a meeting called for the purpose
of voting on this form of Agreement. Each Fund reserves the right, at any time,
to suspend payments under its 12b-1 plan. You will furnish the Fund and us with
such information as may be reasonably requested by the Fund or its directors or
trustees or by us with respect to fees paid to you pursuant to this Agreement.
In accordance with interpretations and rulings to the Staff of the Commission,
you will not charge your customers any fees for services for which you are being
compensated under a 12b-1 Plan of a Fund.
SALE OF NO-LOAD - NON 12B-1 PLAN FUNDS: In connection with any orders placed by
you on behalf of your customers for shares of Funds that do not charge a sales
load and do not have a 12b-1 Plan, we understand that you may charge your
customers a limited service or transaction fee, in accordance with
interpretations and rulings of the Staff of the Commission.
<PAGE>
LEGAL COMPLIANCE: This Agreement and any transaction with or payment to you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are and at all times during its
effectiveness yo will be (a) a registered broker-dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws, if
any, to act as a broker or dealer in securities, and a member in good standing
of the National Association of Securities Dealers, Inc. (the "NASD"); or (b) a
"bank" as defined in Section 3(a)(6) of the Securities Exchange Act of 1934 (or
other financial institution) and not otherwise required to register as a broker
or dealer under such Act. You agree to notify us promptly in writing if this
representation ceases to be true. You also agree that you will comply with the
rules of the NASD including, in particular, Sections 2 and 26 of Article III
thereof, to the extent applicable, that you will maintain adequate records with
respect to your customers and their transactions, and that such transactions
will be without recourse against you by your customers. We recognize that, in
addition to applicable provisions of state and federal securities laws, you may
be subject to the provisions of the Glass-Steagall Act and other laws governing,
among other things, the conduct of activities by federal and state chartered and
supervised financial institutions and their affiliated organizations. Because
you will be the only one having a direct relationship with the customer, yo will
be responsible in that relationship for insuring compliance with all laws and
regulations, including those of all applicable federal and state regulatory
authorities and bodies having jurisdiction over you or your customers to the
extent applicable to securities purchases hereunder.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we shall furnish you with information identifying the states under the
securities laws of which it is believed a Fund's shares may be sold. You will
not transact orders for Fund shares in states in which we indicate Fund shares
may not be sold.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicly available by the Fund, in
reasonable quantities upon your request. We shall file Fund sales literature and
promotional material with the NASD and SEC as required. You may not publish or
use any sales literature or promotional materials with respect to the Funds
without our prior review and written approval.
CUSTOMERS: The names of your customers will remain your sole property and will
not be used by us except for servicing or informational mailings and other
correspondence in the normal course of business.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at 1818 Market Street, Philadelphia, PA 19103. Any notice from us to you
shall be deemed to have been duly given if mailed or telegraphed to you at the
address set forth above. Each of us may change the address to which notices
shall be sent by notice to the other in accordance with the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Fund and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, us or any one or more of our dealers,
based upon the claim that you and such dealers or any of them constitute a
partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you promptly notify us in writing to the contrary, you
will be deemed to have accepted such modifications.
<PAGE>
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach. Nothing contained
herein shall constitute you, us and any dealers an association or partnership.
All references in this Agreement to the "Prospectus" include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto, provided that any requirement in this Agreement to deliver
a copy of the Prospectus shall not include the Statement of Additional
Information unless requested by the customer. This Agreement is to be construed
in accordance with the laws of the State of Delaware.
Please confirm this Agreement by executing one copy of this Agreement below and
returning it to us. Keep the enclosed duplicate copy for your records.
Date:________________ DELAWARE DISTRIBUTORS, L.P.
BY: DELAWARE DISTRIBUTORS, INC.,
General Partner
Accepted and Agreed to:
- ---------------------------
(Name of Firm)
BY:________________________
Name:
Title:
<PAGE>
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
<PAGE>
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I
PURPOSE CLAUSE . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III
ELIGIBILITY OF EMPLOYEES
TO PARTICIPATE IN THE PLAN . . . . . . . . . . . . . . 6
ARTICLE IV
CONTRIBUTIONS TO PLAN . . . . . . . . . . . . . . . . . 7
ARTICLE V
ALLOCATION OF CONTRIBUTIONS . . . . . . . . . . . . . . 12
ARTICLE VI
RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . 14
ARTICLE VII
DISABILITY BENEFITS . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII
DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IX
OTHER SEPARATION FROM SERVICE . . . . . . . . . . . . . 16
ARTICLE X
METHOD OF PAYMENT . . . . . . . . . . . . . . . . . . . 18
ARTICLE XI
ADMINISTRATION OF PLAN . . . . . . . . . . . . . . . . 26
ARTICLE XII
AMENDMENT, CONSOLIDATION, MERGER
OR TERMINATION . . . . . . . . . . . . . . . . . . . . 29
(i)
<PAGE>
ARTICLE XIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XIV
LOANS . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XV
LIMITATIONS ON ALLOCATIONS . . . . . . . . . . . . . . 32
ARTICLE XVI
TOP HEAVY DEFINITIONS AND RULES . . . . . . . . . . . . 36
(ii)
<PAGE>
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
ARTICLE I
PURPOSE CLAUSE
--------------
This Profit Sharing Plan and the Trust Agreement forming a part hereof are
established for the benefit of the employees of Delaware Group Delaware Fund,
Inc. and the other investment companies of the Delaware Group of Funds to
promote in them a strong interest in the successful operation of the business
and to provide for them an opportunity for accumulation of funds for their
retirement benefit.
ARTICLE II
DEFINITIONS
-----------
When used herein, the following words shall have the following meanings
unless the context clearly indicates otherwise:
2.1 "Administrative Committee" or "Committee" shall mean the Administrative
Committee with authority and responsibility to manage and direct the operation
and administration of this Plan. "Administrative Committee" shall be deemed to
also mean "Administrator" and "Plan Administrator" as defined in ERISA.
2.2 "Anniversary Date" shall mean the first day of each Plan Year.
2.3 "Beneficiary" shall mean the person or persons designated by a
Participant to receive benefits upon the death of said Participant pursuant to
Article VIII.
2.4 "Board of Directors" shall mean the Board of Directors of the Employer.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.6 "Effective Date" of the Plan shall mean October 1, 1983. The Effective
Date of this amended and restated Plan shall mean April 1, 1989, except where
indicated otherwise.
2.7 "Eligibility Computation Period" shall mean the period of twelve (12)
-4-
<PAGE>
consecutive months beginning on the date an Employee first performs an Hour of
Service upon hire or rehire after a One Year Break in Service, and any Plan Year
following such date of hire or date of rehire following a One Year Break in
Service.
2.8 "Eligibility Year of Service" shall mean the Eligibility Computation
Period during which the Employee performs one thousand (1,000) or more Hours of
Service. Eligibility Years of Service shall include an Employee's prior service
with Delaware Management Company, Inc. or any Entity required to be aggregated
with Delaware Management Company, Inc. under Sections 414(b) or(c) of the Code.
2.9 "Employee" shall mean any person employed by the Employer or by any
affiliated Entity which adopts this Plan; provided, however, no person covered
by a collective bargaining agreement under which the Employer has participated
in good faith bargaining concerning retirement benefits shall be considered an
Employee for the purposes of this Plan. Any Leased Employee shall not be
considered an Employee for purposes of the Plan.
2.10 "Employer" shall mean Delaware Group Delaware Fund, Inc. and any other
affiliated investment company which adopts this Plan. Effective October 1, 1987,
and solely for purposes of determining periods of service for eligibility for
participation and vesting, the term "Employer" shall include any corporation
which is a member of a controlled group of corporations (as defined in Section
414(b) of the Code) which includes the Employer; any trade or business (whether
or not incorporated) which is under common control (as defined in Section 414(c)
of the Code) with the Employer; any organization (whether or not incorporated)
which is a member of an affiliated service group (as defined in Section 414(m)
of the Code) which includes the Employer; and any other Entity required to be
aggregated with the Employer pursuant to regulations under Section 414(o) of the
Code.
2.11 "Employer Contribution Account" shall mean a Participant's account
derived from Employer contributions and the earnings thereon.
2.12 "Entity" shall mean an individual, partnership, corporation or
unincorporated organization.
2.13 "ERISA" shall mean the Employee Retirement Income Security Act of 1974
and the Regulations promulgated thereunder by either the Department of Labor or
Treasury.
2.14 "Hour of Service" shall mean:
-5-
<PAGE>
(a) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer. These hours will be credited to the
Employee for the computation period in which the duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to payment, by the
Employer on account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability), layoff, jury
duty, military service or leave of absence. No more than 501 Hours of Service
will be credited under this paragraph for any single continuous period (whether
or not such period occurs in a single computation period); and
(c) Each hour for which back pay, regardless of mitigation of damages, is
either awarded or agreed to by the Employer. The same Hours of Service will not
be credited both under paragraph (a) or paragraph (b), as the case may be, and
under this paragraph (c). These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.
(d) Hours of Service will be calculated on the basis described in
Department of Labor Regulations Section 2530.200b-2(b) and (c).
(e) Solely for purposes of determining whether a Break in Service has
occurred, for participation and vesting purposes, an individual who is absent
from work for maternity or paternity reasons will receive credit for the Hours
of Service which would otherwise have been credited to such individual. In the
event these hours cannot be determined, eight (8) Hours of Service per day will
be used. For purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence (i) by reason of the pregnancy of the
individual, (ii) by reason of the birth of a child of the individual, (iii) by
reason of the placement of a child with the individual in connection with the
adoption of the child by such individual, or (iv) for purposes of caring for the
child for a period beginning immediately following such birth or placement.
However, in no event will the hours treated as Hours of Service under this
paragraph (e), by reason of any pregnancy or placement, exceed 501 hours. The
Hours of Service credited under this paragraph will be credited (i) in the Plan
Year in which the absence begins if the crediting is necessary to prevent a
Break in Service in that period, or (ii) in all other cases, in the following
Plan Year.
(f) Effective for Plan Years beginning on or after April 1, 1994, an
Employee shall be credited with 45 Hours of Service for each week for which he
would be required to be credited with at least one Hour of Service under
paragraphs (a)-(e) above.
-6-
<PAGE>
2.15 "Leased Employee" shall mean any person described in Section 414(n) of
the Code who is not an employee of the Employer who, pursuant to an agreement
between the Employer and any other person, has performed service for the
Employer (or for any related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full-time basis for a period of at
least one year and such services are of a type historically performed by
employees in the Employer's business field.
2.16 "Named Fiduciary" shall be the Administrative Committee and the
Trustee or Trustees serving from time to time and any other person who is
specifically so designated by the Board of Directors.
2.17 "Normal Retirement Date" shall mean the date on which a Participant
shall reach age 65.
2.18 "One Year Break in Service" or "Break in Service" shall mean a Plan
Year during which an Employee has or was separated from employment with Employer
and has completed 500 or less Hours of Service.
2.19 "Participant" shall mean any Employee who meets the eligibility
requirements under Article III or any Employee who is or may become eligible to
receive a benefit under the Plan or whose Beneficiaries may be eligible to
receive any such benefit.
2.20 "Participant Contribution Account" shall mean a Participant's account
derived from his voluntary contributions and the earnings thereon.
2.21 "Plan" shall mean the Employer's Profit Sharing Plan set forth in this
document and all subsequent amendments thereto.
2.22 "Plan Compensation" shall mean as of each Anniversary Date, the basic
compensation received by an Employee from the Employer during the preceding Plan
Year, including salary, draw, overtime and bonuses, but excluding contributions
to this or any other deferred compensation plan. Plan Compensation includes
salary reduction contributions paid by the Employer on the Employee's behalf to
a cafeteria plan, within the meaning of Section 125 of the Code, maintained by
the Employer. Effective for Plan Years beginning on or after April 1, 1994, Plan
Compensation shall mean the sum of (a) the total earnings which are received by
the Employee from the Employer for the preceding Plan Year and which are
required to be reported as wages on the Employee's Form W-2 (in the wages, tips
and other compensation box) and (b) the total amount contributed by the
-7-
<PAGE>
Employer on behalf of the Employee pursuant to a salary reduction agreement
which is not includable in the gross income of the Employee under Sections 125
or 402 (e)(3) of the Code, but excluding all of the following items (even if
includable in gross income): reimbursements or other expense allowances, fringe
benefits (cash and non-cash), moving expenses, deferred compensation and welfare
benefits.
For Plan Years beginning on or after April 1, 1989, the Plan Compensation
of each Participant taken into account under the Plan shall not exceed $200,000,
as adjusted by the Secretary of the Treasury. In determining the Plan
Compensation of a Participant for purposes of the limitations set forth in the
preceding sentence, the rules of Section 414(q)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only the spouse
of the Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the Plan Year. If, as a result of the
application of such rules, the adjusted $200,000 limitation is exceeded, then
the limitation shall be prorated among the affected individuals in proportion to
each such individual's Plan Compensation as determined under this Section 2.22
prior to the application of this limitation. Effective for Plan Years beginning
on or after January 1, 1994, the Plan Compensation of a Participant shall not
exceed $150,000, as adjusted at the time and manner prescribed by Section 401
(a)(17)(B) of the Code.
2.23 "Plan Year" shall mean a twelve-month period beginning on April 1st
and ending on March 31st. For the Plan Years beginning before April 1, 1989 and
after December 31, 1986, the term Plan Year means a twelve month period
beginning October 1st and ending September 30th, except that the Plan Year
beginning October 1, 1988 is a short year which ends March 31, 1989.
2.24 "Total and Permanent Disability" shall mean incapacity, resulting from
injury or disease, of a Participant to perform any work for Employer and shall
be presumed permanent after the same has continued uninterrupted for six months
as certified by a qualified physician selected by the Administrative Committee.
2.25 "Trustee" or "Trustees" shall mean the trustee or trustees named in
the Trust Agreement attached hereto and forming a part hereof, or any successor
thereto.
2.26 "Trust Fund" or "Fund" shall mean all property held pursuant to the
Trust Agreement.
2.27 "Valuation Date" means the last day of each Plan Year and such other
quarterly, monthly or daily dates as determined by the Administrative Committee.
-8-
<PAGE>
2.28 "Year of Service" shall mean a Plan Year during which an Employee
completes at least 1,000 Hours of Service; provided, however, that for the
period from October 1, 1988 through March 31, 1990, an Employee shall be given
credit for a Year of Service if he completes 1,000 Hours of Service during the
period October 1, 1988 to September 30, 1989 and shall be given credit for an
additional Year of Service if he completes 1,000 Hours of Service during the
period April 1, 1989 to March 31, 1990. For purposes of determining a
Participant's nonforfeitable right to his Employer Contribution Account, Years
of Service shall include an Employee's prior service with Delaware Management
Company, Inc. or any other Entity required to be aggregated with Delaware
Management Company, Inc. under Sections 414(b) or (c) of the Code. An Employee
shall also receive credit for a Year of Service if he completes 1000 or more
Hours of Service during his initial Eligibility Computation Period.
2.29 Whenever used herein, the masculine provision includes the feminine
and the singular includes the plural.
ARTICLE III
ELIGIBILITY OF EMPLOYEES
TO PARTICIPATE IN THE PLAN
--------------------------
3.1 Each Employee who was a Participant on March 31, 1989 shall continue as
a Participant. Each other Employee shall be eligible to participate in this Plan
on the first day of the Plan Year within which he completes one Eligibility Year
of Service.
3.2 Any Participant who returns to service after a Break in Service shall
be admitted to the Plan as a Participant on his date of re-employment.
3.3 Within 60 days of each Anniversary Date of this Plan, the Employer
shall furnish the Administrator a list showing all eligible Employees, the date
of employment, the Years of Service, the Plan Compensation of each eligible
Employee and the date of termination of any terminated Employees.
3.4 Notwithstanding the provisions of Section 3.1 to the contrary, if an
Employee is employed by the Employer on March 31, 1989 and has completed by such
date 1,000 or more Hours of Service during an Eligibility Computation Period
which began on or before October 1, 1988, such Employee shall be eligible to
participate in the Plan on October 1, 1988.
-9-
<PAGE>
ARTICLE IV
CONTRIBUTIONS TO PLAN
---------------------
4.1 Each participating Employer may contribute to the Plan's Trust Fund for
each taxable year an amount, if any, determined in accordance with a resolution
of the Board of Directors adopted before the date prescribed by law for filing
its Federal income tax return for such taxable year (including extensions
thereof); provided, however, that no contributions shall be made for any year in
excess of the amount deductible for such year under provisions of the Code and
regulations thereunder as then in effect. For Plan Years beginning on or after
April 1, 1989, the Employer may make contributions regardless of whether or not
it has Net Profits and Earnings for its tax year.
4.2 For Plan Years beginning before April 1, 1989, Net Profits and Earnings
in any one year of operations means the net income before provisions for Federal
and State income taxes as determined by the certified public accountants
employed by the Employer in accordance with generally accepted accounting
principles of open-end management investment companies.
4.3 For each taxable year, the contributions shall accrue on the
Anniversary Date thereof, but shall not be considered as accruing during the
said taxable year prior to the Anniversary Date thereof.
4.4 The Trust Fund shall not be diverted to any use other than the
exclusive benefit of eligible Employees and their Beneficiaries.
4.5 Effective August 1, 1991, a Participant may not make voluntary
contributions to his Participant Contribution Account. Prior to August 1, 1991,
a Participant may make voluntary contributions to his Participant Contribution
Account. Such contributions may be made by payroll deductions or in such other
manner and subject to such procedures as the Administrator may prescribe. No
Participant may contribute more than ten percent of his aggregate Plan
Compensation for all Plan Years during which he participated in the Plan.
4.6 Notwithstanding the provisions of Article IX, a Participant shall have
a nonforfeitable interest in all voluntary contributions made by him and in any
increase in his account attributable to such contributions.
4.7 A Participant shall have the right to withdraw the total amount of his
voluntary contributions at any time; provided, however, that such withdrawal
-10-
<PAGE>
shall be permissible only with respect to the amount of such Participant's
voluntary contributions and not to any increase in his account attributable to
such contributions. No Participant shall be permitted to make withdrawals of
his voluntary contributions more than four times in any one calendar year.
Effective as of the date of adoption of this amended and restated Plan, a
Participant shall be permitted to make withdrawals as frequently as monthly of
all or a portion of his voluntary contributions, including the earnings
thereon.
4.8 The Fund may accept rollover contributions on behalf of an Employee
(including an Employee who has not satisfied the requirements to be eligible to
participate) from any other plan maintained for his benefit which satisfies the
requirements of a tax-qualified plan, or a rollover individual retirement
account; provided, however, that such rollovers are permitted by and effected in
accordance with the requirements of the Code. The Administrative Committee may
as a condition of acceptance of such rollovers demand such information, opinions
and statements as it deems necessary to assure that such rollovers conform to
the requirements of the federal tax laws.
4.9 An Employee for whom a rollover has been made shall be deemed a
Participant with respect to the amount contributed and shall have a
nonforfeitable interest in such amount and any increases attributable to it. Any
such rollovers shall be held in a special account for the Participant segregated
from other assets held by the fund. Such contributions will be administered and
distributed pursuant to the provisions of this Plan.
4.10 The following special non-discrimination rules pertaining to voluntary
contributions shall be applicable for Plan Years beginning on or after October
1, 1987 and before April 1, 1990.
(a) For any Plan Year, the Contribution Percentage for all Highly
Compensated Employees will not exceed the greater of (i) or (ii) as follows:
(i) The Contribution Percentage for all Non-Highly Compensated Employees,
times 1.25; or
(ii) The lesser of the Contribution Percentage for all Non-Highly
Compensated Employees, times 2.0, provided that the Contribution Percentage for
all Highly Compensated Employees may not exceed the Contribution Percentage for
all Non-Highly Compensated Employees by more than two (2) percentage points or
such lesser amount as the Secretary of Treasury will prescribe to prevent the
multiple use of this alternative limitation with respect to any Highly
Compensated Employee.
-11-
<PAGE>
(b) Distribution of Excess Aggregate Contributions.
(i) Excess Aggregate Contributions, plus any income and minus any loss
allocable thereto, will be distributed no later than the last day of each Plan
Year to Participants to whose accounts Excess Aggregate Contributions were
allocated for the preceding Plan Year.
(ii) For the Plan Year beginning on October 1, 1987, the income or loss
allocable to Excess Aggregate Contributions shall be determined under any
reasonable method, which method shall be applied on a consistent basis for all
Participants. For Plan Years beginning after 1987, the income or loss allocable
to Excess Aggregate Contributions shall be the sum of (A) and (B) below:
(A) The income or loss for the Plan Year allocable to the Participant's
voluntary contribution Account multiplied by a fraction, the numerator of which
is the Participant's Excess Aggregate Contributions for the year, and the
denominator of which is the balance of the Participant's voluntary contribution
account as of the end of the Plan Year, minus income (or plus losses) allocable
to such account.
(B) The income or loss for the period between the end of the Plan Year and
the date of the distribution allocable to the Participant's voluntary
contribution account multiplied by the fraction described in (A), above.
In lieu of using the formula described in (B), the income or loss for the
period between the end of the Plan Year and the date of the distribution
allocable to Excess Aggregate Contributions for the year may be calculated under
the following alternative method, provided such method is applied on a
consistent basis for all Participants: ten percent (10%) of the amount
determined under (A), above, multiplied by the number of whole calendar months
that have elapsed since the end of the Plan Year. For this purpose, if a
distribution of Excess Aggregate Contributions is made after the 15th day of a
month, that month will be counted as a whole month.
(c) The following definitions apply for purposes of this Section 4.10.:
(i) "Contribution Percentage" means, for a group of Participants, the
average of the following ratios (calculated separately) for each Participant in
the group:
(A) The sum of voluntary contributions made on behalf of each Participant
for the Plan Year; over
-12-
<PAGE>
(B) The Participant's Compensation for that Plan Year, whether or not the
Participant was a Participant for the entire Plan Year.
The Contribution Percentage for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to have voluntary employee
contributions or employer matching contributions allocated to his account under
two or more plans described in Section 401(a) of the Code or arrangements
described in Section 401(k) of the Code that are maintained by the employer or
an entity that is required to be aggregated with the employer pursuant to
Sections 414(b), (c), (m), or (o) of the Code will be determined as if all such
contributions were made under a single plan. If a Highly Compensated Employee
participates in two or more arrangements described in Section 401(k) of the Code
that have different plan years, all such arrangements ending with or within the
same calendar year shall be treated as a single arrangement.
For purposes of determining the Contribution Percentage of a Participant
who is a five-percent owner or one of the ten most Highly Compensated Employees,
the Contribution Percentage and compensation of such Participant will include
the Contribution Percentage and Compensation of Family Members, and such Family
Members will be disregarded in determining the Contribution Percentage for
Participants who are Non-Highly Compensated Employees.
Voluntary contributions will be considered made for a Plan Year if made by
the date specified in the applicable regulations and allocated to a
Participant's account for the Plan Year.
The determination and treatment of the Contribution Percentage of any
Participant will satisfy such other requirements as may be prescribed by
Secretary of the Treasury.
In the event that this Plan satisfies the requirements of Sections 401(m),
401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans,
or if one or more other plans satisfy the requirements of such Sections only if
aggregated with this Plan, then this Section 4.10 will be applied by determining
the Contribution Percentages of eligible Participants as if all such plans were
a single plan. For plan years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Section 401(m) of the Code only if they have the
same plan year.
(ii) "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of:
-13-
<PAGE>
(A) The aggregate Contribution Percentage amounts taken into account in
computing the numerator of the Contribution Percentage actually made on behalf
of Highly Compensated Employees for such Plan Year; over
(B) The maximum Contribution Percentage amounts permitted by the
Contribution Percentage limits set forth in this Section 4.10 (determined by
reducing contributions made on behalf of Highly Compensated Employees in order
of their Contribution Percentages beginning with the highest of such
percentages).
(iii) "Family Member" means an individual described in Section 414(q)(6)(B)
of the Code.
(iv) "Highly Compensated Employee" means a highly compensated active
employee or a highly compensated former employee, as described below.
A highly compensated active employee includes any employee who performs
service for the employer during the determination year and who, during the
look-back year: (i)received compensation from the employer in excess of $75,000
(as adjusted pursuant to Section 415(d) of the Code); (ii) received compensation
from the employer in excess of $50,000 (as adjusted pursuant to Section 415(d)
of the Code) and was a member of the top-paid group for such year; or (iii) was
an officer of the employer and received compensation during such year that is
greater than 50 percent of the dollar limitation in effect under Section
415(b)(1)(A) of the Code. The term Highly Compensated Employee also includes:
(i) employees who are both described in the preceding sentence if the term
"determination year" is substituted for the term "look-back year" and the
employee is one of the 100 employees who received the most compensation from the
Employer during the determination year; and (ii) employees who are five percent
owners at any time during the look-back year or determination year.
If no officer has satisfied the compensation requirement of (iii) above
during either a determination year or a look-back year, the highest paid officer
for such year shall be treated as a Highly Compensated Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back shall be the twelve (12)-month period immediately preceding the
determination year.
A highly compensated former employee includes any employee who separated
from service (or was deemed to have separated) prior to the determination year,
performs no service for the employer during the determination year, and was a
highly compensated active employee for either the separation year or any
determination year ending on or after the employee's fifty-fifth (55th)
birthday.
-14-
<PAGE>
If an employee is, during a determination year or look-back year, a Family
Member of either a five percent owner who is an active or former employee or a
Highly Compensated Employee who is one of the ten (10) most Highly Compensated
Employees ranked on the basis of compensation paid by the Employer during such
year, then the Family Member and the five percent owner or top-ten (10) Highly
Compensated Employee shall be aggregated. In such case, the Family Member and
five percent owner or top-ten Highly Compensated Employee shall be treated as a
single employee receiving compensation and Plan contributions or benefits equal
to the sum of such compensation and contributions or benefits of the Family
Member and five percent owner or ten (10) most Highly Compensated Employee.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of employees in the top-paid group,
the top one hundred (100) employees, a five percent owner, the number of
employees treated as officers and the compensation that is considered, will be
made in accordance with Section 414(q) of the Code and the regulations
thereunder.
(v) "Compensation" means all of an Employee's compensation, as that term is
defined in Article XV, Limitations on Allocations, and shall include elective
contributions that are made by the Employer on behalf of the Employee and which
are not includable in income under Section 125 of the Code. Compensation shall
be subject to the limitation of Section 401(a)(17) of the Code.
ARTICLE V
ALLOCATION OF CONTRIBUTIONS
---------------------------
5.1 A separate and complete accounting shall be maintained for each
Participant which shall set forth the amount credited to or forfeited from his
Employer Contribution Account and his Participant Contribution Account. Employer
contributions and Participant contributions shall be allocated among investment
companies managed by Delaware Management Company, Inc. Each Participant shall
file a written notice with the Committee thereby making an election as to what
proportion of his contributions, including both contributions made by the
Employer and voluntary contributions, shall be allocated to the eligible
investment company funds, as announced from time to time by the Committee. Each
Participant shall have the right to change the investment allocation of his
contributions and his accumulated account balance, in accordance with rules and
procedures as announced from time to time by the Committee, provided changes are
subject to any limitations imposed on the right of exchange by the investment
media.
-15-
<PAGE>
5.2 The Employer's contributions and any forfeitures for each Plan Year
shall be credited to the Employer Contribution Accounts of Participants who are
employed by the Employer on the Anniversary Date and allocated in the proportion
that the Plan Compensation of each Participant bears to the total Plan
Compensation of all Participants for such Plan Year. A Participant who
terminates employment on the Anniversary Date shall be treated as employed by
the Employer on the Anniversary Date. All voluntary contributions made by a
Participant prior to August 1, 1991 shall be credited to his Participant
Contribution Account.
5.3 As of the Anniversary Date, each Participant's Employer Contribution
Account and his Participant Contribution Account shall be valued at its fair
market value. For the purposes of paying benefits to a Participant, his accounts
shall be valued on the most recent Valuation Date as determined by the
Administrative Committee.
5.4 Income when earned less expenses, if any, when charged, shall be
credited to or charged against each Participant's account, in accordance with
the self-directed investments selected by the Participant.
5.5 The Committee shall, as of each Anniversary Date, determine the total
amount of forfeitures which accrued during the Plan Year and shall add the
forfeited amount to the Employer's annual contribution for the purposes of
reallocation to the remaining Participants as provided in Section 5.2.
5.6 Any allocation made and credited to the account of a Participant under
this Article shall not cause such Participant to have any right, title or
interest in or to any assets of the Trust Fund except at the time or times, and
under the terms and conditions, expressly provided for in this Plan.
5.7 (a) In the case of a contribution to the Plan which is made by the
Employer because of a mistake of fact, the Employer may, within one year after
the payment of such contribution, withdraw such contribution from the Trust
Fund.
(b) Employer contributions to the Plan are expressly conditioned on the
deductibility of such contributions under Section 404 of the Code. To the extent
such contributions are disallowed, the Employer may, within one year of the
disallowance of the deduction, withdraw such contribution from the Trust Fund.
-16-
<PAGE>
ARTICLE VI
RETIREMENT BENEFITS
-------------------
6.1 Upon attaining Normal Retirement Date, a Participant shall have a fully
vested and nonforfeitable right to his entire Employer Contribution Account and
shall be entitled to retire and upon so retiring shall be entitled to the
commencement of the payment of his benefits, consisting of the balance of his
accounts, in accordance with the method of payment elected pursuant to Article
X.
6.2 A Participant who retires after his Normal Retirement Date shall
continue to be a Participant in the Plan until his actual retirement and shall
be eligible to share in the allocation of Employer contributions as provided in
Section 5.2.
ARTICLE VII
DISABILITY BENEFITS
-------------------
7.1 If the employment of a Participant has been terminated prior to his
retirement date because of Total and Permanent Disability, such Participant
shall be entitled to receive his entire Participant Contribution Account and his
entire Employer Contribution Account in accordance with the manner elected under
Article X.
7.2 Upon a Participant's cessation of Total and Permanent Disability and
upon his return to work for Employer before all of his account has been
distributed, no further payments shall be made therefrom by reason of the
disability. A Participant shall have no right or obligation to repay any amount
distributed to him pursuant to Section 7.1.
ARTICLE VIII
DEATH BENEFITS
--------------
8.1 Notwithstanding anything stated in the Plan to the contrary, if a
Participant dies prior to receiving the entire nonforfeitable amount credited to
his accounts, all such undistributed nonforfeitable amounts shall be paid to the
Participant's surviving spouse, unless there is no surviving spouse or the
surviving spouse consents in writing to the payment of death benefits to another
Beneficiary. A spouse's consent must satisfy the following requirements:
-17-
<PAGE>
(a) the consent must be in writing;
(b) the consent must be witnessed by a member of the Administrative
Committee or a notary public;
(c) the consent must approve a designation of a specific Beneficiary,
including any class of Beneficiaries or any contingent Beneficiaries, which may
not be changed without spousal consent, or the spouse expressly permits
designations by the Participant without any further spousal consent; and
(d) the consent acknowledges the effect of the Participant's designation of
Beneficiary. If a consent permits designations by the Participant without any
requirement of further consent by such spouse, it must acknowledge that the
spouse has the right to limit consent to a specific Beneficiary and that the
spouse voluntarily elects to relinquish such right.
Written consent of a spouse need not be obtained if the Participant
establishes to the satisfaction of the Committee that there is no spouse or that
the spouse cannot be located. Any such designation may be changed from time to
time by the Participant by filing a new designation with the Committee, provided
the spousal consent requirements above are satisfied.
8.2 Each Participant may file with the Committee a designation of
Beneficiary to receive amounts payable under this Plan upon his death. The
designation may be changed from time to time by the Participant, except that a
married Participant may not name a Beneficiary other than his spouse without a
written consent which satisfies the requirements of Section 8.1. If no
designation has been filed, or all designated Beneficiaries have predeceased the
Participant, then any amounts payable shall be paid to his surviving spouse. If
there is no surviving spouse, any amounts payable shall be paid to his estate.
8.3 If at, after or during the time when a benefit is payable to any
Beneficiary, the Administrative Committee, upon request of the Trustee or at its
own instance, mails by registered or certified mail to the Beneficiary at the
Beneficiary's last known address a written demand for his then address, or for
satisfactory evidence of his continued life or both, and, if the Beneficiary
shall fail to furnish the information to the Committee within 3 years from the
mailing of the demand, then the Committee shall distribute the remaining
benefits to the Beneficiary next entitled thereto under Section 8.3 above as if
the Beneficiary designated by the Participant or Section 8.3 were then deceased.
-18-
<PAGE>
ARTICLE IX
OTHER SEPARATION FROM SERVICE
-----------------------------
9.1 (a) If a Participant separates from service other than under Articles
VI, VII or VIII, he shall be entitled to receive a lump sum distribution of his
entire Participant Contribution Account and his entire nonforfeitable Employer
Contribution Account. Such distribution shall be made upon the written request
of the Participant and shall be made as soon as practicable following the
Participant's separation from service, but not later than the close of the
second Plan which such separation occurs.
(b) If the non-forfeitable portion of the Participant's Employer
Contribution Account and his Participant Contribution Account exceeds $3500 (or
ever exceeded $3500 at the time of an earlier distribution), and the Participant
does not consent in writing to receive a lump sum distribution of his accounts
by the close of the second Plan Year following his separation from service, no
distribution shall be made to the Participant until he attains his Normal
Retirement Date. Regardless of whether the Participant consents in writing, if
the non-forfeitable portion of the Participant's Employer Contribution Account
and Participant Contribution Account does not exceed $3500 (or did not exceed
$3500 at the time of a prior distribution), a lump sum distribution shall be
made to the Participant of the entire value of the non-forfeitable portion of
his accounts not later than the end of the second Plan Year following his
separation from service.
(c) If a distribution is made to the Participant of the nonforfeitable
portion of his Employer Contribution Account upon his separation from service,
the non-vested portion of his Account, if any, will be treated as a forfeiture
and reallocated to remaining Participants as provided in Section 5.2. If the
Participant does not receive a distribution of his Employer Contribution Account
upon his separation from service, such Account shall be held for the Participant
until he attains Normal Retirement Date and the non-vested portion of the
Account shall be treated as a forfeiture when the Participant sustains five
consecutive One Year Breaks in Service.
(d) In the event a Participant who is less than fully vested in his
Employer Contribution Account receives a distribution of his vested interest in
such Account upon his separation from service, and such Participant subsequently
returns to employment of the Employer, the Participant's Employer Contribution
Account will be restored to the value of the Account on the date of the
distribution if the Participant repays to the Trustees the full amount of such
-19-
<PAGE>
distribution before the earlier of five consecutive One-Year Breaks in Service
or five years after the Participant's date of reemployment. Restoration of the
forfeited amount of a Participant's Account shall be made from forfeitures or
Employer contributions.
9.2 (a) In the event a Participant separates from service with the Employer
for reasons other than retirement, disability, death or a layoff by the
Employer, he shall have a nonforfeitable right to the amount credited to his
Employer Contribution Account in accordance with the following schedule:
Completed Years of Service Percentage
-------------------------- ----------
At least But less than
0 1 0%
1 2 20%
2 3 40%
3 4 60%
4 5 80%
5 or more 100%
(b) A Participant shall have a wholly vested and nonforfeitable right to
his Employer Contribution Account upon separation from service on account of
retirement on or after the Normal Retirement Date, Total and Permanent
Disability, death while in the employ of the Employer or layoff by the Employer.
For purposes of this Section 9.2, the term "layoff" shall mean any involuntary
separation from service other than separation due to cause. If a Participant
separates from service with the Employer, the non-vested portion of his Employer
Contribution Account, if any, shall be forfeited upon the death of the
Participant.
(c) If the Employer amends the Plan in a manner which directly or
indirectly affects the computation of a Participant's nonforfeitable percentage,
each Participant who completes an Hour of Service in any Plan Year beginning
after December 31, 1988 and who has at least three Years of Service may elect
after the adoption of such amendment to have his nonforfeitable interest
computed under the Plan without regard to such amendment. The period during
which the election may be made shall commence the day the amendment is adopted
and shall end on later of:
(i) sixty (60) days after the amendment is adopted;
(ii) sixty (60) days after the amendment becomes effective; or
(iii) sixty (60) days after the Participant is issued written notice of the
amendment by the Employer or the Committee.
-20-
<PAGE>
9.3 (a) In the case of a Participant who has a Break in Service, Years of
Service completed before such Break shall not be counted until the Participant
has completed a Year of Service for the purpose of determining his
nonforfeitable percentage of the amount credited to his Employer Contribution
Account after such Break in Service.
(b) Years of Service completed on reemployment and after separation from
service with the Employer in connection with which he has five consecutive One
Year Breaks in Service shall not be counted for purposes of determining such
Participant's nonforfeitable percentage right to amounts credited to his
Employer Contribution Account before such Break in Service.
ARTICLE X
METHOD OF PAYMENT
-----------------
10.1 At the request of a Participant, the form of benefit payments may be
one of the following in cash:
(a) in a lump sum payment; or
(b) in periodic, monthly, quarterly, semi-annual or annual installments
over a period certain not exceeding the Participant's life expectancy or the
joint life expectancy of the Participant and his designated Beneficiary. If
periodic installments are to be paid, a Participant's account shall be invested
in the investment company funds available under the Plan as designated by the
Participant.
If periodic installments are paid over the life expectancy of the
Participant or joint life expectancy of the Participant and a designated
Beneficiary, a Participant may elect, prior to the time distributions begin,
whether or not to have his life expectancy and his Beneficiary's life expectancy
(if the Beneficiary is his spouse) annually recalculated. In the absence of such
election, life expectancies will not be recalculated.
10.2 In no event shall payments of benefits under this Plan commence later
than sixty (60) days after the close of the Plan Year in which the latest of the
following events occur:
(a) the Participant attains age sixty-five (65); or
(b) the Participant completes ten years of participation in the Plan; or
-21-
<PAGE>
(c) the termination of the Participant's service with the Employer.
10.3 (a) Notwithstanding the other requirements of this Plan, distributions
on behalf of any Participant, including a five percent (5%) owner, may be made
in accordance with all of the following requirements (regardless of when such
distribution commences):
(i) The distribution by the Trust Fund is one which would not have
disqualified such Trust under Section 401(a)(9) of the Code as in effect prior
to amendment by the Deficit Reduction Act of 1984.
(ii) The distribution is in accordance with a method of distribution
designated by the Participant whose interest is being distributed or, if the
Participant is deceased, by a Beneficiary of such Participant.
(iii) Such designation was in writing, was signed by the Participant or the
Beneficiary, and was made before January 1, 1984.
(iv) The Participant had accrued a benefit under the Plan as of December
31, 1983.
(v) The method of distribution designated by the Participant or the
Beneficiary specifies the time at which distribution will commence, the period
over which distributions will be made, and in the case of any distribution upon
the Participant's death, the Beneficiaries of the Participant listed in order of
priority.
(b) A distribution upon death will not be covered by this Section unless
the information in the designation contains the required information described
above with the respect to the distributions to be made upon the death of the
Participant.
(c) For any distribution which commenced before January 1, 1984, but
continues after December 31, 1983, the Participant, or the Beneficiary, to whom
such distribution is being made, will be presumed to have designated the method
of distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements in subsections (a)(i) and (v) above.
(d) If a designation is revoked, any subsequent distribution must satisfy
the requirements of Section 401(a)(9) of the Code. Any changes in the
designation will be considered to be revocation of the designation. However, the
mere substitution or addition of another Beneficiary (one not named in the
-22-
<PAGE>
designation) under the designation will not be considered to be revocation
of the designation, so long as such substitution or addition does not alter the
period over which distributions are to be made under the designation, either
directly or indirectly (for example, by altering the relevant measuring life).
10.4 Required Distributions. All distributions required under this Section
10.4 shall be determined and made in accordance with the proposed regulations
under Section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirement of Section 1.401(a)(9)-2 of the proposed
regulations.
(a) Required beginning date. The entire interest of a Participant must be
distributed or begin to be distributed no later than the Participant's required
beginning date.
(b) Limits on Distribution Periods. As of the first distribution calendar
year, distributions, if not made in a single-sum, may only be made over one of
the following periods (or a combination thereof):
(1) a period certain not extending beyond the life expectancy of the
Participant, or
(2) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated beneficiary.
(c) Determination of amount to be distributed each year. If the
Participant's interest is to be distributed in other than a single sum, the
following minimum distribution rules shall apply on or after the required
beginning date:
(1) If a Participant's benefit is to be distributed over (i) a period not
extending beyond the life expectancy of the Participant or the joint life and
last survivor expectancy of the Participant and the Participant's designated
beneficiary or (ii) a period not extending beyond the life expectancy of the
designated beneficiary, the amount required to be distributed for each calendar
year, beginning with distributions for the first distribution calendar year,
must at least equal the quotient obtained by dividing the Participant's benefit
by the applicable life expectancy.
(2) For calendar years beginning before January 1, 1989, if the
Participant's spouse is not the designated beneficiary, the method of
distribution selected must assure that at least fifty percent (50%) of the
present value of the amount available for distribution is paid within the life
expectancy of the Participant.
-23-
<PAGE>
(3) For calendar years beginning after December 31, 1988, the amount to be
distributed each year, beginning with distributions for the first distribution
calendar year, shall not be less than the quotient obtained by dividing the
Participant's benefit by the lesser of (1) the applicable life expectancy or (2)
if the Participant's spouse is not the designated beneficiary, the applicable
divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of
the proposed regulations. Distributions after the death of the Participant shall
be distributed using the applicable life expectancy in (c)(i)(A) above as the
relevant divisor without regard to proposed regulations Section 1.401(a)(9)-2.
(4) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the Participant's required
beginning date. The minimum distribution for other calendar years, including the
minimum distribution for the distribution calendar year in which the
Participant's required beginning date occurs, must be made on or before December
31 of that distribution calendar year.
(d) Death Distribution Provisions.
(1) Distribution beginning before death. If the Participant dies after
distribution of his or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the method
of distribution being used prior to the Participant's death.
(2) Distribution beginning after death. If the Participant dies before
distribution of his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the calendar year
containing the fifth (5th) anniversary of the Participant's death except to the
extent that the Participant or his designated beneficiary elects to receive
distributions in accordance with (i) or (ii) below:
(i) if any portion of the Participant's interest is payable to a designated
beneficiary, distributions may be made over a period certain not greater than
the life expectancy of the designated beneficiary commencing on or before
December 31 of the calendar year immediately following the calendar year in
which the Participant died;
(ii) if the designated beneficiary is the Participant's surviving spouse,
the date distributions are required to begin in accordance with (i) above shall
not be earlier than the later of (1) December 31 of the calendar year
immediately following the calendar year in which the Participant died and (2)
December 31 of the calendar year in which the Participant would have attained
age 70 1/2.
-24-
<PAGE>
If the Participant has not made an election pursuant to Section 10.4(d)(2)
by the time of his or her death, the Participant's designated beneficiary must
elect the method of distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to begin under this
Section 10.4(d), or (2) December 31 of the calendar year which contains the
fifth (5th) anniversary of the date of death of the Participant. If the
Participant has no designated beneficiary, or if the designated beneficiary does
not elect a method of distribution, distribution of the Participant's entire
interest must be completed by December 31 of the calendar year containing the
fifth (5th) anniversary of the Participant's death.
(3) For purposes of Section 10.4(d)(2) above, if the surviving spouse dies
after the Participant, but before payments to such spouse begin, the provisions
of Section 10.4(d)(2), with the exception of subparagraph (ii) therein, shall be
applied as if the surviving spouse were the Participant.
(4) For purposes of Section 10.4(d), distribution of a Participant's
interest is considered to begin on the Participant's required beginning date
(or, if Section 10.4(d)(3) above is applicable, the date distribution is
required to begin to the surviving spouse pursuant to Section 10.4(d)(3) above).
(e) Definitions.
(1) Applicable life expectancy. The life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the Participant (or
designated beneficiary) as of the Participant's (or designated beneficiary's)
birthday in the applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first calculated. If life
expectancy is being recalculated, the applicable life expectancy will be the
life expectancy as so recalculated. The applicable calendar year shall be the
first distribution calendar year and if life expectancy is being recalculated,
such succeeding calendar year.
(2) Designated beneficiary. The individual who is designated as the
beneficiary under the Plan in accordance with Section 401(a)(9) and the proposed
regulations thereunder.
(3) Distribution calendar year. A calendar year for which a minimum
distribution is required. For distributions beginning before the Participant's
death, the first distribution calendar year is the calendar year immediately
preceding the calendar year which contains the Participant's required beginning
date. For distributions beginning after the Participant's death, the first
distribution calendar year is the calendar year in which distributions are
required to begin pursuant to Section 10.4(d) above.
-25-
<PAGE>
(4) Life expectancy. Life expectancy and joint and last survivor expectancy
are computed by use of the expected return multiples in Tables V and VI of
Section 1.72-9 of the income tax regulations. Unless otherwise elected by the
Participant by the time distributions are required to begin, life expectancies
shall not be recalculated annually. Such election shall be irrevocable as to the
Participant (or spouse) and shall apply to all subsequent years. The life
expectancy of a nonspouse designated beneficiary may not be recalculated. A
spousal designated beneficiary may not elect to have his or her life expectancy
recalculated with respect to any distribution paid pursuant to Section
10.4(d)(2).
(5) Participant's benefit.
(i) The Participant's account balance as of the last valuation date in the
calendar year immediately preceding the distribution calendar year (valuation
calendar year) increased by the amount of any contributions or forfeitures
allocated to the account balance as of dates in the valuation calendar year
after the valuation date and decreased by distributions made in the valuation
calendar year after the valuation date.
(ii) For purposes of paragraph (i) above, if any portion of the minimum
distribution for the first distribution calendar year is made in the second
distribution calendar year on or before the required beginning date, the amount
of the minimum distribution made in the second distribution calendar year shall
be treated as if it had been made in the immediately preceding distribution
calendar year.
(6) Required beginning date.
(i) General rule. The required beginning date of a Participant is the first
day of April of the calendar year following the calendar year in which the
Participant attains age 70 1/2.
(ii) Transitional rules. The required beginning date of a Participant who
attains age 70 1/2 before January 1, 1988, shall be determined in accordance
with (A) or (B) below:
(A) Non-five (5)-percent owners. The required beginning date of a
Participant who is not a five (5)-percent owner is the first day of April of the
calendar year following the calendar year in which the later of retirement or
attainment of age 70 1/2 occurs.
-26-
<PAGE>
(B) Five (5)-percent owners. The required beginning date of a Participant
who is a five (5)-percent owner during any year beginning after December 31,
1979, is the first day of April following the later of:
(I) the calendar year in which the Participant attains age 70 1/2, or
(II) the earlier of the calendar year with or within which ends the Plan
Year in which the Participant becomes a five (5)-percent owner, or the calendar
year in which the Participant retires.
The required beginning date of a Participant who is not a five (5)-percent
owner who attains age 70 1/2 during 1988 and who has not retired as of January
1, 1989, is April 1, 1990.
(iii) Five (5)-percent owner. A Participant is treated as a five
(5)-percent owner for purposes of this section if such Participant is a five
(5)-percent owner as defined in Section 416(i) of the Code (determined in
accordance with Section 416 but without regard to whether the Plan is top-heavy)
at any time during the Plan Year ending with or within the calendar year in
which such owner attains age 66 1/2 or any subsequent Plan Year.
(iv) Once distributions have begun to a five (5)-percent owner under this
section, they must continue to be distributed, even if the Participant ceases to
be a five (5)-percent owner in a subsequent year.
10.5 Restrictions on Distributions Prior to Normal Retirement Date. If the
value of a Participant's vested account balance exceeds (or at the time of any
prior distribution exceeded) $3,500, the Participant must consent to any
distribution made to him before he attains the Normal Retirement Date. The
consent of the Participant shall be obtained in writing within the 90-day period
ending on the date benefits are paid. The Committee shall notify the Participant
of his right to defer any distribution until the Participant attains the Normal
Retirement Date (or would have attained the Normal Retirement Date if not
deceased). Such notification shall include a general description of the material
features, and an explanation of the relative values of, the optional forms of
benefit available under the Plan in a manner that would satisfy the notice
requirements of Section 417(a)(3) of the Code below, and shall be provided no
less than 30 days and no more than 90 days prior to the date benefits are paid.
The consent of the Participant shall not be required to the extent that a
distribution is required to satisfy Sections 401(a)(9) or 415 of the Code. A
distribution may be paid to the Participant less than 30 days after the notice
described in this Section 10.5 is given to him, provided that the Administrative
Committee clearly informs the Participant that he has the right to a period of
-27-
<PAGE>
at least 30 days after receiving the notice to consider the decision of
whether or not to elect the distribution and the Participant, after receiving
the notice, affirmatively elects to receive a distribution. In addition, subject
to Section 10.7, upon termination of this Plan, the Participant's entire account
balance may be distributed without the Participant's consent to the Participant
or transferred to another defined contribution plan (other than an employee
stock ownership plan, as defined in Section 4975(e)(7) of the Code) within the
same controlled group as the Employer.
10.6 Withdrawals upon Attainment of Age 59-1/2. Upon the attainment of age
59-1/2, a Participant who is fully vested in his Employer Contribution Account
will be entitled to withdraw once a Plan Year all or any portion of his account
balance in a single sum. Any withdrawal by a Participant under this Section 10.6
will be made only after the Participant files a written request with the
Administrative Committee pursuant to such terms and conditions as the Committee
may prescribe.
10.7 Direct Rollovers
(a) This Section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a distributee may elect, at
the time and in the manner prescribed by the Administrative Committee to have
any portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
(b) Definitions.
(i) Eligible rollover distribution: An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities).
(ii) Eligible retirement plan: An eligible retirement plan is an individual
retirement account described in section 408(a) of the Code, an individual
-28-
<PAGE>
retirement annuity described in section 408(b) of the Code, an annuity plan
described in section 403(a) of the Code, or a qualified trust described in
section 401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
(iii) Distributee: A distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse or former
spouse who is the alternate payee under a qualified domestic relations order, as
defined in section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
(iv) Direct rollover: A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
ARTICLE XI
ADMINISTRATION OF PLAN
----------------------
11.1 (a) This Plan shall be administered by a Committee which shall consist
of not less than two nor more than five members.
(b) The Committee shall serve without compensation from the Plan. Vacancies
may be filled by the Chief Executive Officer of Delaware Group Delaware Fund,
Inc. on an interim basis, until action to fill the vacancy is taken by the Board
of Directors of Delaware Group Delaware Fund, Inc.
(c) The Committee:
(1) shall act by affirmative vote of a majority of its members at a meeting
called with five days notice or in writing without a meeting;
(2) shall appoint a Secretary who may be but need not be one of its own
members. He shall keep complete records of the administration of the Plan;
(3) may authorize each and any one of its members to perform routine acts
and to sign documents on its behalf.
11.2 The Committee may appoint such persons or committees, employ such
attorneys, agents, accountants, investment managers, consultants, actuaries, and
other specialists as it deems necessary or desirable to advise or assist
-29-
<PAGE>
it in the performance of its duties hereunder and the Committee may rely upon
their respective written opinions or certificates. To the extent such persons
are empowered by written notification from the Committee to perform duties
defined in ERISA as fiduciary duties, such empowerment shall constitute a
delegation of fiduciary responsibility for purposes of determining the
co-fiduciary liability under ERISA. The Committee shall review the performance
of any such persons periodically.
11.3 Administration of the Plan shall consist of interpreting and carrying
out the provisions of this Plan. The Committee shall determine the eligibility
of Employees to participate in this Plan, their rights while Participants in
this Plan and the nature and amount of benefits to be received therefrom. The
Committee shall decide any disputes which may arise under this Plan and the
Trust Agreement. The Committee may provide rules and regulations for the
administration of the Plan consistent with its terms and provisions. Any
construction or interpretation of the Plan and any determination of fact in
administering the Plan made in good faith by the Committee shall be final and
conclusive for all Plan purposes. The Committee shall have the discretionary
authority to determine eligibility for benefits and to construe the terms of the
Plan.
11.4 (a) The Committee shall prescribe a form for the presentation of
claims under the terms of this Plan and/or Trust Agreement.
(b) Upon presentation to the Committee of a claim on the prescribed form,
the Committee shall make a determination of the validity thereof. If the
determination is adverse to the claimant, the Committee shall furnish to the
claimant within 90 days after the receipt of the claim a written notice setting
forth the following:
(1) The specific reason or reasons for the denial;
(2) Specific reference to pertinent provisions of the Plan on which the
denial is based;
(3) A description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such material or
information is necessary; and
(4) Appropriate information as to the steps to be taken if the claimant
wishes to submit his or her claim for review.
-30-
<PAGE>
(c) In the event of a denial of a claim, the claimant or his duly
authorized representative may appeal such denial to the Committee for a full and
fair review of the adverse determination. Claimant's request for review must be
in writing and made to the Committee within 60 days after receipt by claimant of
the written notification required under Section 11.4(b); provided, however, such
60 day period shall be extended if circumstances so warrant. Claimant or his
duly authorized representative may submit issues and comments in writing which
shall be given full consideration by the Committee in his review.
(d) The Committee may, in its sole discretion, conduct a hearing. A request
for a hearing made by claimant will be given full consideration. At such
hearing, the claimant shall be entitled to appear and present evidence and be
represented by counsel.
(e) A decision on a request for review shall be made by the Committee not
later than 60 days after receipt of the request; provided, however, in the event
of a hearing or other special circumstances, such decision shall be made not
later than 120 days after receipt of such request. If it is necessary to extend
the period of time for making a decision beyond 60 days after the receipt of the
request, the claimant shall be notified in writing of the extension of time
prior to the beginning of such extension.
(f) The Committee's decision on review shall state in writing the specific
reasons and references to the Plan provisions on which it is based. Such
decision shall be promptly provided to the claimant. If the decision on review
is not furnished in accordance with the foregoing, the claim shall be deemed
denied on review.
11.5 The Committee shall have the power to allocate its responsibilities
among its several members, except that all matters involving the hearing of and
decision on the claims and the review of the determination of benefits shall be
made by the full Committee; provided, however, that no member of the Committee
shall participate in any matter relating solely to himself.
11.6 To the extent required by law, the Committee shall give notice in
writing to all interested parties of any amendment of this Plan and/or Trust
Agreement and of any application to any government agency for any determination
of the effect of any such amendment on the Plan within the jurisdiction of that
agency.
11.7 (a) The Committee shall administer the Plan and the Trust Agreement
forming a part thereof under uniform rules of general application.
(b) The Committee or any member thereof:
-31-
<PAGE>
(1) May serve under the Plan and/or the Trust Agreement in one or more
fiduciary capacities, as that term is defined in ERISA; and
(2) May resign by giving written notice thereof to the Chief Executive
Officer of Delaware Group Delaware Fund, Inc. not less than fifteen (15) days
before the effective date of such resignation; and
(3) May be removed at any time, without cause, by the Board of Directors of
Delaware Group Delaware Fund, Inc.
ARTICLE XII
AMENDMENT, CONSOLIDATION, MERGER OR TERMINATION
-----------------------------------------------
12.1 Delaware Group Delaware Fund, Inc. may amend the Plan and the Trust
Agreement in any manner and at any time by action of its Board of Directors;
provided, however, that no amendment shall deprive any Participant or his
Beneficiary of any vested interest he may have hereunder unless the amendment is
for the purpose of conforming the Plan to the requirements of the Code or any
other applicable law. No amendment which affects the rights, responsibilities or
duties of the Trustee may be made without the Trustee's written consent. No
amendment shall be made to the Plan which has the effect of eliminating or
reducing an early retirement benefit or a retirement-type subsidy, eliminating
an optional form of benefit or decreasing a Participant's account balance with
respect to benefits attributable to service before the amendment. Further, if
the vesting schedule of the Plan is amended, in the case of an Employee who is a
Participant as of the later of the date such amendment is adopted or the date it
becomes effective, the nonforfeitable percentage (determined as of such date) of
such Employee's right to his Employer derived account balance will not be less
than his percentage computed under the Plan without regard to such amendment.
12.2 Any Participant on the effective date of an amendment who is not
actively participating in the Plan on such effective date shall not benefit from
an amendment unless otherwise required by law or unless such amendment is
specifically made applicable to such Participant.
12.3 In the event of any merger or consolidation with, or transfer of
assets or liabilities to, any other plan, each Participant shall be entitled to
a benefit after the merger, consolidation or transfer (if the Plan then
terminated) which is not less than the benefits he would have been entitled to
receive immediately before the merger, consolidation or transfer (if the Plan
had then terminated).
-32-
<PAGE>
12.4 The Employer intends to continue the Plan indefinitely but reserves
the right to discontinue contributions, terminate or partially terminate the
Plan at any time. In the event of a complete discontinuance of contributions,
termination or partial termination of the Plan, the interests of all
Participants affected shall become nonforfeitable. Upon termination of the Plan,
the Employer shall in its complete discretion notify the Trustee to either hold
all assets of the Trust Fund and make payments in accordance with the terms of
the Plan or distribute to each Participant his net account balance in a lump sum
payment in cash or kind. The Employer's contribution to the Trust Fund or the
income thereof shall not be paid to, or shall not revert to Employer and shall
not be used for any purpose other than the exclusive benefit of the Participants
or their Beneficiaries.
ARTICLE XIII
MISCELLANEOUS
-------------
13.1 To the extent permitted by law, it is a condition of the Plan that the
benefits provided hereunder shall not be subject to assignment, anticipation,
alienation, attachment, levy or transfer, and any attempt to do so shall not be
recognized. The preceding sentence shall also apply to the creation, assignment
or recognition of a right to any benefit payable with respect to a Participant
pursuant to a domestic relations order, unless such order is determined to be a
qualified domestic relations order as defined in Section 414(p) of the Code. If
provided by the terms of a qualified domestic relations order, a distribution of
benefits may be made from the Plan to the alternate payee under such order in a
single lump sum as soon as practicable following the determination by the
Administrative Committee that the order constitutes a qualified domestic
relations order. Payment of benefits may be made to the alternate payee even
though the Participant identified in the order has not attained the earliest
retirement age under the Plan. For purposes of this Section 13.1, the "earliest
retirement age" means the earlier of (i) the date in which the Participant is
entitled to a distribution under the Plan or (ii) the later of the date the
Participant attains age 50 or the earliest date on which the Participant would
begin receiving benefits if the Participant separated from service.
13.2 Nothing herein contained shall be deemed to give any Employee the
right to be retained in the employ of Employer or to interfere with the right of
the Employer to discharge any Employee at any time, nor shall it be deemed to
give the Employer the right to require any Employee to remain in its employ, nor
shall it interfere with the Employee's right to terminate his employment at any
time.
-33-
<PAGE>
13.3 All expenses incurred by the Trustees in the administration of the
Fund, including but not limited to the compensation of counsel, accountants,
Trustees, other agents or fiduciaries, shall be charged against the Employer,
unless otherwise paid by the Fund.
13.4 This Plan shall be interpreted in accordance with the laws of the
Commonwealth of Pennsylvania, except to the extent superseded by ERISA as in
effect from time to time.
ARTICLE XIV
LOANS
-----
14.1 The Committee, in its sole discretion, may direct the Trustees to make
a loan to a Participant, who is a party-in-interest, as defined in Section 3(14)
of ERISA, from the Participant's account balance upon receipt of a written
request from the Participant. The total amount of any such loan (when added to
the outstanding balance of all other loans to the Participant under the Plan or
any other qualified plan of the Employer) shall not exceed the lesser of $50,000
or 50% of the Participant's vested account balance. The $50,000 limitation shall
be reduced by the excess, if any, of the highest outstanding balance of loans to
the Participant from the Plan during the one-year period ending on the day
before the date on which such loan was made over the outstanding balance of
loans from the Plan to the Participant on the date that such loan was made.
14.2 A request by a Participant for a loan shall be made in writing to the
Committee and shall specify the amount of the loan. The terms and conditions on
which the Committee shall approve loans under the Plan shall be applied on a
reasonably equivalent basis with respect to all Participants. If a Participant's
request for a loan is approved by the Committee, the Committee shall furnish the
Trustees with written instructions directing the Trustees to make the loan in a
lump sum payment of cash to the Participant. In making any loan payment under
this Article XIV, the Trustees shall be fully entitled to rely on the
instructions furnished by the Committee, and shall be under no duty to make any
inquiry or investigation with respect thereto.
14.3 Loans shall be made on such terms and subject to such limitations as
the Committee may prescribe from time to time, provided that any such loan shall
be evidenced by a written note, shall bear a reasonable rate of interest on the
unpaid principal thereof, shall be adequately secured, and shall be repaid by
the Participant over a period not to exceed five years.
-34-
<PAGE>
14.4 Any loan to a Participant under the Plan shall be secured by the
pledge of not more than 50% percent of the Participant's right, title and
interest in his vested account balance. Such pledge shall be evidenced by the
execution of a promissory note by the Participant.
14.5 The Committee shall have the sole responsibility for insuring that a
Participant timely makes all loan repayments, and for notifying the Trustees in
the event of any default by the Participant on the loan. Each loan repayment
shall be paid to the Trustees, and shall be accompanied by written instructions
from the Committee that identifies the Participant on whose behalf the loan
repayment is being made. Repayment of loans shall be made solely by means of
payroll deductions, or such other manner approved by the Committee.
14.6 In the event of a default by a Participant on a loan repayment, all
remaining principal payments on the loan shall be immediately due and payable.
The Committee shall be authorized (to the extent permitted by law) to take any
and all actions necessary and appropriate to enforce collection of an unpaid
loan. However, in the event of a default, foreclosure on the note and attachment
of security will not occur until a distributable event occurs under the Plan.
14.7 Upon the occurrence of a Participant's retirement or death, or earlier
distribution of benefits, the unpaid balance of any loan, including any unpaid
interest, shall be deducted from any payment or distribution from the Trust Fund
to which such Participant or his Beneficiary may be entitled and his vested
interest in his account shall be reduced.
14.8 A loan to a Participant shall be considered an investment of the
separate account(s) of the Participant from which the loan is made. All loan
repayments shall be credited to such separate account(s) and reinvested in the
investment company fund designated by the Participant.
14.9 A loan may not be made to a Participant who owns (or is considered as
owning within the meaning of Section 318(a)(1) of the Internal Revenue Code)
more than 5% of the outstanding stock of the Employer.
14.10 For loans granted or renewed on or after the last day of first Plan
Year beginning on or after January 1, 1989, the Committee shall issue written
loan guidelines, which shall form part of the Plan, describing the procedures
and conditions for making loans, and may revise those guidelines at any time,
and for any reason.
-35-
<PAGE>
ARTICLE XV
LIMITATIONS ON ALLOCATIONS
--------------------------
15.1 The provisions of this Article XV shall be effective for limitation
years beginning after December 31, 1986.
(a) Notwithstanding any provisions of this Plan to the contrary, the annual
additions which may be credited to a Participant's account for any limitation
year will not exceed the lesser of the maximum permissible amount or any other
limitation contained in this Plan.
(b) As soon as is administratively feasible after the end of the limitation
year, the maximum permissible amount for the limitation year will be determined
on the basis of the Participant's actual compensation for the limitation year.
(c) In the event that it is determined that because of the allocation of
forfeitures, a reasonable error in estimating a Participant's annual
compensation or under other limited facts and circumstances permitted by the
Commissioner of the Internal Revenue Service, if there is an excess amount the
excess will be disposed of as follows:
(1) If the Participant is covered by the Plan at the end of the limitation
year, the excess amount shall be used to reduce employer contributions
(including any allocation of forfeitures) for such Participant in the next
limitation year, and each succeeding limitation year if necessary;
(2) If the Participant is not covered by the Plan at the end of the
limitation year, the excess amount will be held unallocated in a suspense
account. The suspense account will be applied to reduce future employer
contributions (including allocation of any forfeitures) for all remaining
Participants in the next limitation year, and each succeeding limitation year if
necessary;
(3) If a suspense account is in existence at any time during the limitation
year pursuant to this Section, it will not participate in the allocation of
investment gains and losses. The entire amount allocated to Participants from a
suspense account, including any such gains or other income or less any losses is
considered an annual addition.
(d) For the purpose of applying the limitations under this Article, all
defined contribution plans maintained by the employer are to be considered as a
single plan.
15.2 Definitions. For purposes of this Article only, the following
definitions and rules of interpretation will apply:
-36-
<PAGE>
(a) "annual additions" -- The sum of the following amounts credited to a
Participant's account for the limitation year:
(1) employer contributions;
(2) forfeitures;
(3) voluntary Employee contributions;
(4) amounts allocated after March 31, 1984, to an individual medical
account, as defined in Section 415(1)(1) of the Code, which is part of a pension
or annuity maintained by the employer;
(5) amounts derived from contributions paid or accrued after December 31,
1985, in taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account of a key
employee, as defined in Section 419A(d)(3) of the Code, under a welfare benefit
fund as defined in Section 419(e) of the Code, maintained by the employer; and
(6) excess amounts applied under this Article in the limitation year to
reduce employer contributions.
(b) "compensation" -- a Participant's earned income, wages, salaries, and
fees for professional services and other amounts received (without regard to
whether an amount is paid in cash) for personal services actually rendered in
the course of employment with the employer to the extent that the amounts are
includable in gross income (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits,
reimbursements and expense allowances), and excluding the following:
(1) Employer contributions to a plan of deferred compensation which are not
includable in the Employee's gross income for the taxable year in which
contributed, or Employer contributions under a simplified employee pension to
the extent such contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
(2) Amounts realized from the exercise of a nonqualified stock option, or
when restricted stock (or property) held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and
-37-
<PAGE>
(4) Other amounts which received special tax benefits, or contributions
made by the employer (whether or not under a salary reduction agreement) towards
the purchase of an annuity described in Section 403(b) of the Code (whether or
not the amounts are actually excludable from the gross income of the Employee);
and
(5) Any contribution for medical benefits (within the meaning of Section
419A(f)(2) of the Code) after separation from service which is otherwise treated
as an annual addition; and
(6) Any amount otherwise treated as an annual addition under Section
415(i)(1) of the Code.
For purposes of applying the limitations of this Article, compensation for
a limitation year is the compensation actually paid or includable in gross
income during such year.
Notwithstanding the preceding sentence, compensation for a Participant who
is permanently and totally disabled (as defined in Section 37(e)(3) of the Code)
is the compensation such Participant would have received for the limitation year
if the Participant had been paid at the rate of compensation paid immediately
before becoming permanently and totally disabled; such imputed compensation for
the disabled Participant may be taken into account only if the Participant is
not an officer, an owner, or highly compensated, and contributions made on
behalf of such Participant are nonforfeitable when made.
(c) "employer" -- The Employer that adopts this Plan, and all members of a
controlled group of corporations (as defined in Section 414(b) of the Code as
modified by Section 415(h) of the Code), all commonly controlled trades or
businesses (as defined in Section 414(c) of the Code as modified by Section
415(h) of the Code), or affiliated service groups (as defined in Section 414(m)
of the Code) of which the adopting Employer is a part.
(d) "excess amount" -- The excess of the Participant's annual additions for
the limitation year over the maximum permissible amount.
(e) "limitation year" -- Effective April 2, 1989, the twelve-month period
beginning April 2 and ending April 1. Prior to April 2, 1989, the limitation
year is the twelve-month period from November 1 through the following October
31, except the limitation year beginning November 1, 1988 shall end April 1,
1989.
-38-
<PAGE>
(f) "maximum permissible amount" -- The lesser of $30,000 (or, if greater,
1/4 of the dollar limitation in effect under Section 415(b)(1)(A) of the Code)
or twenty-five percent (25%) of the Participant's compensation for the
limitation year.
ARTICLE XVI
TOP HEAVY DEFINITIONS AND RULES
-------------------------------
16.1 Key employee. An Employee or former Employee, (or the Beneficiary of
such an Employee or former Employee) who at any time during the determination
period was:
(a) An officer of the Employer having an annual compensation greater than
fifty percent (50%) of the amount in effect under Section 415(b)(1)(A) of the
Code for any such Plan Year;
(b) One of the ten Employees having annual compensation from the Employer
of more than the limitation in effect under Section 415(c)(1)(A) of the Code and
owning (or considered as owning within the meaning of Section 318 of the Code)
the largest interests in the Employer;
(c) A person owning (or considered as owning within the meaning of Section
318 of the Code) more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more then five percent (5%) of the total combined
voting power of ail stock of the Employer, or
(d) A person who has annual compensation from the Employer of more than
$150,000 and who would be described in (c) hereof if one percent (1%) were
substituted for five percent (5%).
For purposes of (a) above, no more than fifty (50) Employees (or, if lesser, the
greater of three or ten percent of the Employees will be treated as officers.)
For purposes of (b), if two Employees have the same interest in the Employer,
the Employee having greater annual compensation from the Employer will be
treated as having a larger interest. For purposes of this Article the term
"compensation" shall have the same meaning as provided for in Article XV.
The determination period is the Plan Year containing the determination date
as defined in Section 16.8, and the four (4) preceding Plan Years. The
determination of who is a key employee will be made in accordance with the rules
and regulations under Section 416(i)(1) of the Code.
16.2 Non-key employee. Any Employee who is not a key employee. In addition,
any Beneficiary of a non-key employee will be treated as a non-key employee.
-39-
<PAGE>
16.3 Permissive aggregation group. The required aggregation group of plans
plus any other plan or plans of the Employer, which considered as a group with
the required aggregation group, would continue to satisfy the requirements of
Sections 401(a)(4) and 410 of the Code.
16.4 Required aggregation group.
(a) Each qualified plan of the Employer in which at least one key employee
participates or participated at any time during the determination period
(regardless of whether the plan has terminated), and
(b) Any other qualified plan of the Employer which enables a plan described
in (a) to meet the requirements of Sections 401 (a)(4) and 410 of the Code.
16.5 Top-heavy plan. This Plan is top-heavy for any Plan Year if any of the
following conditions exist;
(a) If the top-heavy ratio for this Plan exceeds sixty percent (60%) and
this Plan is not part of any required aggregation group or permissive
aggregation group of plans.
(b) If this Plan is part of a required aggregation group of plans but not
part of a permissive aggregation group and the top-heavy ratio for the required
aggregation group of plans exceeds sixty percent (60%).
(c) If this Plan is a part of a permissive aggregation group of plans and
the top-heavy ratio for the required aggregation group exceeds sixty percent
(60%) and the top-heavy ratio for the permissive aggregation group exceeds sixty
percent (60%).
16.6 Super top-heavy plan. For any Plan Year in which this Plan would be a
Top-Heavy Plan pursuant to Section 16.5 above if "ninety percent (90%)" were
substituted for "sixty percent (60%)" at each place where "sixty percent (60%)"
appears therein.
16.7 Top-heavy ratio.
(a) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and has not maintained any
defined benefit plan which during the five (5) year period ending on the
determination date has or has had accrued benefits, the top-heavy ratio for this
Plan alone or for the required or permissive aggregation group as appropriate is
a fraction, the numerator of which is the sum of the account balances of all key
employees as of the determination date (including any part of any account
balance distributed in the five (5) year period ending on the determination
-40-
<PAGE>
date), and the denominator of which is the sum of all account balances
(including any part of any account balance distributed in the five (5) Year
period ending on the determination date), both computed in accordance with
Section 416 of the Code and the regulations thereunder. Both the numerator and
denominator of the top-heavy ratio are increased to reflect any contribution not
actually made as of the determination date, but which is required to be taken
into account on that date under Section 416 of the Code and the regulations
thereunder.
(b) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and maintains or has maintained
one or more defined benefit plans which during the five (5) year period ending
on the Determination Date has or has had any accrued benefits, the top-heavy
ratio for any required or permissive aggregation group as appropriate is a
fraction, the numerator of which is the sum of account balances under the
aggregated defined contribution plan or plans for all key employees determined
in accordance with (2) above, and the present value of accrued benefits under
the aggregated defined benefit plan or plans for all key employees as of the
determination date, and the denominator of which is the sum of the account
balances under the aggregated defined contribution plan or plans for all
Participants, determined in accordance with (a) above, and the present value of
accrued benefits under the aggregated defined benefit plan or plans for all
Participants as of the determination dates, all determined in accordance with
Section 416 of the Code and the regulations thereunder. The accrued benefits
under a defined benefit plan in both the numerator and denominator of the
top-heavy ratio are increased for any distribution of an accrued benefit made in
the five year period ending on the determination date.
(c) For the purposes of (a) and (b) above, the value of account balances
and the present value of accrued benefits will be determined as of the most
recent valuation date that falls within or ends with the twelve (12) month
period ending on the determination date, except as provided in Section 416 of
the Code and the regulations thereunder for the first and second plan years of a
defined benefit plan. The account balances and accrued benefits of a Participant
(1) who is a non-key employee but who was a key employee in a prior year, or (2)
who has not been credited with at least one Hour of Service with any Employer
maintaining the Plan at any time during the five (5) year period ending on the
determination date will be disregarded. The calculation of the top-heavy ratio,
and the extent to which distributions, rollovers, and transfers are taken into
account will be made in accordance with Section 416 of the Code and the
regulations thereunder. When aggregating plans the value of account balances and
accrued benefits will be calculated with reference to the determination dates
that fall within the same calendar year. If any individual has not received
-41-
<PAGE>
any compensation from any employer maintaining the plan (other than benefits
under the Plan) at any time during the five (5) year period ending on the
determination date, any accrued benefit for such individual (and the account
of such individual) will not be taken into account.
Effective for Plan Years beginning after December 31, 1986, the accrued
benefit of a Participant other than a key employee shall be determined under (i)
the method, if any, that uniformly applies for accrual purposes under all
defined benefit plans maintained by the Employer or (ii) if there is no such
method, as if such benefit accrued not more rapidly than the slowest accrual
rate permitted under the fractional rule of Section 411(b)(1)(C) of the Code.
16.8 Determination date. With respect to any Plan Year subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that Plan Year.
16.9 Valuation date. The last day of the Plan Year.
16.10 Present value. Present value will be based upon the interest and
mortality rates specified in the Employer's defined benefit plan.
16.11 Minimum Allocation.
(a) If in any Plan Year the Plan is a Top Heavy Plan and the Employer does
not maintain any qualified defined benefit plan in addition to this Plan, except
as provided in (b) and (c) below, the Employer contributions and forfeitures
allocated on behalf of any Participant who is a non-key employee will not be
less than the lesser of three percent (3%) of such Participant's compensation or
the largest percentage of Employer contributions and forfeitures, as a
percentage of the first $200,000 of the key employee's compensation (as defined
in Section 15.2(b)), and as limited by Section 401(a)(17) of the Code, allocated
on behalf of any key employee for that year. The minimum allocation is
determined without regard to any Social Security contributions. This minimum
allocation will be made even though, under other Plan provisions, the
Participant would not otherwise be entitled to receive an allocation, or would
have received a lesser allocation for the year because of the Participant's
failure to complete 1,000 Hours of Service. The minimum allocation (if any)
required under this paragraph (a) shall be made to this Plan only to the extent
such allocation is not made for the Participant under any other defined
contribution plan(s) maintained by the Employer.
-42-
<PAGE>
(b) In the event the Employer maintains a qualified defined benefit plan(s)
in addition to this Plan, the Employer will provide a minimum allocation at
least equal to five percent (5%) of compensation (as defined in Section 15.2(b))
to each non-key employee, entitled under (a) above to receive a minimum
allocation, who is covered under this Plan and the qualified defined benefit
plan(s). If this Plan enables a defined benefit plan to meet the requirements of
Section 401(a) or 410 of the Code, the minimum allocation described in (a) above
must be at least three percent (3%) of a Participant's compensation, regardless
of the largest percentage of Employer contributions and forfeitures of a key
employee's compensation.
(c) The provisions in (a) and (b) above will not apply to any Participant
who was not employed by the Employer on the last day of the Plan Year.
(d) The minimum allocation required under this Section 16.11 (to the extent
required to be nonforfeitable under Section 416(b) of the Code) may not be
forfeited under Sections 411(a)(3)(B) or 411(a)(3)(D) of the Code.
IN WITNESS WHEREOF, Delaware Group Delaware Fund, Inc. has caused this
amended and restated Plan, effective April 1, 1989, to be executed by its duly
authorized officers and its corporate seal to be impressed hereon this 17th day
of November, 1994.
Attest: DELAWARE GROUP DELAWARE FUND, INC.
/s/ George M. Chamberlain, Jr. By: /s/Brian F. Wruble
- ------------------------------ -------------------------
George M. Chamberlain, Jr. Brian F. Wruble
Senior Vice President/Secretary President and Chief
Executive Officer
-43-
<PAGE> 1
Consent of Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses of Delaware Group Tax-Free Fund, Inc. - Tax-Free
USA Fund, Delaware Group Tax-Free Fund, Inc - Tax-Free Insured Fund, and
Delaware Group Tax-Free Fund, Inc. - Tax-Free USA Intermediate Fund and
"Financial Statements" in the Statement of Additional Information of Delaware
Group Tax-Free Fund, Inc. and to the incorporation by reference in this
Post-Effective Amendment No. 21 to the Registration Statement (Form N-1A)(No.
2-86606) of Delaware Group Tax-Free Fund, Inc. of our reports dated October 12,
1995, included inb the 1995 Annual Reports to Shareholders of the Delaware Group
Tax-Free Fund, Inc. - Tax-Free USA Fund and Delaware Group Tax-Free Fund, Inc -
Tax-Free Insured Fund, and Delaware Group Tax-Free Fund, Inc. - Tax-Free
USA Intermediate Fund.
/s/Ernst & Young LLP
--------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
November 20, 1995
<PAGE> 2
EX 99.B11
[ERNST & YOUNG LETTERHEAD]
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Tax-Free Fund, Inc. - Tax-Free USA Fund
Delaware Group Tax-Free Fund, Inc. - Tax-Free Insured Fund
We have audited the accompanying statement of net assets of Delaware Group
Tax-Free Fund, Inc. - Tax-Free USA Fund and Delaware Group Tax-Free Fund, Inc.
- - Tax-Free Insured 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 five years in the period then ended. 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 Fund and Delaware Group
Tax-Free Fund, Inc. - Tax-Free Insured Fund at August 31, 1995, the results of
their operations for the year then ended, the changes in their net assets for
each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
Philadelphia, Pennsylvania /s/Ernst & Young LLP
October 12, 1995 Ernst & Young LLP
<PAGE> 3
[ERNST & YOUNG LETTERHEAD]
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.
Philadelphia, Pennsylvania /s/Ernst & Young LLP
October 12, 1995 Ernst & Young LLP
<PAGE> 1
[FORM OF 12b-1 PLAN FOR CLASS A SHARES]
12b-1 Plan
Class A
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule l2b-l under the Investment Company Act of l940 (the "Act") by [FUND
NAME] (the "Fund")[, now for the [SERIES NAME] (the "Series")] on behalf of the
_____________ class [now doing business as the _____________ A Class]
(hereinafter referred to as the "Class"), which Fund[, Series] and Class may do
business under these or such other names as the Board of [Directors/Trustees] of
the Fund may designate from time to time. The Plan has been approved by a
majority of the Board of [Directors/Trustees], including a majority of the
[Directors/Trustees] who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related thereto ("non-interested [Directors/Trustees]"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
by the [Directors/Trustees] included a determination that in the exercise of
reasonable business judgment and in light of their fiduciary duties, there is a
reasonable likelihood that the Plan will benefit the Class and its shareholders.
If the Plan has not yet been approved by a majority of the outstanding voting
securities as required in the Act, the Plan will be presented to the public
shareholders at the next regular annual or special meeting.
<PAGE>
The Fund is a [corporation/common law trust] organized under the laws
of the [State of Maryland/Commonwealth of Pennsylvania], is authorized to issue
different series and classes of securities and is an open-end management
investment company registered under the Act. [Delaware Management Company,
Inc./Delaware International Advisers Ltd.] serves as the [Fund's/Series']
investment adviser and manager pursuant to an Investment Management Agreement.
Delaware Service Company, Inc. serves as the [Fund's/Series'] shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the [Fund's/Series'] shares, including shares of the Class pursuant to the
Distribution Agreement between the Distributor and the [Fund/Series]
("Distribution Agreement").
The Plan provides that:
l. The Fund shall pay to the Distributor a monthly fee not to exceed
0.3% (3/10 of l%) per annum of the [Fund's/Series'] average daily net assets
represented by shares of the Class (the "Maximum Amount") as may be determined
by the Fund's Board of [Directors/Trustees] from time to time. Such monthly fee
shall be reduced by the aggregate sums paid by the Fund [on behalf of the
Series] to persons other than broker-dealers (the "Service Providers") who may,
pursuant to servicing agreements, provide to the [Fund/Series] services in the
[Fund's/Series'] marketing of shares of the Class.
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph l above to furnish, or cause or encourage others to furnish, services
and incentives in connection with the promotion, offering and sale of Class
shares and, where suitable and appropriate, the retention of Class shares by
shareholders.
(b) The Service Providers shall use the monies paid respectively to
them to reimburse themselves for the actual costs they have incurred in
confirming that their customers have received the Prospectus and Statement of
Additional Information, if applicable, and as a fee for (l) assisting such
customers in maintaining proper records with the Fund (2) answering questions
relating to their respective accounts and (3) aiding in maintaining the
investment of their respective customers in the Class.
<PAGE>
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under the Plan. The Service
Providers shall inform the Fund monthly and in writing of the amounts each
claims under the Plan; both the Distributor and the Service Providers shall
furnish the Board of [Directors/Trustees] of the Fund with such other
information as the Board may reasonably request in connection with the payments
made under the Plan and the use thereof by the Distributor and the Service
Providers, respectively, in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.
4. The officers of the Fund shall furnish to the Board of
[Directors/Trustees] of the Fund, for their review, on a quarterly basis, a
written report of the amounts expended under the Plan and the purposes for which
such expenditures were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund in writing of the commencement of the Plan, which time shall not
be before the first annual or special meeting of the public shareholders at
which the Plan is or was approved by the vote of a majority of the outstanding
voting securities as required in the Act (the "Commencement Date"); thereafter,
the Plan shall continue in effect for a period of more than one year from the
Commencement Date only so long as such continuance is specifically approved at
least annually by a vote of the Board of [Directors/Trustees] of the Fund, and
of the non-interested [Directors/Trustees], cast in person at a meeting called
for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested [Directors/Trustees] or by vote of a majority of the
outstanding voting securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph l thereof without approval by
the shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested [Directors/Trustees] in the manner described in paragraph 5
above.
<PAGE>
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested [Directors/Trustees] shall be committed to the
discretion of such non-interested [Directors/Trustees].
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
November 29, 1995
<PAGE> 1
[FORM OF 12b-1 PLAN FOR CLASS B SHARES]
12b-1 Plan
Class B
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by [FUND
NAME] (the "Fund") [,for the [SERIES NAME] (the "Series")] on behalf of the
_______________________ B Class (the "Class"), which Fund[, Series] and Class
may do business under these or such other names as the Board of
[Directors/Trustees] of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of [Directors/Trustees], including a
majority of the [Directors/Trustees] who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("non-interested
[Directors/Trustees]"), cast in person at a meeting called for the purpose of
voting on such Plan. Such approval by the [Directors/Trustees] included a
determination that in the exercise of reasonable business judgment and in light
of their fiduciary duties, there is a reasonable likelihood that the Plan will
benefit the Class and its shareholders. The Plan has been approved by a vote of
the holders of a majority of the outstanding voting securities of the Class, as
defined in the Act.
The Fund is a [corporation/common law trust] organized under the laws
of the [State of Maryland/Commonwealth of Pennsylvania], is authorized to issue
different series and classes of securities and is an open-end management
investment company registered under the Act. [Delaware Management Company,
Inc./Delaware International Advisers Ltd.] serves as the [Fund's/Series']
investment adviser and manager pursuant to an Investment Management Agreement.
Delaware Service Company, Inc. serves as the [Fund's/Series'] shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the [Fund's/Series'] shares, including shares of the Class, pursuant to the
Distribution Agreement between the Distributor and the [Fund/Series]
("Distribution Agreement").
<PAGE>
The Plan provides that:
1. (a) The Fund shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the [Fund's/Series'] average daily net
assets represented by shares of the Class as may be determined by the Fund's
Board of [Directors/Trustees] from time to time.
(b) In addition to the amounts described in (a) above, the Fund
shall pay (i) to the Distributor for payment to dealers or others, or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
[Fund's/Series'] average daily net assets represented by shares of the Class, as
a service fee pursuant to dealer or servicing agreements.
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of
[Directors/Trustees] of the Fund with such other information as the Board may
reasonably request in connection with the payments made under the Plan and the
use thereof by the Distributor and others in order to enable the Board to make
an informed determination of the amount of the Fund's payments and whether the
Plan should be continued.
<PAGE>
4. The officers of the Fund shall furnish to the Board of
[Directors/Trustees] of the Fund, for their review, on a quarterly basis, a
written report of the amounts expended under the Plan and the purposes for which
such expenditures were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of [Directors/Trustees] of the
Fund, and of the non-interested [Directors/Trustees], cast in person at a
meeting called for the purpose of voting on such Plan.
6.(a) The Plan may be terminated at any time by vote of a majority
of the non-interested [Directors/Trustees] or by vote of a majority of the
outstanding voting securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 thereof without approval by
the shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested [Directors/Trustees] in the manner described in paragraph 5
above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested [Directors/Trustees] shall be committed to the
discretion of such non-interested [Directors/Trustees].
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
November 29, 1995
<PAGE> 1
<PAGE>
[FORM OF 12b-1 PLAN
C CLASS SHARES]
DISTRIBUTION PLAN
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by the Fund
(the "Fund"), on behalf of the Fund's C Class (the "Class"). The Plan has been
approved by a majority of the Board of Directors, including a majority of the
Directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related thereto, cast in person at a meeting called for the purpose of voting on
such Plan. Such approval by the Directors included a determination that in the
exercise of reasonable business judgment and in light of their fiduciary duties,
there is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. The Plan has been approved by a vote of the holders of a majority
of the outstanding voting securities of the Class, as defined in the Act.
The Fund is a [corporation/business trust] organized under the laws of
the [State of Maryland/Commonwealth of Pennsylvania], is authorized to issue
different series and classes of securities and is an open-end management
investment company registered under the Act. [Delaware Management Company, Inc.
("DMC") or Delaware International Advisers Ltd. ("Delaware International"), an
<PAGE>
affiliate of DMC,] serves as the Fund's investment adviser and manager pursuant
to an Investment Management Agreement. Delaware Service Company, Inc. serves as
the Fund's shareholder servicing, dividend disbursing and transfer agent.
Delaware Distributors, L.P. (the "Distributor") is the principal underwriter and
national distributor for the Fund's shares, including shares of the Class,
pursuant to the Distribution Agreement between the Distributor and the Fund
("Distribution Agreement").
The Plan provides that:
1.(a) The Fund shall pay to the Distributor a monthly fee not to exceed
0.75% (3/4 of 1%) per annum of the Fund's average daily net assets represented
by shares of the Class as may be determined by the Fund's Board of Directors
from time to time.
(b) In addition to the amounts described in paragraph 1(a) above, the
Fund shall pay: (i) to the Distributor for payment to dealers or others; or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Fund's average daily net assets represented by shares of the Class, as a service
fee pursuant to dealer or servicing agreements.
2.(a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
<PAGE>
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Fund.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, and the Directors shall review, on a quarterly basis, a written report
of the amounts expended under the Plan and the purposes for which such
expenditures were made.
<PAGE>
5. This Plan shall take effect at such time as the Distributor shall
notify the fund in writing of the commencement of the Plan (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more than
one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Directors of
the Fund, and of the Directors who are not interested persons of the Fund and
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan ("non-interested Directors"), cast in person
at a meeting called for the purpose of voting on such Plan.
6.(a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 thereof without approval by
the shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
9. The definitions contained in Sections 2(a)(3), 2(a)(19) and
2(a)(42) of the Act shall govern the meaning of "affiliated person,"
<PAGE>
"interested person(s)" and "vote of a majority of the outstanding voting
securities," respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
November 29, 1995
<PAGE> 1
Delaware Tax-Free USA Fund A
Yield Quotation for the Month Ended August 31, 1995
Interest Earned $3,826,488.00
Expenses Accrued $579,927.99
Net Income $3,246,560.01
Average Shares Outstanding 62,265,918.992
Maximum Offering Price
August 31, 1995 $12.67
Yield 4.99%
3,826,488 - 579,928
Tax-Free USA Fund A 2[(------------------- + 1)6 - 1] = 4.99%
62,265,919 x 12.67
<PAGE> 2
Delaware Tax-Free USA Fund B
Yield Quotation for the Month Ended August 31, 1995
Interest Earned $86,700.93
Expenses Accrued $24,711.64
Net Income $61,989.29
Average Shares Outstanding 1,410,827.109
Maximum Offering Price
August 31, 1995 $12.07
Yield 4.41%
86,701 - 24,712
Tax-Free USA Fund B 2[(----------------- + 1)6 - 1] = 4.41%
1,410,827 x 12.07
<PAGE> 3
Delaware Tax-Free Insured Fund A
Yield Quotation for the Month Ended August 31, 1995
Interest Earned $418,957.61
Expenses Accrued $69,665.65
Net Income $349,291.96
Average Shares Outstanding 7,856,357.590
Maximum Offering Price
August 31, 1995 $11.60
Yield 4.64%
418,958 - 69,666
Tax-Free Insured Fund A 2[(---------------- + 1)6 - 1] = 4.64%
7,856,358 x 11.6
<PAGE> 4
Delaware Tax-Free Insured Fund B
Yield Quotation for the Month Ended August 31, 1995
Interest Earned $11,957.84
Expenses Accrued $3,673.05
Net Income $8,284.79
Average Shares Outstanding 224,235.283
Maximum Offering Price
August 31, 1995 $11.05
Yield 4.05%
11,958 - 3,673
Tax-Free Insured Fund B 2[(--------------- + 1)6 - 1] = 4.05%
224,235 x 11.05
<PAGE> 5
Delaware Tax-Free USA Intermediate Fund A
Yield Quotation for the Month Ended August 31, 1995
Interest Earned $87,103.43
Expenses Accrued $4,291.08
Net Income $82,812.35
Average Shares Outstanding 1,958,549.935
Maximum Offering Price
August 31, 1995 $10.73
Yield 4.78%
87,103 - 4,291
Tax-Free USA Intermediate Fund A 2[(----------------- + 1)6 - 1] = 4.78%
1,958,550 x 10.73
<PAGE> 6
Delaware Tax-Free USA Intermediate Fund B
Yield Quotation for the Month Ended August 31, 1995
Interest Earned $3,536.92
Expenses Accrued $766.38
Net Income $2,770.54
Average Shares Outstanding 79,528.851
Maximum Offering Price
August 31, 1995 $10.41
Yield 4.05%
3,537 - 766
Tax-Free USA Intermediate Fund B 2[(-------------- + 1)6 - 1] = 4.05%
79,529 x 10.41
<PAGE> 7
DELAWARE GROUP TAX-FREE USA A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- ----------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ------------------
1
$1000(1 - T) = $1,067.40
T = 6.74%
THREE
YEARS
- ------------------
3
$1000(1 - T) = $1,209.50
T = 6.55%
FIVE
YEARS
- ------------------
5
$1000(1 - T) = $1,514.42
T = 8.65%
TEN
YEARS
- ------------------
10
$1000(1 - T) = $2,458.12
T = 9.41%
LIFE OF
FUND
- ------------------
11.63934426
$1000(1 - T) = $3,082.52
T = 10.16%
<PAGE> 8
DELAWARE GROUP TAX-FREE USA A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- ----------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------------------
1
$1000(1 - T) = $116.75
T = 1.68%
THREE
YEARS
- -----------------------
3
$1000(1 - T) = $1,152.58
T = 4.85%
FIVE
YEARS
- -----------------------
5
$1000(1 - T) = $1,442.7
T = 7.61%
TEN
YEARS
- -----------------------
10
$1000(1 - T) = $2,341.37
T = 8.88%
LIFE OF
FUND
- -----------------------
11.63934426
$1000(1 - T) = $2,935.06
T = 9.69%
<PAGE> 9
DELAWARE GROUP TAX-FREE USA A
TOTAL RETURN PERFORMANCE
THREE MONTHS
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $12.72
Initial Shares 78.616
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 78.616 $0.185 1.216 79.832
- ------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 79.832
Ending NAV $12.07
----------
Investment Return $963.57
Total Return Performance
- ------------------------
Investment Return $963.57
Less Initial Investment $1,000.00
----------
($36.43) / $1,000.00 x 100
Total Return: -3.64%
</TABLE>
<PAGE> 10
DELAWARE GROUP TAX-FREE USA A
TOTAL RETURN PERFORMANCE
SIX MONTHS
- -----------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $12.49
Initial Shares 80.064
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 80.064 $0.373 2.520 82.584
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 82.584
Ending NAV $12.07
----------
Investment Return $996.79
Total Return Performance
- ------------------------
Investment Return $996.79
Less Initial Investment $1,000.00
----------
($3.21) / $1,000.00 x 100
Total Return: -0.32%
</TABLE>
<PAGE> 11
DELAWARE GROUP TAX-FREE USA A
TOTAL RETURN PERFORMANCE
NINE MONTHS
- ----------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $12.03
Initial Shares 83.126
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------
<S> <C> <C> <C> <C>
1995 83.126 $0.557 3.973 87.099
- ----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 87.099
Ending NAV $12.07
-----------
Investment Return $1,051.28
Total Return Performance
- ------------------------
Investment Return $1,051.28
Less Initial Investment $1,000.00
-----------
$51.28 / $1,000.00 x 100
Total Return: 5.13%
</TABLE>
<PAGE> 12
DELAWARE GROUP TAX-FREE USA A
TOTAL RETURN PERFORMANCE
ONE YEAR
- ----------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $12.64
Initial Shares 79.114
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 79.114 $0.745 5.124 84.238
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 84.238
Ending NAV x $12.07
----------
Investment Return $1,016.75
Total Return Performance
- ------------------------
Investment Return $1,016.75
Less Initial Investment $1,000.00
----------
$16.75 / $1,000.00 x 100
Total Return: 1.68%
</TABLE>
<PAGE> 13
DELAWARE GROUP TAX-FREE USA A
TOTAL RETURN PERFORMANCE
THREE YEARS
- ------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $12.73
Initial Shares 78.555
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
1993 78.555 $0.851 5.618 84.173
- ---------------------------------------------------------
1994 84.173 $0.785 5.509 89.682
- ---------------------------------------------------------
1995 89.682 $0.745 5.809 95.491
- ---------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 95.491
Ending NAV x $12.07
----------
Investment Return $1,152.58
Total Return Performance
- ------------------------
Investment Return $1,152.58
Less Initial Investment $1,000.00
----------
$152.58 / $1,000.00 x 100
Total Return: 15.26%
</TABLE>
<PAGE> 14
DELAWARE GROUP TAX-FREE USA A
TOTAL RETURN PERFORMANCE
FIVE YEARS
- -----------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $11.62
Initial Shares 86.059
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1991 86.059 $0.783 6.139 92.198
- -----------------------------------------------------------
1992 92.198 $0.765 6.136 98.334
- -----------------------------------------------------------
1993 98.334 $0.851 7.034 105.368
- -----------------------------------------------------------
1994 105.368 $0.785 6.895 112.263
- -----------------------------------------------------------
1995 112.263 $0.745 7.270 119.533
- -----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 119.533
Ending NAV x $12.07
-----------
Investment Return $1,442.76
- ------------------------
Investment Return $1,442.76
Less Initial Investment $1,000.00
-----------
$442.76 / $1,000.00 x 10
Total Return: 44.28%
</TABLE>
<PAGE> 15
DELAWARE GROUP TAX-FREE USA A
TOTAL RETURN PERFORMANCE
TEN YEARS
- ----------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.74
Initial Shares 93.110
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------
<S> <C> <C> <C> <C>
1986 93.110 $1.202 10.567 103.677
- -----------------------------------------------------
1987 103.677 $0.865 8.142 111.819
- -----------------------------------------------------
1988 111.819 $0.842 8.986 120.805
- -----------------------------------------------------
1989 120.805 $0.844 9.221 130.026
- -----------------------------------------------------
1990 130.026 $0.817 9.636 139.662
- -----------------------------------------------------
1991 139.662 $0.783 9.963 149.625
- -----------------------------------------------------
1992 149.625 $0.765 9.957 159.582
- -----------------------------------------------------
1993 159.582 $0.851 11.413 170.995
- -----------------------------------------------------
1994 170.995 $0.785 11.189 182.184
- -----------------------------------------------------
1995 182.184 $0.745 11.799 193.983
- -----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 193.983
Ending NAV $12.07
-----------
Investment Return $2,341.37
Total Return Performance
- ------------------------
Investment Return $2,341.37
Less Initial Investment $1,000.00
-----------
$1,341.37 / $1,000.00 x 100
Total Return: 134.14%
</TABLE>
<PAGE> 16
DELAWARE GROUP TAX-FREE USA A
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- ----------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.03
Initial Shares 99.701
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------
<S> <C> <C> <C> <C>
1984 99.701 $0.568 6.275 105.976
- ----------------------------------------------------
1985 105.976 $0.950 10.743 116.719
- ----------------------------------------------------
1986 116.719 $1.202 13.247 129.966
- ----------------------------------------------------
1987 129.966 $0.865 10.207 140.173
- ----------------------------------------------------
1988 140.173 $0.842 11.265 151.438
- ----------------------------------------------------
1989 151.438 $0.844 11.559 162.997
- ----------------------------------------------------
1990 162.997 $0.817 12.081 175.078
- ----------------------------------------------------
1991 175.078 $0.783 12.488 187.566
- ----------------------------------------------------
1992 187.566 $0.765 12.479 200.045
- ----------------------------------------------------
1993 200.045 $0.851 14.308 214.353
- ----------------------------------------------------
1994 214.353 $0.785 14.026 228.379
- ----------------------------------------------------
1995 228.379 $0.745 14.791 243.170
- ----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 243.170
Ending NAV $12.07
------------
Investment Return $2,935.06
Total Return Performance
- ------------------------
Investment Return $2,935.06
Less Initial Investment $1,000.00
------------
$1,935.06 / $1,000.00 x 100
Total Return: 193.51%
</TABLE>
<PAGE> 17
DELAWARE GROUP TAX-FREE USA B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- -----------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- --------------------------
1
$1000(1 - T) = $1,018.76
T = 1.88%
LIFE OF
FUND
- --------------------------
1.33424658
$1000(1 - T) = $1,034.18
T = 2.55%
<PAGE> 18
DELAWARE GROUP TAX-FREE USA B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- -----------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- --------------------------
1
$1000(1 - T) = $1,058.76
T = 5.88%
LIFE OF
FUND
- --------------------------
1.33424658
$1000(1 - T) = $1,074.15
T = 5.51%
<PAGE> 19
DELAWARE GROUP TAX-FREE USA B
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- ----------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $12.12
Initial Shares 82.508
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 82.508 $0.160 1.105 83.613
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 83.613
Ending NAV x $12.07
----------
$1,009.21
Less CDSC $39.84
----------
Investment Return $969.37
Total Return Performance
- ------------------------
Investment Return $969.37
Less Initial Investment $1,000.00
----------
($30.63) / $1,000.00 x 100
Total Return: -3.06%
</TABLE>
<PAGE> 20
DELAWARE GROUP TAX-FREE USA B
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- ------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $12.12
Initial Shares 82.508
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
1995 82.508 $0.160 1.105 83.613
- ---------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 83.613
Ending NAV x $12.07
----------
Investment Return $1,009.21
Total Return Performance
- ------------------------
Investment Return $1,009.21
Less Initial Investment $1,000.00
----------
$9.21 / $1,000.00 x 100
Total Return: 0.92%
</TABLE>
<PAGE> 21
DELAWARE GROUP TAX-FREE USA B
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- -----------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $11.90
Initial Shares 84.034
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1995 84.034 $0.324 2.293 86.327
- -----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 86.327
Ending NAV x $12.07
-----------
$1,041.97
Less CDSC $40.00
-----------
Investment Return $1,001.97
Total Return Performance
- ------------------------
Investment Return $1,001.97
Less Initial Investment $1,000.00
-----------
$1.97 / $1,000.00 x 100
Total Return: 0.20%
</TABLE>
<PAGE> 22
DELAWARE GROUP TAX-FREE USA B
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- ----------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $11.90
Initial Shares 84.034
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------
<S> <C> <C> <C> <C>
1994 84.034 $0.324 2.293 86.327
- -----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 86.327
Ending NAV $12.07
-----------
Investment Return $1,041.97
Total Return Performance
- ------------------------
Investment Return $1,041.97
Less Initial Investment $1,000.00
-----------
$41.97 / $1,000.00 x 100
Total Return: 4.20%
</TABLE>
<PAGE> 23
DELAWARE GROUP TAX-FREE USA B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- -----------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $12.08
Initial Shares 82.781
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 82.781 $0.214 1.480 84.261
- ------------------------------------------------------------
1995 0.000 $0.649 88.993 88.993
- ------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 88.993
Ending NAV $12.07
----------
$1,074.15
Less CDSC $39.97
----------
Investment Return $1,034.18
Total Return Performance
- ------------------------
Investment Return $1,034.18
Less Initial Investment $1,000.00
----------
$34.18 / $1,000.00 x 100
Total Return: 3.42%
</TABLE>
<PAGE> 24
DELAWARE GROUP TAX-FREE USA B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- -----------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $12.08
Initial Shares 82.781
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------
<S> <C> <C> <C> <C>
1994 82.781 $0.214 1.480 84.261
- -----------------------------------------------------
1995 84.261 $0.649 4.732 88.993
- -----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 88.993
Ending NAV $12.07
-----------
Investment Return $1,074.15
Total Return Performance
- ------------------------
Investment Return $1,074.15
Less Initial Investment $1,000.00
-----------
$74.15 / $1,000.00 x 100
Total Return: 7.42%
</TABLE>
<PAGE> 25
DELAWARE GROUP TAX-FREE USA B
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- -----------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $11.46
Initial Shares 87.260
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------
<S> <C> <C> <C> <C>
1995 87.260 $0.485 3.619 90.879
- -----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 90.879
Ending NAV $12.07
------------
$1,096.91
Less CDSC $40.00
------------
Investment Return $1,056.91
Total Return Performance
- ------------------------
Investment Return $1,056.91
Less Initial Investment $1,000.00
------------
$56.91 / $1,000.00 x 100
Total Return: 5.69%
</TABLE>
<PAGE> 26
DELAWARE GROUP TAX-FREE USA B
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- -----------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $11.46
Initial Shares 87.260
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 87.260 $0.485 3.619 90.879
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 90.879
Ending NAV $12.07
------------
Investment Return $1,096.91
Total Return Performance
- ------------------------
Investment Return $1,096.91
Less Initial Investment $1,000.00
------------
$96.91 / $1,000.00 x 100
Total Return: 9.69%
</TABLE>
<PAGE> 27
DELAWARE GROUP TAX-FREE USA B
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- -----------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $12.04
Initial Shares 83.056
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------
<S> <C> <C> <C> <C>
1994 83.056 $0.649 4.662 87.718
- -----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 87.718
Ending NAV $12.07
-------------
$1,058.76
Less CDSC $40.00
-------------
Investment Return $1,018.76
Total Return Performance
- ------------------------
Investment Return $1,018.76
Less Initial Investment $1,000.00
-------------
$18.76 / $1,000.00 x 100
Total Return: 1.88%
</TABLE>
<PAGE> 28
DELAWARE GROUP TAX-FREE USA B
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- -------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $12.04
Initial Shares 83.056
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------
<S> <C> <C> <C> <C>
1994 83.056 $0.649 4.662 87.718
- ----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 87.718
Ending NAV $12.07
------------
$1,058.76
Investment Return $1,058.76
Total Return Performance
- ------------------------
Investment Return $1,058.76
Less Initial Investment $1,000.00
------------
$58.76 / $1,000.00 x 100
Total Return: 5.88%
</TABLE>
<PAGE> 29
DELAWARE GROUP TAX-FREE INSURED FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- ------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ---------
1
$1000(1 - T) = $1,063.34
T = 6.33%
THREE
YEARS
- ---------
3
$1000(1 - T) = $1,170.38
T = 5.38%
FIVE
YEARS
- ---------
5
$1000(1 - T) = $1,434.65
T = 7.49%
TEN
YEARS
- ---------
10
$1000(1 - T) = $2,241.77
T = 8.41%
LIFE OF
FUND
- ---------
10.43835616
$1000(1 - T) = $2,314.54
T = 8.37%
<PAGE> 30
DELAWARE GROUP TAX-FREE INSURED FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- ------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ---------
1
$1000(1 - T) = $1,012.78
T = 1.28%
THREE
YEARS
- ---------
3
$1000(1 - T) = $1,115.09
T = 3.70%
FIVE
YEARS
- ---------
5
$1000(1 - T) = $1,366.6
T = 6.45%
TEN
YEARS
- ---------
10
$1000(1 - T) = $2,136.2
T = 7.89%
LIFE OF
FUND
- ---------
10.43835616
$1000(1 - T) = $2,203.43
T = 7.86%
<PAGE> 31
DELAWARE GROUP TAX-FREE INSURED FUND A
TOTAL RETURN PERFORMANCE
THREE MONTHS
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $11.65
Initial Shares 85.837
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1995 85.837 $0.157 1.230 87.067
- --------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 87.067
Ending NAV $11.05
---------
Investment Return $962.09
Total Return Performance
- ------------------------
Investment Return $962.09
Less Initial Investment $1,000.00
---------
($37.91)/$1,000.00 x 100
Total Return: -3.79%
</TABLE>
<PAGE> 32
DELAWARE GROUP TAX-FREE INSURED FUND A
TOTAL RETURN PERFORMANCE
SIX MONTHS
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $11.46
Initial Shares 87.260
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1995 87.260 $0.321 2.575 89.835
- -----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 89.835
Ending NAV $11.05
---------
Investment Return $992.68
Total Return Performance
- ------------------------
Investment Return $992.68
Less Initial Investment $1,000.00
---------
($7.32)/$1,000.00 x 100
Total Return: -0.73%
</TABLE>
<PAGE> 33
DELAWARE GROUP TAX-FREE INSURED FUND A
TOTAL RETURN PERFORMANCE
NINE MONTHS
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $11.02
Initial Shares 90.744
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1995 90.744 $0.480 4.068 94.812
- ----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 94.812
Ending NAV $11.05
-----------
Investment Return $1,047.67
Total Return Performance
- ------------------------
Investment Return $1,047.67
Less Initial Investment $1,000.00
-----------
$47.67 /$1,000.00 x 100
Total Return: 4.77%
</TABLE>
<PAGE> 34
DELAWARE GROUP TAX-FREE INSURED FUND A
TOTAL RETURN PERFORMANCE
ONE YEAR
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $11.57
Initial Shares 86.430
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1995 86.430 $0.639 5.224 91.654
- --------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 91.654
Ending NAV x $11.05
----------
Investment Return $1,012.78
Total Return Performance
- ------------------------
Investment Return $1,012.78
Less Initial Investment $1,000.00
----------
$12.78 /$1,000.00 x 100
Total Return: 1.28%
</TABLE>
<PAGE> 35
DELAWARE GROUP TAX-FREE INSURED FUND A
TOTAL RETURN PERFORMANCE
THREE YEARS
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $11.87
Initial Shares 84.246
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
---------------------------------------------------------
<S> <C> <C> <C> <C>
1993 84.246 $0.668 5.454 89.700
---------------------------------------------------------
1994 89.700 $0.722 5.461 95.161
---------------------------------------------------------
1995 95.161 $0.639 5.752 100.913
---------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 100.913
Ending NAV x $11.05
----------
Investment Return $1,115.09
Total Return Performance
- ------------------------
Investment Return $1,115.09
Less Initial Investment $1,000.00
----------
$115.09 / $1,000.00 x 100
Total Return: 11.51%
</TABLE>
<PAGE> 36
DELAWARE GROUP TAX-FREE INSURED FUND A
TOTAL RETURN PERFORMANCE
FIVE YEARS
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.98
Initial Shares 91.075
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1991 91.075 $0.699 6.114 97.189
- -----------------------------------------------------------
1992 97.189 $0.674 6.062 103.251
- -----------------------------------------------------------
1993 103.251 $0.668 6.202 109.453
- -----------------------------------------------------------
1994 109.453 $0.722 7.176 116.629
- -----------------------------------------------------------
1995 116.629 $0.639 7.048 123.677
- -----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 123.677
Ending NAV x $11.05
-----------
Investment Return $1,366.63
- ------------------------
Investment Return $1,366.63
Less Initial Investment $1,000.00
-----------
$366.63 / $1,000.00 x 100
Total Return: 36.66%
</TABLE>
<PAGE> 37
DELAWARE GROUP TAX-FREE INSURED FUND A
TOTAL RETURN PERFORMANCE
TEN YEARS
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $9.98
Initial Shares 100.200
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1986 100.200 $0.790 8.064 108.264
- ----------------------------------------------------------
1987 108.264 $0.720 7.551 115.815
- ----------------------------------------------------------
1988 115.815 $0.725 8.499 124.314
- ----------------------------------------------------------
1989 124.314 $0.727 8.817 133.131
- ----------------------------------------------------------
1990 133.131 $0.714 9.228 142.359
- ----------------------------------------------------------
1991 142.359 $0.699 9.556 151.915
- ----------------------------------------------------------
1992 151.915 $0.674 9.475 161.390
- ----------------------------------------------------------
1993 161.390 $0.668 9.697 171.087
- ----------------------------------------------------------
1994 171.087 $0.722 11.218 182.305
- ----------------------------------------------------------
1995 182.305 0.639 11.018 193.323
- ----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 193.323
Ending NAV $11.05
------------
Investment Return $2,136.22
Total Return Performance
- ------------------------
Investment Return $2,136.22
Less Initial Investment $1,000.00
-----------
$1,136.22 /$1,000.00 x 100
Total Return: 113.62%
</TABLE>
<PAGE> 38
DELAWARE GROUP TAX-FREE INSURED FUND A
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $9.53
Initial Shares 104.932
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1985 104.932 $0.327 -1.578 103.354
- ----------------------------------------------------------
1986 103.354 $0.790 8.319 111.673
- ----------------------------------------------------------
1987 111.673 $0.720 7.788 119.461
- ----------------------------------------------------------
1988 119.461 $0.725 8.765 128.226
- ----------------------------------------------------------
1989 128.226 $0.727 9.092 137.318
- ----------------------------------------------------------
1990 137.318 $0.714 9.518 146.836
- ----------------------------------------------------------
1991 146.836 $0.699 9.856 156.692
- ----------------------------------------------------------
1992 156.692 $0.674 9.774 166.466
- ----------------------------------------------------------
1993 166.466 $0.668 10.000 176.466
- ----------------------------------------------------------
1994 176.466 $0.722 11.573 188.039
- ----------------------------------------------------------
1995 188.039 $0.639 11.366 199.405
- ----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 199.405
Ending NAV $11.05
---------
Investment Return $2,203.43
Total Return Performance
- ------------------------
Investment Return $2,203.43
Less Initial Investment $1,000.00
---------
$1,203.43/$1,000.00 x 100
Total Return: 120.34%
</TABLE>
<PAGE> 39
DELAWARE GROUP TAX-FREE USA B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- ------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------
1
$1000(1 - T) = $1,054.69
T = 5.47%
LIFE OF
FUND
- ----------
1.33424658
$1000(1 - T) = $1,074.87
T = 5.56%
<PAGE> 40
DELAWARE GROUP TAX-FREE USA B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- ------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------
1
$1000(1 - T) = $1,014.69
T = 1.47%
LIFE OF
FUND
- ----------
1.33424658
$1000(1 - T) = $1,034.87
T = 2.60%
<PAGE> 41
DELAWARE GROUP TAX-FREE INSURED FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $11.10
Initial Shares 90.090
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1995 90.090 $0.135 1.106 91.196
- --------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 91.196
Ending NAV x $11.05
----------
$1,007.72
Less CDSC $39.82
----------
Investment Return $967.90
Total Return Performance
- ------------------------
Investment Return $967.90
Less Initial Investment $1,000.00
----------
($32.10)/$1,000.00 x 100
Total Return: -3.21%
</TABLE>
<PAGE> 42
DELAWARE GROUP TAX-FREE INSURED FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $11.10
Initial Shares 90.090
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
1995 90.090 $0.135 1.106 91.196
- ---------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 91.196
Ending NAV x $11.05
----------
Investment Return $1,007.72
Total Return Performance
- ------------------------
Investment Return $1,007.72
Less Initial Investment $1,000.00
----------
$7.72 / $1,000.00 x 100
Total Return: 0.77%
</TABLE>
<PAGE> 43
DELAWARE GROUP TAX-FREE INSURED FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.92
Initial Shares 91.575
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1995 91.575 $0.276 2.319 93.894
- -----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 93.894
Ending NAV x $11.05
-----------
$1,037.53
Less CDSC $40.00
-----------
Investment Return $997.53
Total Return Performance
- ------------------------
Investment Return $997.53
Less Initial Investment $1,000.00
-----------
($2.47)/ $1,000.00 x 100
Total Return: -0.25%
</TABLE>
<PAGE> 44
DELAWARE GROUP TAX-FREE INSURED FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.92
Initial Shares 91.575
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------
<S> <C> <C> <C> <C>
1994 91.575 $0.276 2.319 93.894
- -------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 93.894
Ending NAV $11.05
-----------
Investment Return $1,037.53
Total Return Performance
- ------------------------
Investment Return $1,037.53
Less Initial Investment $1,000.00
-----------
$37.53 /$1,000.00 x 100
Total Return: 3.75%
</TABLE>
<PAGE> 45
DELAWARE GROUP TAX-FREE INSURED FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.50
Initial Shares 95.238
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1995 95.238 $0.413 3.665 98.903
- --------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 98.903
Ending NAV $11.05
-----------
$1,092.88
Less CDSC $40.00
-----------
Investment Return $1,052.88
Total Return Performance
- ------------------------
Investment Return $1,052.88
Less Initial Investment $1,000.00
-----------
$52.88 /$1,000.00 x 100
Total Return: 5.29%
</TABLE>
<PAGE> 46
DELAWARE GROUP TAX-FREE INSURED FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.50
Initial Shares 95.238
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ------------------------------------------------------
<S> <C> <C> <C> <C>
1995 95.238 $0.413 3.665 98.903
- ------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 98.903
Ending NAV $11.05
---------
Investment Return $1,092.88
Total Return Performance
- ------------------------
Investment Return $1,092.88
Less Initial Investment $1,000.00
---------
$92.88 /$1,000.00 x 100
Total Return: 9.29%
</TABLE>
<PAGE> 47
DELAWARE GROUP TAX-FREE INSURED FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $11.02
Initial Shares 90.744
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
1994 90.744 $0.550 4.703 95.447
- ---------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 95.447
Ending NAV $11.05
---------
$1,054.69
Less CDSC $40.00
---------
Investment Return $1,014.69
Total Return Performance
- ------------------------
Investment Return $1,014.69
Less Initial Investment $1,000.00
---------
$14.69 /$1,000.00 x 100
Total Return: 1.47%
</TABLE>
<PAGE> 48
DELAWARE GROUP TAX-FREE INSURED FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $11.02
Initial Shares 90.744
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
1994 90.744 $0.550 4.703 95.447
- ---------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 95.447
Ending NAV $11.05
---------
$1,054.69
Investment Return $1,054.69
Total Return Performance
- ------------------------
Investment Return $1,054.69
Less Initial Investment $1,000.00
---------
$54.69 /$1,000.00 x 100
Total Return: 5.47%
</TABLE>
<PAGE> 49
DELAWARE GROUP TAX-FREE INSURED FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.99
Initial Shares 90.992
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ------------------------------------------------------
<S> <C> <C> <C> <C>
1994 90.992 $0.179 1.487 92.479
- ------------------------------------------------------
1995 92.479 $0.550 4.794 97.273
- ------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 97.273
Ending NAV $11.05
---------
$1,074.87
Less CDSC $40.00
---------
Investment Return $1,034.87
Total Return Performance
- ------------------
Investment Return $1.034.87
Less Initial Investment $1,000.00
---------
$34.87 /$1,000.00 x 100
Total Return: 3.49%
</TABLE>
<PAGE> 50
DELAWARE GROUP TAX-FREE INSURED FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- ------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.99
Initial Shares 90.992
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ------------------------------------------------------
<S> <C> <C> <C> <C>
1994 90.992 $0.179 1.487 92.479
- ------------------------------------------------------
1995 92.479 $0.550 4.794 97.273
- ------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 97.273
Ending NAV $11.05
---------
Investment Return $1,074.87
Total Return Performance
- ------------------
Investment Return $1.074.87
Less Initial Investment $1,000.00
---------
$74.87 /$1,000.00 x 100
Total Return: 7.49%
</TABLE>
<PAGE> 51
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -------------
1
$1000(1 - T) = $1,064.26
T = 6.43%
LIFE OF
FUND
- -------------
2.64931507
$1000(1 - T) = $1,192.41
T = 6.87%
<PAGE> 52
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ---------------
1
$1000(1 - T) = $1,032.26
T = 3.23%
LIFE OF
FUND
- ---------------
2.64931507
$1000(1 - T) = $1,156.50
T = 5.64%
<PAGE> 53
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND A
TOTAL RETURN PERFORMANCE
THREE MONTHS
- ----------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.66
Initial Shares 93.809
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 93.809 $0.139 1.265 95.074
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 95.074
Ending NAV x $10.41
-----------
Investment Return $989.72
- ------------------------
Investment Return $989.72
Less Initial Investment $1,000.00
-----------
($10.28)/ $1,000.00 x 100
Total Return: -1.03%
</TABLE>
<PAGE> 54
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND A
TOTAL RETURN PERFORMANCE
SIX MONTHS
- -------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.51
Initial Shares 95.147
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 95.147 $0.278 2.605 97.752
- -------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 97.752
Ending NAV x $10.41
-----------
Investment Return $1,017.60
Total Return Performance
- ------------------------
Investment Return $1,017.60
Less Initial Investment $1,000.00
-----------
$17.60 /$1,000.00 x 100
Total Return: 1.76%
</TABLE>
<PAGE> 55
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND A
TOTAL RETURN PERFORMANCE
NINE MONTHS
- -----------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.14
Initial Shares 98.619
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 98.619 $0.413 4.067 102.686
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 102.686
Ending NAV x $10.41
-----------
Investment Return $1,068.96
Total Return Performance
- ------------------------
Investment Return $1,068.96
Less Initial Investment $1,000.00
------------
$68.96 /$1,000.00 x 100
Total Return: 6.90%
</TABLE>
<PAGE> 56
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND A
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.64
Initial Shares 93.985
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 93.985 $0.546 5.175 99.160
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 99.160
Ending NAV x $10.41
-------------
Investment Return $1,032.26
Total Return Performance
- ------------------------
Investment Return $1,032.26
Less Initial Investment $1,000.00
-------------
$32.26 /$1,000.00 x 100
Total Return: 3.23%
</TABLE>
<PAGE> 57
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND A
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.31
Initial Shares 96.993
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
1993 96.993 $0.331 3.145 100.138
- ---------------------------------------------------------
1994 100.138 $0.527 5.159 105.297
- ---------------------------------------------------------
1995 105.297 $0.546 5.798 111.095
- ---------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 111.095
Ending NAV x $10.41
----------
Investment Return $1,156.50
Total Return Performance
- ------------------------
Investment Return $1,156.50
Less Initial Investment $1,000.00
----------
$156.50 / $1,000.00 x 100
Total Return: 15.65%
</TABLE>
<PAGE> 58
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ------------
1
$1000(1 - T) = $1,055.33
T = 5.53%
LIFE OF
FUND
- -------------
1.33424658
$1000(1 - T) = $1,079.71
T = 5.92%
<PAGE> 59
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------
1
$1000(1 - T) = $1,035.33
T = 3.53%
LIFE OF
FUND
- ------------
1.33424658
$1000 (1 - T) = $1,059.71
T = 4.44%
<PAGE> 60
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.34
Initial Shares 96.712
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 96.712 $0.117 1.100 97.812
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 97.812
Ending NAV $10.41
------------
$1,018.22
Less CDSC $20.00
------------
Investment Return $998.22
Total Return Performance
- ------------------------
Investment Return $998.22
Less Initial Investment $1,000.00
------------
($1.78)/$1,000.00 x 100
Total Return: -0.18%
</TABLE>
<PAGE> 61
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- ---------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.34
Initial Shares 96.712
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 96.712 $0.117 1.100 97.812
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 97.812
Ending NAV $10.41
--------------
Investment Return $1,018.22
Total Return Performance
- ------------------------
Investment Return $1,018.22
Less Initial Investment $1,000.00
--------------
$18.22 /$1,000.00 x 100
Total Return: 1.82%
</TABLE>
<PAGE> 62
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- ------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.19
Initial Shares 98.135
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 98.135 $0.234 2.262 100.397
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 100.397
Ending NAV $10.41
------------
$1,045.13
Less CDSC $20.00
------------
Investment Return $1,025.13
Total Return Performance
- ------------------------
Investment Return $1,025.13
Less Initial Investment $1,000.00
------------
$25.13 /$1,000.00 x 100
Total Return: 2.51%
</TABLE>
<PAGE> 63
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.19
Initial Shares 98.135
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 98.135 $0.234 2.262 100.397
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 100.397
Ending NAV $10.41
------------
Investment Return $1,045.13
Total Return Performance
- ------------------------
Investment Return $1,045.13
Less Initial Investment $1,000.00
------------
$45.13 /$1,000.00 x 100
Total Return: 4.51%
</TABLE>
<PAGE> 64
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- -----------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $9.84
Initial Shares 101.626
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 101.626 $0.348 3.525 105.151
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 105.151
Ending NAV $10.41
------------
$1,094.62
Less CDSC $20.00
------------
Investment Return $1,074.62
Total Return Performance
- ------------------------
Investment Return $1,074.62
Less Initial Investment $1,000.00
------------
$74.62 /$1,000.00 x 100
Total Return: 7.46%
</TABLE>
<PAGE> 65
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- -----------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $9.84
Initial Shares 101.626
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 101.626 $0.348 3.525 105.151
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 105.151
Ending NAV $10.41
--------------
Investment Return $1,094.62
Total Return Performance
- ------------------------
Investment Return $1,094.62
Less Initial Investment $1,000.00
--------------
$94.62 /$1,000.00 x 100
Total Return: 9.46%
</TABLE>
<PAGE> 66
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- -------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.32
Initial Shares 96.899
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 96.899 $0.460 4.475 101.374
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 101.374
Ending NAV x $10.41
----------
$1,055.30
Less CDSC $20.00
----------
Investment Return $1,035.30
Total Return Performance
------------------------
Investment Return $1,035.30
Less Initial Investment $1,000.00
----------
$35.30 /$1,000.00 x 100
Total Return: 3.53%
</TABLE>
<PAGE> 67
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.32
Initial Shares 96.899
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 96.899 $0.460 4.475 101.374
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 101.374
Ending NAV x $10.41
--------------
Investment Return $1,055.30
Total Return Performance
- ------------------------
Investment Return $1,055.30
Less Initial Investment $1,000.00
--------------
$55.30 / $1,000.00 x 100
Total Return: 5.53%
</TABLE>
<PAGE> 68
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $10.23
Initial Shares 97.752
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 97.752 $0.146 1.390 99.142
- ----------------------------------------------------------------------
1995 99.142 $0.460 4.577 103.719
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 103.719
Ending NAV x $10.41
-----------
$1,079.71
Less CDSC $20.00
-----------
Investment Return $1,059.71
Total Return Performance
------------------------
Investment Return $1,059.71
Less Initial Investment $1,000.00
-----------
$59.71 / $1,000.00 x 100
Total Return: 5.97%
</TABLE>
<PAGE> 69
DELAWARE GROUP TAX-FREE USA INTERMEDIATE FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $9.84
Initial Shares 101.626
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 101.626 $0.146 -2.484 99.142
- -----------------------------------------------------------------------------
1995 99.142 $0.460 4.577 103.719
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 103.719
Ending NAV $10.41
------------
Investment Return $1,079.71
Total Return Performance
- ------------------------
Investment Return $1,079.71
Less Initial Investment $1,000.00
------------
$79.71 /$1,000.00 x 100
Total Return: 7.97%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000728352
<NAME> DELAWARE GROUP TAX-FREE FUND, INC.
<SERIES>
<NUMBER> 011
<NAME> TAX-FREE USA FUND - A CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 720,945,121
<INVESTMENTS-AT-VALUE> 773,791,900
<RECEIVABLES> 14,909,487
<ASSETS-OTHER> 73,046
<OTHER-ITEMS-ASSETS> 6,907
<TOTAL-ASSETS> 788,781,340
<PAYABLE-FOR-SECURITIES> 9,849,677
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,682,310
<TOTAL-LIABILITIES> 12,531,987
<SENIOR-EQUITY> 643,226
<PAID-IN-CAPITAL-COMMON> 720,246,523
<SHARES-COMMON-STOCK> 62,849,328
<SHARES-COMMON-PRIOR> 61,930,989
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,512,825
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 52,846,779
<NET-ASSETS> 758,470,199
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 53,570,933
<OTHER-INCOME> 0
<EXPENSES-NET> 6,915,519
<NET-INVESTMENT-INCOME> 46,655,414
<REALIZED-GAINS-CURRENT> 5,528,096
<APPREC-INCREASE-CURRENT> (3,462,957)
<NET-CHANGE-FROM-OPS> 48,720,553
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 46,114,506
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,764,777
<NUMBER-OF-SHARES-REDEEMED> 10,009,753
<SHARES-REINVESTED> 2,163,314
<NET-CHANGE-IN-ASSETS> 26,516,431
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,015,271)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,388,886
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,915,519
<AVERAGE-NET-ASSETS> 733,028,201
<PER-SHARE-NAV-BEGIN> 12.04
<PER-SHARE-NII> 0.746
<PER-SHARE-GAIN-APPREC> 0.030
<PER-SHARE-DIVIDEND> 0.746
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.07
<EXPENSE-RATIO> 0.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000728352
<NAME> DELAWARE GROUP TAX-FREE FUND, INC.
<SERIES>
<NUMBER> 012
<NAME> TAX-FREE USA FUND - B CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 720,945,121
<INVESTMENTS-AT-VALUE> 773,791,900
<RECEIVABLES> 14,909,487
<ASSETS-OTHER> 73,046
<OTHER-ITEMS-ASSETS> 6,907
<TOTAL-ASSETS> 788,781,340
<PAYABLE-FOR-SECURITIES> 9,849,677
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,682,310
<TOTAL-LIABILITIES> 12,531,987
<SENIOR-EQUITY> 643,226
<PAID-IN-CAPITAL-COMMON> 720,246,523
<SHARES-COMMON-STOCK> 1,473,239
<SHARES-COMMON-PRIOR> 326,963
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,512,825
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 52,846,779
<NET-ASSETS> 17,779,154
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 53,570,933
<OTHER-INCOME> 0
<EXPENSES-NET> 6,915,519
<NET-INVESTMENT-INCOME> 46,655,414
<REALIZED-GAINS-CURRENT> 5,528,096
<APPREC-INCREASE-CURRENT> (3,462,957)
<NET-CHANGE-FROM-OPS> 48,720,553
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 540,908
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,293,697
<NUMBER-OF-SHARES-REDEEMED> 170,688
<SHARES-REINVESTED> 23,267
<NET-CHANGE-IN-ASSETS> 26,516,431
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,015,271)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,388,886
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,915,519
<AVERAGE-NET-ASSETS> 10,201,864
<PER-SHARE-NAV-BEGIN> 12.04
<PER-SHARE-NII> 0.649
<PER-SHARE-GAIN-APPREC> 0.030
<PER-SHARE-DIVIDEND> 0.649
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.07
<EXPENSE-RATIO> 1.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000728352
<NAME> DELAWARE GROUP TAX-FREE FUND, INC.
<SERIES>
<NUMBER> 021
<NAME> TAX-FREE INSURED FUND - A CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 83,174,787
<INVESTMENTS-AT-VALUE> 87,568,144
<RECEIVABLES> 2,899,942
<ASSETS-OTHER> 813
<OTHER-ITEMS-ASSETS> 63,322
<TOTAL-ASSETS> 90,532,221
<PAYABLE-FOR-SECURITIES> 969,683
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 358,807
<TOTAL-LIABILITIES> 1,328,490
<SENIOR-EQUITY> 80,714
<PAID-IN-CAPITAL-COMMON> 84,720,214
<SHARES-COMMON-STOCK> 7,849,869
<SHARES-COMMON-PRIOR> 8,276,883
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,446
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,393,357
<NET-ASSETS> 86,755,817
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,072,946
<OTHER-INCOME> 0
<EXPENSES-NET> 879,855
<NET-INVESTMENT-INCOME> 5,193,091
<REALIZED-GAINS-CURRENT> 942,322
<APPREC-INCREASE-CURRENT> (753,311)
<NET-CHANGE-FROM-OPS> 5,382,102
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,114,142
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 741,299
<NUMBER-OF-SHARES-REDEEMED> 1,410,700
<SHARES-REINVESTED> 242,387
<NET-CHANGE-IN-ASSETS> (2,857,070)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (932,876)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 523,070
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 879,855
<AVERAGE-NET-ASSETS> 86,834,922
<PER-SHARE-NAV-BEGIN> 11.02
<PER-SHARE-NII> 0.639
<PER-SHARE-GAIN-APPREC> 0.030
<PER-SHARE-DIVIDEND> 0.639
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.05
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000728352
<NAME> DELAWARE GROUP TAX-FREE FUND, INC.
<SERIES>
<NUMBER> 022
<NAME> TAX-FREE INSURED FUND - B CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 83,174,787
<INVESTMENTS-AT-VALUE> 87,568,144
<RECEIVABLES> 2,899,942
<ASSETS-OTHER> 813
<OTHER-ITEMS-ASSETS> 63,322
<TOTAL-ASSETS> 90,532,221
<PAYABLE-FOR-SECURITIES> 969,683
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 358,807
<TOTAL-LIABILITIES> 1,328,490
<SENIOR-EQUITY> 80,714
<PAID-IN-CAPITAL-COMMON> 84,720,214
<SHARES-COMMON-STOCK> 221,493
<SHARES-COMMON-PRIOR> 74,906
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,446
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,393,357
<NET-ASSETS> 2,447,914
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,072,946
<OTHER-INCOME> 0
<EXPENSES-NET> 879,855
<NET-INVESTMENT-INCOME> 5,193,091
<REALIZED-GAINS-CURRENT> 942,322
<APPREC-INCREASE-CURRENT> (753,311)
<NET-CHANGE-FROM-OPS> 5,382,102
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 78,949
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 164,244
<NUMBER-OF-SHARES-REDEEMED> 21,543
<SHARES-REINVESTED> 3,885
<NET-CHANGE-IN-ASSETS> (2,857,070)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (932,876)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 523,070
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 879,855
<AVERAGE-NET-ASSETS> 1,632,945
<PER-SHARE-NAV-BEGIN> 11.02
<PER-SHARE-NII> 0.550
<PER-SHARE-GAIN-APPREC> 0.030
<PER-SHARE-DIVIDEND> 0.550
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 011.05
<EXPENSE-RATIO> 1.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000728352
<NAME> DEALWARE GROUP TAX-FREE FUND, INC.
<SERIES>
<NUMBER> 031
<NAME> TAX-FREE USA INTERMEDIATE FUND - A CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 20,590,468
<INVESTMENTS-AT-VALUE> 21,312,414
<RECEIVABLES> 339,247
<ASSETS-OTHER> 9,365
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,661,026
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 220,257
<TOTAL-LIABILITIES> 220,257
<SENIOR-EQUITY> 20,604
<PAID-IN-CAPITAL-COMMON> 21,765,160
<SHARES-COMMON-STOCK> 1,969,203
<SHARES-COMMON-PRIOR> 2,732,887
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,066,941)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 721,946
<NET-ASSETS> 20,492,249
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,264,519
<OTHER-INCOME> 0
<EXPENSES-NET> 62,101
<NET-INVESTMENT-INCOME> 1,202,418
<REALIZED-GAINS-CURRENT> (623,654)
<APPREC-INCREASE-CURRENT> 560,494
<NET-CHANGE-FROM-OPS> 1,139,258
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,171,911
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 526,910
<NUMBER-OF-SHARES-REDEEMED> 1,371,578
<SHARES-REINVESTED> 80,984
<NET-CHANGE-IN-ASSETS> (7,349,382)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (443,287)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 112,549
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 246,643
<AVERAGE-NET-ASSETS> 21,811,581
<PER-SHARE-NAV-BEGIN> 10.32
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 0.09
<PER-SHARE-DIVIDEND> 0.55
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.41
<EXPENSE-RATIO> 0.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000728352
<NAME> DELAWARE GROUP TAX-FREE FUND, INC.
<SERIES>
<NUMBER> 032
<NAME> TAX-FREE USA INTERMEDIATE FUND - B CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 20,590,468
<INVESTMENTS-AT-VALUE> 21,312,414
<RECEIVABLES> 339,247
<ASSETS-OTHER> 9,365
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,661,026
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 220,257
<TOTAL-LIABILITIES> 220,257
<SENIOR-EQUITY> 20,604
<PAID-IN-CAPITAL-COMMON> 21,765,160
<SHARES-COMMON-STOCK> 91,148
<SHARES-COMMON-PRIOR> 57,854
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,066,941)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 721,946
<NET-ASSETS> 948,520
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,264,519
<OTHER-INCOME> 0
<EXPENSES-NET> 62,101
<NET-INVESTMENT-INCOME> 1,202,418
<REALIZED-GAINS-CURRENT> (623,654)
<APPREC-INCREASE-CURRENT> 560,494
<NET-CHANGE-FROM-OPS> 1,139,258
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 30,507
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 54,596
<NUMBER-OF-SHARES-REDEEMED> 23,622
<SHARES-REINVESTED> 2,320
<NET-CHANGE-IN-ASSETS> (7,349,382)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (443,287)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 112,549
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 246,643
<AVERAGE-NET-ASSETS> 685,712
<PER-SHARE-NAV-BEGIN> 10.32
<PER-SHARE-NII> 0.46
<PER-SHARE-GAIN-APPREC> 0.09
<PER-SHARE-DIVIDEND> 0.46
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.41
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
POWER OF ATTORNEY
Each of the undersigned, a member of the Board of Directors of DELAWARE
GROUP TAX-FREE FUND, INC., hereby constitutes and appoints Wayne A. Stork, W.
Thacher Longstreth and Walter P. Babich and any one of them acting singly, his
true and lawful attorneys-in-fact, in his name, place, and stead, to execute
and cause to be filed with the Securities and Exchange Commission and other
federal or state government agency or body, such registration statements, and
any and all amendments thereto as either of such designees may deem to be
appropriate under the Securities Act of 1933, as amended, the Investment
Company Act of 1940, as amended, and all other applicable federal and state
securities laws.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
this 20th day of April, 1995.
/s/Walter P. Babich /s/W. Thacher Longstreth
- ---------------------- ------------------------
Walter P. Babich W. Thacher Longstreth
/s/Anthony D. Knerr /s/Charles E. Peck
- ---------------------- ------------------------
Anthony D. Knerr Charles E. Peck
/s/Ann R. Leven /s/Wayne A. Stork
- ---------------------- ------------------------
Ann R. Leven Wayne A. Stork
