DELAWARE GROUP TAX FREE FUND INC, 485BPOS, 1997-10-30

DELAWARE GROUP TAX FREE FUND INC
485BPOS, 1997-10-30

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<PAGE>

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. 23 [X]
--------

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. 23
------

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: October 30, 1997
----------------

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
---------

X on October 30, 1997 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
---------

Title of Securities Being Registered
------------------------------------

Tax-Free USA Fund A Class, Tax-Free USA Fund B Class, Tax-Free USA Fund C Class,
Tax-Free Insured Fund A Class, Tax-Free Insured Fund B Class, Tax-Free Insured
Fund C Class, Tax-Free USA Intermediate Fund A Class, Tax-Free USA Intermediate
Fund B Class and Tax-Free USA Intermediate Fund C Class
<PAGE>

--- C O N T E N T S ---

This Post-Effective Amendment No. 23 to Registration File No. 2-86606
includes the following:

1. Facing Page

2. Contents Page

3. Cross-Reference Sheet

4. Part A - Prospectus

5. Part B - Statement of Additional Information

6. Part C - Other Information

7. Signatures
<PAGE>

CROSS-REFERENCE SHEET*
---------------------

PART A
------
<TABLE>
<CAPTION>

Item No. Description Location in Prospectuses
- -------- ----------- ------------------------
<S> <C> <C>
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate 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 Objectives and
Policies; Shares; Other
Investment Policies and
Risk Considerations

5 Management of the Funds.................. Management of the Funds

6 Capital Stock and Other Securities....... The Delaware Difference;
Dividends and Distributions;
Taxes; Shares

7 Purchase of Securities Being Offered..... Cover; How to Buy Shares;
Calculation of Offering
Price and Net Asset
Value Per Share;
Management of the Funds

8 Redemption or Repurchase................. How to Buy 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. Tax-Free USA Fund offers Tax-
Free USA Fund A Class, Tax-Free USA Fund B Class and Tax-Free USA Fund C Class;
Tax-Free Insured Fund offers Tax-Free Insured Fund A Class, Tax-Free Insured
Fund B Class and Tax-Free Insured Fund C Class; and Tax-Free 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. Class A, B and C
Shares of each series are combined in one Prospectus, Statement of Additional
Information and Part C.
<PAGE>

CROSS-REFERENCE SHEET
---------------------

PART B
------
<TABLE>
<CAPTION>

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
Agreements; 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>

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>

(USA-INS/INT-ABC)

The Delaware Group includes funds with a --------------------------------
wide range of investment objectives. Stock TAX-FREE USA FUND
funds, income funds, national and state- TAX-FREE INSURED FUND
specific tax-exempt funds, money market TAX-FREE USA INTERMEDIATE FUND
funds, global and international funds and
closed-end funds give investors the
ability to create a portfolio that fits A CLASS
their personal financial goals. For more B CLASS
information, contact your financial adviser C CLASS
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, P R O S P E C T U S
DIVIDEND DISBURSING,
ACCOUNTING SERVICES --------------------------------
AND TRANSFER AGENT
Delaware Service Company, Inc. OCTOBER 30, 1997
1818 Market Street
Philadelphia,PA 19103

LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103

INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103

CUSTODIAN
Bankers Trust Company
One Bankers Trust Plaza
New York,NY 1006 DELAWARE
GROUP
--------
<PAGE>

Table of
Contents
<TABLE>
<S> <C>
COVER PAGE.....................................
SYNOPSIS.......................................
SUMMARY OF EXPENSES............................
FINANCIAL HIGHLIGHTS...........................
INVESTMENT OBJECTIVES AND POLICIES.............
SUITABILITY...................................
INVESTMENT STRATEGY...........................
THE DELAWARE DIFFERENCE
PLANS AND SERVICES............................
CLASSES OF SHARES..............................
HOW TO BUY SHARES..............................
REDEMPTION AND EXCHANGE........................
DIVIDENDS AND DISTRIBUTIONS....................
TAXES..........................................
CALCULATION OF OFFERING PRICE
AND NET ASSET VALUE PER SHARE.................
MANAGEMENT OF THE FUNDS........................
OTHER INVESTMENT POLICIES AND RISK
CONSIDERATIONS................................
APPENDIX A--INVESTMENT ILLUSTRATIONS...........
APPENDIX B--RATINGS............................
APPENDIX C--CLASSES OFFERED....................
</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 FUNDS 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 THE PRINCIPAL AMOUNT INVESTED. SHARES OF
THE FUNDS ARE NOT BANK OR CREDIT UNION DEPOSITS.
<PAGE>

Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
A Class/B Class/C Class

October 30, 1997

1818 MARKET STREET, PHILADELPHIA, PA 19103

FOR PROSPECTUS AND PERFORMANCE:
NATIONWIDE 800-523-4640

INFORMATION ON EXISTING ACCOUNTS:
(SHAREHOLDERS ONLY)
NATIONWIDE 800-523-1918

DEALER SERVICES:
(BROKER/DEALERS ONLY)
NATIONWIDE 800-362-7500

REPRESENTATIVES OF FINANCIAL INSTITUTIONS:

NATIONWIDE 800-659-2265

This Prospectus describes shares of Tax-Free USA Fund ("USA Fund"), Tax-Free
Insured Fund ("Insured Fund") and Tax-Free USA Intermediate Fund ("Intermediate
Fund") (individually a "Fund" and, collectively, the "Funds") of Delaware Group
Tax-Free Fund, Inc. ("Tax-Free Fund, Inc."), a professionally managed mutual
fund of the series type.

The investment objective of each Fund 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. 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 Insured Fund's portfolio securities.

Each Fund offers Class A Shares, Class B Shares and Class C Shares
(individually a "Class" and, collectively, the "Classes").

This Prospectus sets forth information that you should read and consider
before you invest. Please retain it for future reference. The Funds' Statement
of Additional Information ("Part B" of Tax-Free Fund, Inc.'s registration
statement), dated October 30, 1997, as it may be amended from time to time,
contains additional information about the Funds 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
Funds' financial statements appear in their Annual Report, which will accompany
any response to requests for Part B.

1
<PAGE>

Synopsis

INVESTMENT OBJECTIVE

USA Fund--The investment objective of 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 is consistent with prudent investment management and
preservation of capital. Typically, the municipal bonds in the Fund will have a
maturity range between five and 30 years.

Insured Fund--The investment objective of 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 is consistent with prudent investment management and
preservation of capital. 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
the Fund will have a maturity range between five and 30 years.

Intermediate Fund--The investment objective of 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 is consistent with prudent investment
management and preservation of capital. The Fund seeks to achieve its objective
by investing primarily in municipal bonds. The portfolio will have a dollar
weighted average maturity of between three and 10 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 Fund 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 Objectives and Policies and Other
Investment Policies and Risk Considerations.

RISK FACTORS AND SPECIAL CONSIDERATIONS

Prospective investors should consider the following factors:

1. While each Fund intends to seek to qualify as a "diversified" investment
company under provisions of Subchapter M of the Internal Revenue Code (the
"Code"), the Funds will not be diversified as defined by the Investment Company
Act of 1940 (the "1940 Act"). Thus, while at least 50% of a Fund's 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 Fund's 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 Fund's assets. A
portfolio which is nondiversified under the 1940 Act 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. This is generally the case
because nondiversified funds are typically dependent upon the securities of a
smaller number of issuers than is the case with diversified funds.

2. USA Fund may invest up to 20% of its assets and Intermediate Fund 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 either Fund.
See Quality Restrictions under Investment Objectives and Policies.

3. Intermediate Fund may lend portfolio securities to creditworthy
institutions; the principal risk to the Fund is the risk that the borrower will
fail to return the borrowed security. The Fund will require borrowers to
deliver collateral to the Fund before lending securities. See Portfolio Loan
Transactions under Other Investment Policies and Risk Considerations.

4. Intermediate Fund 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
Bankers Trust Company. While the Fund does not engage in options and futures
for speculative purposes, there are risks that result from the use of these
instruments by the Fund, and an investor should carefully review the
descriptions of such in this Prospectus. Certain

2
<PAGE>

options and futures may be considered to be derivative securities. Tax-Free
Fund, Inc. is not registered as a commodity pool operator nor is Delaware
Management Company (the "Manager") registered as a commodities trading adviser,
in reliance upon various exemptive rules. See Options and Futures under Other
Investment Policies and Risk Considerations.

5. Intermediate Fund may invest in inverse floaters which may be considered to
be derivative securities. The interest rates attributable to inverse floaters
may move in the opposite direction to short-term interest rates at an
accelerated speed causing rapid fluctuations in the value of such securities.
See Inverse Floaters under Other Investment Policies and Risk Considerations.

INVESTMENT MANAGER, DISTRIBUTOR AND SERVICE AGENT

The Manager furnishes investment management services to the Funds, subject to
the supervision and direction of Tax-Free Fund, Inc.'s Board of Directors. The
Manager also provides investment management services to certain of the other
funds in the Delaware Group. Delaware Distributors, L.P. (the "Distributor") is
the national distributor for each 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, accounting services and
transfer agent for each Fund and for all of the other mutual funds in the
Delaware Group. See Summary of Expenses and Management of the Funds for further
information regarding the Manager and the fees payable under each Fund's
Investment Management Agreement.

SALES CHARGES

The price of Class A Shares for USA Fund, Insured Fund and Intermediate Fund
includes a maximum front-end sales charge of 3.75%, 3.75% and 2.75%,
respectively, of the offering price, which, based on the net asset value per
share of each Fund's Class A Shares as of the end of Tax-Free Fund, Inc.'s most
recent fiscal year, was equivalent to 3.93%, 3.89% and 2.87%, respectively, of
the amount invested. The front-end 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 (subject to a CDSC
of 1% if shares are redeemed within 12 months of purchase if in connection with
such purchase a dealer commission was paid). Class A Shares are subject to
annual 12b-1 Plan expenses for the life of the investment.

The price of Class B Shares of each Fund is equal to the net asset value per
share. Class B Shares of USA

Fund and Insured Fund are subject to a contingent deferred sales charge
("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 USA Fund and Insured Fund are subject to annual 12b-1 Plan expenses
for approximately eight years after purchase. Class B Shares of Intermediate
Fund 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 of Intermediate Fund are subject to annual 12b-1 Plan
expenses for approximately five years after purchase. See Deferred Sales Charge
Alternative--Class B Shares and Automatic Conversion of Class B Shares under
Classes of Shares.

The price of Class C Shares of each Fund is equal to the net asset value per
share. Class C Shares are subject to a CDSC of 1% if shares are redeemed within
12 months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses
for the life of the investment.

See Classes of Shares and Distribution (12b-1) and Service under Management
of the Funds.

PURCHASE AMOUNTS

Generally, the minimum initial investment in any Class is $1,000. 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 these 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 in Class A Shares,
and that Class A Shares are subject to lower annual 12b-1 Plan expenses than
Class B and Class C Shares and generally are not subject to a CDSC. See How to
Buy Shares.

REDEMPTION AND EXCHANGE
Class A Shares of each Fund may be redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request. Neither
the Funds nor the Distributor assesses a charge for redemptions or exchanges of
Class A Shares, except for certain redemptions of shares purchased at net asset
value, which may be subject to a CDSC if a dealer's

3
<PAGE>

commission was paid in connection with such purchases. See Front-End Sales
Charge Alternative--Class A Shares under Classes of 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 Funds
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.

OPEN-END INVESTMENT COMPANY

Tax-Free Fund, Inc. is an open-end management investment company. Each Fund's
portfolio of assets is nondiversified as defined by the 1940 Act. Tax-Free
Fund, Inc. was organized as a Maryland corporation on August 17, 1983. See
Shares under Management of the Funds.

4
<PAGE>

Summary of
Expenses

A general comparison of the sales arrangements and other expenses applicable
to Class A, Class B and Class C Shares follows:

<TABLE>
<CAPTION>
USA FUND INSURED FUND INTERMEDIATE FUND
SHAREHOLDER TRANSACTION CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
EXPENSES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
----------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
offering price)........ 3.75% None None 3.75% None None 2.75% None None
Maximum Sales Charge
Imposed on Reinvested
Dividends
(as a percentage of
offering price)........ None None None None None None 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%+ None* 4.00%** 1.00%+ None* 2.00%*** 1.00%+
Redemption Fees......... None++ None++ None++ None++ None++ None++ None++ None++ None++
</TABLE>

*Class A purchases of $1,000,000 or more may be made at net asset value.
However, if in connection with any such purchase a dealer commission is paid
to the financial adviser through whom such purchase is effected, a CDSC of 1%
will be imposed on certain redemptions within 12 months of purchase ("Limited
CDSC"). See Contingent Deferred Sales Charge for Certain Redemptions of Class
A Shares Purchased at Net Asset Value under Redemption and Exchange.

**USA Fund B Class shares and Insured Fund B Class 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. See Deferred Sales Charge Alternative--Class B Shares
under Classes of Shares.

***Intermediate Fund B Class shares are subject to a CDSC of (i) 2% if shares
are redeemed within the first two years of purchase; (ii) 1% if shares are
redeemed during the third year following purchase; and (iii) 0% thereafter.
See Deferred Sales Charge Alternative--Class B Shares under Classes of
Shares.
+Class C Shares of each Fund are subject to a CDSC of 1% if shares are redeemed
within 12 months of purchase. See Level Sales Charge Alternative--Class C
Shares under Classes of Shares.
++CoreStates Bank, N.A. currently charges $7.50 per redemption for redemptions
payable by wire.

5
<PAGE>

<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES USA FUND INSURED FUND
(AS A PERCENTAGE OF AVERAGE DAILY NET CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
ASSETS) SHARES SHARES SHARES SHARES SHARES SHARES
- -------------------------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Management Fees
(after voluntary waivers in the case of
Intermediate Fund)......................... 0.59% 0.59% 0.59% 0.59% 0.59% 0.59%
12b-1 Plan Expenses (including service
fees)...................................... 0.20%+/++ 1.00%++ 1.00%++ 0.20%+/++ 1.00%++ 1.00%++
Other Operating Expenses
(after expense limitations in the case of
Intermediate Fund)......................... 0.15% 0.15% 0.15% 0.26% 0.26% 0.26%
---- ---- ---- ---- ---- ----
Total Operating Expenses
(after voluntary waivers and expense
limitations in the case of Intermediate
Fund)...................................... 0.94% 1.74% 1.74% 1.05% 1.85% 1.85%
==== ==== ==== ==== ==== ====
<CAPTION>
ANNUAL OPERATING EXPENSES INTERMEDIATE FUND
(AS A PERCENTAGE OF AVERAGE DAILY NET CLASS A CLASS B CLASS C
ASSETS) SHARES SHARES SHARES
- --------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Management Fees
(after voluntary waivers in the case of
Intermediate Fund)......................... 0.12%* 0.12%* 0.12%*
12b-1 Plan Expenses (including service
fees)...................................... 0.15%++ 1.00%++ 1.00%++
Other Operating Expenses
(after expense limitations in the case of
Intermediate Fund)......................... 0.33%* 0.33%* 0.33%*
--------- --------- ---------
Total Operating Expenses
(after voluntary waivers and expense
limitations in the case of Intermediate
Fund)...................................... 0.60%* 1.45%* 1.45%*
========= ========= =========
</TABLE>

*Beginning July 1, 1997, the Manager has elected voluntarily to waive that
portion, if any, of the annual management fees payable by Intermediate Fund
and to pay certain of the Fund's expenses to the extent necessary to ensure
that the Total Operating Expenses of the Fund do not exceed 0.45% (excluding
the 12b-1 Plan fees). This waiver and expense limitation will extend through
December 31, 1997. Effective the end of the Fund's last fiscal year, August
31, 1996 and through June 30, 1997, commitments of waiver and reimbursement by
the Manager that were different from that currently in effect for the Fund
were in place. The expense information set forth above has been restated to
reflect the current fees. See Management of the Funds for a complete history
of the commitments of waiver and reimbursement by the Manager. If the
voluntary expense waivers were not in effect, the Total Operating Expenses of
Intermediate Fund A Class, Intermediate Fund B Class and Intermediate Fund C
Class, as a percentage of average daily net assets, would have been 1.02%,
1.87% and 1.87%, respectively, reflecting Management Fees of 0.49%.

+The actual 12b-1 Plan expenses to be paid and, consequently, the Total
Operating Expenses of USA Fund A Class and Insured Fund A Class, may vary
because of the formula adopted by the Board of Directors for use in
calculating the 12b-1 Plan expenses for these Classes beginning June 1, 1992,
but the 12b-1 Plan expenses will not be more than 0.30% nor less than 0.10%.
See Distribution (12b-1) and Service under Management of the Funds.
++Class A Shares, Class B Shares and Class C Shares of each Fund 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 Funds.

Investors utilizing the Delaware Group Asset Planner asset allocation service
also typically incur an annual maintenance fee of $35 per Strategy. However,
effective November 1, 1996, the annual maintenance fee is waived until further
notice. Investors who utilize the Asset Planner for an Individual Retirement
Account ("IRA") will pay an annual IRA fee of $15 per Social Security number.
See Delaware Group Asset Planner in Part B.

6
<PAGE>

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 and no redemption at the end of each time period and (3)
for Class B Shares and Class C Shares, payment of a CDSC at the time of
redemption, if applicable.

<TABLE>
<CAPTION>
ASSUMING REDEMPTION ASSUMING NO REDEMPTION
------------------- ----------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
USA FUND ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $47/1/ $66 $ 88 $149 $47 $66 $ 88 $149
Class B Shares $58 $85 $114 $184/2/ $18 $55 $ 94 $184/2/
Class C Shares $28 $55 $ 94 $205 $18 $55 $ 94 $205

INSURED FUND
Class A Shares $48/1/ $70 $ 93 $161 $48 $70 $ 93 $161
Class B Shares $59 $88 $120 $196/2/ $19 $58 $100 $196/2/
Class C Shares $29 $58 $100 $217 $19 $58 $100 $217

INTERMEDIATE FUND
Class A Shares $33/1/ $46 $ 60 $100 $33 $43 $ 56 $100
Class B Shares $35 $56 $ 79/3/ $119/3/ $15 $46 $ 79/3/ $119/3/
Class C Shares $25 $46 $ 79 $174 $15 $46 $ 79 $174
</TABLE>
/1/Generally, the Funds do 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, USA Fund B Class
shares and Insured Fund B Class shares will be automatically converted into
Class A Shares of the relevant Fund. 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 Class
A Shares. See Automatic Conversion of Class B Shares under Classes of Shares
for a description of the automatic conversion feature.

/3/At the end of approximately five years after purchase, Intermediate Fund B
Class Shares will be automatically converted into Intermediate Fund A Class
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 Class A Shares. See Automatic
Conversion of Class B Shares under Classes of 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.

The purpose of the above tables 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.

7
<PAGE>

Financial
Highlights

The following financial highlights are derived from the financial statements
of Tax-Free USA Fund, Tax-Free Insured Fund and Tax-Free USA Intermediate Fund
of Delaware Group Tax-Free Fund, Inc. 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, all
of which are incorporated by reference into Part B. Further information about
the Funds' performance is contained in their Annual Report to shareholders. A
copy of the Funds' Annual Report (including the report of Ernst & Young LLP)
may be obtained from Tax-Free Fund, Inc. upon request at no charge.

<TABLE>
<CAPTION>
USA FUND CLASS A SHARES
----------------------------------------------------------------------------------------------------
YEAR ENDED
8/31/97 8/31/96 8/31/95 8/31/94 8/31/93 8/31/92/1/ 8/31/91 8/31/90 8/31/89 8/31/88
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 11.550 $ 12.070 $ 12.040 $ 12.640 $ 12.130 $ 11.560 $ 11.070 $ 11.600 $ 11.020 $ 10.930
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income... 0.666 0.696 0.746 0.751 0.751 0.765 0.783 0.817 0.844 0.842
Net Gains (Losses) on
Securities (both
realized and
unrealized)............ 0.210 (0.460) 0.030 (0.566) 0.610 0.570 0.490 (0.530) 0.580 0.090
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From
Investment
Operations......... 0.876 0.236 0.776 0.185 1.361 1.335 1.273 0.287 1.424 0.932
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------

LESS DISTRIBUTIONS
- ------------------
Dividends from Net
Investment Income
(Loss)................. (0.666) (0.696) (0.746) (0.751) (0.751) (0.765) (0.783) (0.817) (0.844) (0.842)
Distributions from
Capital Gains (0.050) (0.060) none (0.034) (0.100) none none none none none
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
Distributions...... (0.716) (0.756) (0.746) (0.785) (0.851) (0.765) (0.783) (0.817) (0.844) (0.842)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 11.710 $ 11.550 $ 12.070 $ 12.040 $ 12.640 $ 12.130 $ 11.560 $ 11.070 $ 11.600 $ 11.020
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN/2/......... 7.79% 1.91% 6.74% 1.49% 11.66% 11.91% 11.88% 2.50% 13.30% 8.93%
- ------------
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of
Period (000's omitted).. $615,852 $700,853 $758,470 $745,796 $762,574 $702,988 $669,546 $611,505 $519,867 $390,987
Ratio of Expenses to
Average Daily Net
Assets................. 0.94% 0.94% 0.92% 0.89% 0.89% 0.80% 0.74% 0.75% 0.75% 0.77%
Ratio of Net Investment
Income to Average Daily
Net Assets............. 5.73% 5.82% 6.29% 6.07% 6.10% 6.47% 6.91% 7.12% 7.35% 7.76%
Portfolio Turnover
Rate................... 44% 42% 27% 10% 12% 21% 19% 14% 8% 25%
</TABLE>
- ------

/1/Beginning June 1, 1992, USA Fund began paying distribution expenses pursuant
to a Rule 12b-1 Plan.

/2/Does not reflect maximum sales charge that is or was in effect nor the 1%
Limited CDSC that would apply in the event of certain redemptions within 12
months of purchase.

8
<PAGE>

<TABLE>
<CAPTION>
USA FUND CLASS C
USA FUND CLASS B SHARES SHARES
-------------------------------------- --------------------
PERIOD PERIOD
5/2/94/1/ YEAR 11/29/95/1/
YEAR ENDED THROUGH ENDED THROUGH
8/31/97 8/31/96 8/31/95 8/31/94 8/31/97 8/31/96
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $11.550 $12.070 $12.040 $12.080 $11.550 $12.230
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income... 0.573 0.600 0.649 0.214 0.573 0.450
Net Gains (Losses) on
Securities (both
realized and
unrealized)............ 0.210 (0.460) 0.030 (0.040) 0.210 (0.620)
------- ------- ------- ------- ------- -------
Total from
Investment
Operations......... 0.783 0.140 0.679 0.174 0.783 0.170
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from Net In-
vestment Income........ (0.573) (0.600) (0.649) (0.214) (0.573) (0.450)
Distributions from Capi-
tal Gains (0.050) (0.060) none none (0.050) (0.060)
------- ------- ------- ------- ------- -------
Total
Distributions...... (0.623) (0.660) (0.649) (0.214) (0.623) (0.510)
------- ------- ------- ------- ------- =======
Net Asset Value, End of
Period................. $11.710 $11.550 $12.070 $12.040 $11.710 $11.550
======= ======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------
TOTAL RETURN/2/......... 6.94% 1.11% 5.88% 1.45%/1/ 6.94% (1.44%)/1/
- ----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (000's
omitted)............... $35,055 $29,773 $17,779 $3,937 $1,505 $805
Ratio of Expenses to Av-
erage Daily Net As-
sets................... 1.74% 1.74% 1.74% 1.74%/1/ 1.74% 1.74%/1/
Ratio of Net Investment
Income to Average Daily
Net Assets............. 4.93% 5.03% 5.47% 5.22%/1/ 4.93% 5.03%/1/
Portfolio Turnover
Rate................... 44% 42% 27% 10% 44% 42%
</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 the contingent deferred sales charge which
varies from 1%-4% depending upon the holding period for USA Fund B Class Shares
and 1% for USA Fund C Class Shares for 12 months from the date of purchase.

9
<PAGE>

<TABLE>
<CAPTION>
INSURED FUND CLASS A SHARES
------------------------------------------------------------------------------------------
YEAR ENDED
8/31/97 8/31/96 8/31/95 8/31/94 8/31/93 8/31/92/1/ 8/31/91 8/31/90 8/31/89 8/31/88
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $10.860 $11.050 $11.020 $11.680 $11.310 $10.900 $10.460 $10.690 $10.300 $10.300
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income... 0.573 0.588 0.639 0.622 0.638 0.674 0.699 0.714 0.727 0.725
Net Gains (Losses) on
Securities
(both realized and
unrealized)............ 0.281 (0.160) 0.030 (0.560) 0.400 0.410 0.440 (0.230) 0.390 none
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total From Invest-
ment Operations.... 0.854 0.428 0.669 0.062 1.038 1.084 1.139 0.484 1.117 0.725
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income
(Loss)................. (0.573) (0.588) (0.639) (0.622) (0.638) (0.674) (0.699) (0.714) (0.727) (0.725)
Distributions from Capi-
tal Gains.............. (0.091) (0.030) none (0.100) (0.030) none none none none none
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distribu-
tions.............. (0.664) (0.618) (0.639) (0.722) (0.668) (0.674) (0.699) (0.714) (0.727) (0.725)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $11.050 $10.860 $11.050 $11.020 $11.680 $11.310 $10.900 $10.460 $10.690 $10.300
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN/2/......... 8.07% 3.88% 6.33% 0.54% 9.48% 10.23% 11.20% 4.63% 11.15% 7.34%
- ---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Pe-
riod
(000's omitted)........ $78,377 $81,149 $86,756 $91,235 $96,118 $85,660 $76,700 $61,394 $54,131 $45,464
Ratio of Expenses to Av-
erage
Daily Net Assets....... 1.05% 0.98% 0.98% 0.98% 0.98% 0.86% 0.83% 0.83% 0.82% 0.82%
Ratio of Net Investment
Income
to Average Daily Net
Assets................. 5.23% 5.29% 5.89% 5.48% 5.58% 6.06% 6.50% 6.69% 6.86% 7.11%
Portfolio Turnover
Rate................... 42% 45% 68% 56% 8% 29% 10% 13% 14% 9%
</TABLE>
- ---------

/1/Beginning June 1, 1992, Insured Fund began paying distribution expenses
pursuant to a Rule 12b-1 Plan.

/2/Does not reflect maximum sales charge that is or was in effect nor the 1%
Limited CDSC that would apply in the event of certain redemptions within 12
months of purchase.

10
<PAGE>

<TABLE>
<CAPTION>
INSURED FUND CLASS B SHARES INSURED FUND CLASS C SHARES
-------------------------------------- ------------------------------
PERIOD PERIOD
5/2/94/1/ 11/29/95/1/
YEAR ENDED THROUGH YEAR ENDED THROUGH
8/31/97 8/31/96 8/31/95 8/31/94 8/31/97 8/31/96
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $10.860 $11.050 $11.020 $10.990 $ 10.860 $ 11.260
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income... 0.485 0.499 0.550 0.179 0.485 0.375
Net Gains (Losses) on
Securities (both real-
ized and unrealized)... 0.281 (0.160) 0.030 0.030 0.281 (0.370)
------- ------- ------- ------- ------------- -------------
Total from Investment
Operations.......... 0.766 0.339 0.580 0.209 0.766 0.005
------- ------- ------- ------- ------------- -------------
LESS DISTRIBUTIONS
Dividends from Net In-
vestment Income........ (0.485) (0.499) (0.550) (0.179) (0.485) (0.375)
Distributions from Capi-
tal Gains.............. (0.091) (0.030) none none (0.091) (0.030)
------- ------- ------- ------- ------------- -------------
Total Distributions.. (0.576) (0.529) (0.550) (0.179) (0.576) (0.405)
------- ------- ------- ------- ------------- -------------
Net Asset Value, End of
Period................. $11.050 $10.860 $11.050 $11.020 $ 11.050 $ 10.860
======= ======= ======= ======= ============= =============
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN/2/......... 7.21% 3.05% 5.47% 1.91%/1/ 7.21% 0.01%/1/
- ----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Pe-
riod (000's omitted)... $ 3,619 $ 3,375 $ 2,448 $826 $89 $120
Ratio of Expenses to Av-
erage Daily Net As-
sets................... 1.85% 1.78% 1.80% 1.83%/1/ 1.85% 1.78%/1/
Ratio of Net Investment
Income to Average Daily
Net Assets............. 4.43% 4.48% 5.07% 4.63%/1/ 4.43% 4.48%/1/
Portfolio Turnover
Rate................... 42% 45% 68% 56% 42% 45%
</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 the contingent deferred sales charge which
varies from 1%-4% depending upon the holding period for Insured Fund B Class
Shares and 1% for Insured Fund C Class Shares for 12 months from the date of
purchase.

11
<PAGE>

<TABLE>
<CAPTION>
INTERMEDIATE FUND CLASS A SHARES
---------------------------------------------
PERIOD
1/7/93/1/
YEAR ENDED THROUGH
8/31/97 8/31/96 8/31/95 8/31/94 8/31/93
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................ $10.320 $10.410 $10.320 $10.630 $10.000
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.......... 0.524 0.550 0.550 0.530 0.330
Net Gains (Losses) on
Securities (both realized and
unrealized)................... 0.140 (0.090) 0.090 (0.310) 0.630
------- ------- ------- ------- -------
Total from Investment
Operations................. 0.664 0.460 0.640 0.220 0.960
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from Net Investment
Income........................ (0.524) (0.550) (0.550) (0.530) (0.330)
Distributions from Capital
Gains none none none none none
------- ------- ------- ------- -------
Total Distributions......... (0.524) (0.550) (0.550) (0.530) (0.330)
------- ------- ------- ------- -------
Net Asset Value, End of
Period........................ $10.460 $10.320 $10.410 $10.320 $10.630
======= ======= ======= ======= =======
- -------------------------------------------------------------------------------
TOTAL RETURN/2/................ 6.57% 4.52% 6.43% 2.09% 9.75%/1/
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted)............... $21,635 $22,617 $20,492 $28,193 $14,684
Ratio of Expenses to Average
Daily Net Assets.............. 0.43% 0.25% 0.25% 0.25% 0.25%/1/
Ratio of Expenses to Average
Daily Net Assets Prior to
Expense Limitation............ 1.02% 0.95% 1.07% 1.19% 1.94%/1/
Ratio of Net Investment Income
to Average Daily Net Assets... 5.03% 5.29% 5.37% 5.00% 4.84%/1/
Ratio of Net Investment Income
to Average Daily Net Asset
Prior to Expense Limitation... 4.44% 4.59% 4.55% 4.06% 3.15%/1/
Portfolio Turnover Rate........ 34% 15% 63% 81% 53%
</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/Does not reflect maximum sales charge that is or was in effect 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 referenced in the
table.

12
<PAGE>

<TABLE>
<CAPTION>
INTERMEDIATE FUND
INTERMEDIATE FUND CLASS B SHARES CLASS C SHARES
------------------------------------ -------------------
PERIOD PERIOD
YEAR 5/2/94/1/ YEAR 11/29/95/1/
ENDED THROUGH ENDED THROUGH
8/31/97 8/31/96 8/31/95 8/31/94 8/31/97 8/31/96
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $10.320 $10.410 $10.320 $10.230 $10.320 $ 10.480
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income... 0.436 0.460 0.460 0.150 0.436 0.035
Net Gains (Losses) on
Securities (both
realized and
unrealized)............ 0.140 (0.090) 0.090 0.090 0.140 (0.160)
------- ------- ------- ------- ------- --------
Total from
Investment
Operations......... 0.576 0.370 0.550 0.240 0.576 0.190
------- ------- ------- ------- ------- --------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income...... (0.436) (0.460) (0.460) (0.150) (0.436) (0.350)
Distributions from
Capital Gains none none none none none none
------- ------- ------- ------- ------- --------
Total
Distributions...... (0.436) (0.460) (0.460) (0.150) (0.436) (0.350)
------- ------- ------- ------- ------- --------
Net Asset Value, End of
Period................. $10.460 $10.320 $10.410 $10.320 $10.460 $ 10.320
======= ======= ======= ======= ======= ========
- -------------------------------------------------------------------------------------
TOTAL RETURN/2/......... 5.67% 3.63% 5.53% 2.31%/1/ 5.76% 1.84%/1/
- -------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (000's
omitted)............... $1,832 $1,490 $949 $597 $1,426 $193
Ratio of Expenses to
Average Daily Net
Assets................. 1.28% 1.10% 1.10% 1.10%/1/ 1.28% 1.10%/1/
Ratio of Expenses to
Average Daily Net
Assets Prior to Expense
Limitation............. 1.87% 1.80% 1.92% 2.04%/1/ 1.87% 1.80%/1/
Ratio of Net Investment
Income to Average Daily
Net Assets............. 4.18% 4.44% 4.52% 4.15%/1/ 4.18% 4.44%/1/
Ratio of Net Investment
Income to Average Daily
Net Assets Prior to
Expense Limitation..... 3.59% 3.74% 3.70% 3.21%/1/ 3.59% 3.74%/1/
Portfolio Turnover
Rate................... 34% 15% 63% 81% 34% 15%
</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 reflects the waiver of fees referenced in the table. Total
return does not reflect the contingent deferred sales charge which varies from
1%-2% depending upon the holding period for Intermediate Fund B Class Shares
and 1% for Intermediate Fund C Class Shares for 12 months from the date of
purchase.

13
<PAGE>

Investment Objectives
and Policies

The investment objective of 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 is consistent with prudent investment management and preservation of
capital. Typically, the municipal bonds in the Fund will have a maturity range
between five and 30 years.

The investment objective of 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 is consistent with prudent investment management and preservation of
capital. 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 the Fund will have a
maturity range between five and 30 years.

The investment objective of 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 is consistent with prudent investment management and
preservation of capital. The Fund seeks to achieve its objective by investing
primarily in municipal bonds. The portfolio will have a dollar weighted
average maturity of between three and 10 years.

The investment objective of each Fund cannot be changed without approval by
the shareholders of that Fund. There is no assurance that the investment
objective of each Fund can be achieved.

SUITABILITY

Each Fund is designed for investors seeking tax-exempt interest. Intermediate
Fund can generally be expected to offer a lower level of income than USA Fund
and Insured Fund, and Insured Fund can generally be expected to offer a lower
level of income than USA Fund.

The net asset value of shares of each Fund will fluctuate. When interest rates
rise, the share value will tend to fall, and when interest rates fall, the
share value will tend to rise. Therefore, the Funds may not be suitable for an
investor whose primary objective is stability of principal. The value of shares
of Intermediate Fund will normally fluctuate less than the value of shares of
USA and Insured Funds. This is because the average maturity of Intermediate
Fund will typically be shorter than the average maturity of USA and Insured
Funds, and the value of bonds of shorter maturity tends to be less affected by
changes in interest rates than bonds of longer maturity. This pattern may vary
during certain economic and market conditions.

Investors should be willing to accept the risk of investments in municipal
bonds. The insurance features of Insured Fund may somewhat lessen the risk of
loss due to default by an issuer of bonds held in that Fund's portfolio as
compared to similarly situated uninsured bonds held by USA Fund, but such bonds
remain subject to the risk of market fluctuation. Also, there is no assurance
that any insurance company will meet its obligations.
An investment in any of the Funds permits an investor to participate in the
municipal bond market while affording the advantages of a high degree of
liquidity and greater diversification than might be achieved by investing
directly in such securities.

Ownership of Fund shares can reduce the bookkeeping and administrative
inconvenience that is typically connected with direct purchases of the type of
securities in which the Funds invest.

Although each Fund will constantly strive to attain its objective, there can
be no assurance that it will be attained. The objective of each Fund may not be
changed without shareholder approval. For a description of the Funds' other
investment policies, see Other Investment Policies and Risk Considerations in
this Prospectus. Part B sets forth other investment restrictions.

14
<PAGE>

INVESTMENT STRATEGY

TAX-EXEMPT INVESTMENTS

Each Fund invests primarily in municipal securities paying interest income
which, in the opinion of the bond issuer's counsel, is exempt from federal
income tax. 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. These securities include 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. 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 Funds will invest in
both types of bonds. Typically, the maturity of municipal bonds in which USA
Fund and Insured Fund invest will range between five and 30 years and
Intermediate Fund will have an average maturity between three and 10 years.

Each Fund 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 Fund 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.

1997 FEDERAL MARGINAL TAX RATES

<TABLE>
<CAPTION>
TAXABLE INCOME TAX-EXEMPT YIELDS
FEDERAL 4.0%* 5.0%* 6.0%* 7.0%*
MARGINAL FEDERAL FEDERAL FEDERAL FEDERAL
TAX TAXABLE TAXABLE TAXABLE TAXABLE
SINGLE RETURN JOINT RETURN RATE EQUIVALENT EQUIVALENT EQUIVALENT EQUIVALENT
------------- ----------------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$0-$24,650 $0-$41,200 15% 4.7% 5.9% 7.1% 8.2%
$24,651-$59,750 $41,201-$99,600 28% 5.6% 6.9% 8.3% 9.7%
$59,751-$124,650 $99,601-$151,750 31% 5.8% 7.2% 8.7% 10.1%
$124,651-$271,050 $151,751-$271,050 36%+ 6.3% 7.8% 9.4% 10.9%
Over $271,050 Over $271,050 39.6%+ 6.6% 8.3% 9.9% 11.6%
</TABLE>

The equivalent taxable yields are calculated on 4%, 5%, 6% and 7% tax-free
yields. While it is expected that each Fund will invest principally in
obligations generating interest exempt from federal income tax, other income
received by a Fund may be taxable and certain income received by a Fund may be
subject to the federal alternative minimum tax. In addition, the tax rates do
not take into consideration any state personal or property taxes.

* This should not be considered representative of a Fund's yield at any
specific time.

+ For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate. In
addition, a 10% surtax (not applicable to capital gains) applies to certain
high-income taxpayers. It is computed by applying a 39.6% rate to taxable
income in excess of $271,050. The above table does not reflect the personal
exemption phaseout nor the limitations of itemized deductions that may apply.

15
<PAGE>

QUALITY RESTRICTIONS
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 Ratings Group ("S&P") at the time of purchase.
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 Manager's opinion equivalent in
credit quality to obligations rated in the top four grades. The fourth grade is
considered medium grade and may have speculative characteristics.

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. Intermediate Fund 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 rated lower than the top four grades. Securities
of lower credit quality are speculative and may involve greater risks and have
higher yields. See Appendix B--Ratings for a description of Moody's and S&P's
ratings.

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"), Financial Guaranty Insurance Company ("FGIC") and Financial
Security Assurance ("FSA") provide a substantial portion of such insurance.
Accordingly, at different times, a substantial portion of 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 but, instead, reviews the
creditworthiness of the actual issuer and its ability to pay interest and
principal. Insurance on municipal bonds that is purchased by Insured Fund will
generally have been obtained by the bond issuer and attached to the bonds for
their lifetime, although in some instances this Fund will obtain insurance on
bonds while they are held by the Fund. Insured Fund may invest a portion of its
assets in debt obligations that are considered to be below investment grade.
The Fund presently intends to limit such investments to no more than 5% of its
assets, measured at the time of purchase.

DIVERSIFICATION

Each Fund's 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 Fund's 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 Fund 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 Funds may
invest their assets in fewer issuers, the value of Fund shares may increase or
decrease more rapidly than if the Fund were fully diversified. In the event a
Fund invests more than 5% of its assets in a single issuer, it would be
affected more than a fully diversified fund if that issuer were to encounter
difficulties in satisfying its financial obligations.
Each Fund may invest more than 25% of its assets in municipal obligations
relating to similar types of projects or with other similar economic, business
or political characteristics (such as bonds of housing finance agencies or
health care facilities). In addition, each Fund may invest more than 25% of its
assets in industrial development bonds or pollution control bonds which may be
backed only by the assets and revenues of a nongovernmental issuer. A Fund 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 Fund 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 Fund 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.
* * *

For a description of the Funds' other investment policies, see Other
Investment Policies and Risk Considerations in this Prospectus. Part B sets
forth other investment restrictions.

16
<PAGE>

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

FUND INFORMATION; LITERATURE;

PRICE; YIELD AND PERFORMANCE FIGURES

SHAREHOLDER SERVICE CENTER
800-523-1918

INFORMATION ON EXISTING INVESTMENT ACCOUNTS; WIRE INVESTMENTS; WIRE
LIQUIDATIONS; TELEPHONE LIQUIDATIONS AND TELEPHONE EXCHANGES

DELAPHONE
800-362-FUND (800-362-3863)

PERFORMANCE INFORMATION
You can call the Investor Information Center at any time for 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.

SHAREHOLDER SERVICES
During business hours, you can call the Delaware Group's Shareholder Service
Center. Our representatives can answer any questions about your account, the
Funds, various service features and other funds in the Delaware Group.

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 also provides current
performance information on the Funds, as well as other funds in the Delaware
Group. 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 dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.

DUPLICATE CONFIRMATIONS
If your financial adviser or investment dealer is noted on your investment
application, we will send a duplicate confirmation to him or her. This makes it
easier for your adviser to help you manage your investments.

TAX INFORMATION
Each year, Tax-Free Fund, Inc. will mail to you information on the tax status
of your dividends and distributions.

DIVIDEND PAYMENTS

Dividends, capital gains and other distributions are automatically reinvested
in your account, unless you elect to receive them in cash. You may also elect
to have the dividends earned in one fund automatically invested in another
Delaware Group fund with a different investment objective, subject to certain
exceptions and limitations.

For more information, see Additional Methods of Adding to Your Investment--
Dividend Reinvestment Plan under How to Buy Shares or call the Shareholder
Service Center.

MONEYLINE (SM) SERVICES

Delaware Group offers the following services for fast and convenient transfer
of funds between your personal bank account and your Delaware Group fund
account.

1. MONEYLINE (SM) DIRECT DEPOSIT SERVICE

If you elect to have your dividends and distributions paid in cash and such
dividends and distributions are in an amount of $25 or more, you may choose the
MoneyLine (SM) Direct Deposit Service and have such payments transferred from
your Fund account to your predesignated bank account. See Dividends and
Distributions. In addition, you may elect to have your Systematic Withdrawal
Plan payments transferred

17
<PAGE>

from your Fund account to your predesignated bank account through this service.
See Systematic Withdrawal Plans under Redemption and Exchange.

2. MONEYLINE (SM) ON DEMAND

You or your investment dealer may request purchases and redemptions of Fund
shares by phone using MoneyLine (SM) On Demand. When you authorize the Fund to
accept such requests from you or your investment dealer, funds will be
withdrawn from (for share purchases) or deposited to (for share redemptions)
your predesignated bank account. Your request will be processed the same day if
you call prior to 4 p.m., Eastern time. There is a $25 minimum and $50,000
maximum limit for MoneyLine (SM) On Demand transactions.

For each MoneyLine (SM) Service, it may take up to four business days for the
transactions to be completed. You can initiate either service by completing an
Account Services form. If your name and address are not identical to the name
and address on your Fund account, you must have your signature guaranteed. The
Fund does not charge a fee for any MoneyLine (SM) Service; however, your bank
may charge a fee. Please call the Shareholder Service Center for additional
information about these services.

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 a Fund with the dollar amount of new purchases of Class A
Shares of such Fund to qualify for a reduced front-end sales charge on such
purchases of Class A Shares. Under the COMBINED PURCHASES PRIVILEGE, you may
also include certain shares that you own in other funds in the Delaware Group.
See Classes of 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 Classes of
Shares and Part B.

12-MONTH REINVESTMENT PRIVILEGE
The 12-Month Reinvestment Privilege permits you to reinvest proceeds from a
redemption of Class A Shares, within one year of the date of the redemption,
without paying a front-end sales charge. See Part B.

EXCHANGE PRIVILEGE

The Exchange Privilege permits you to exchange all or part of your 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 invest in the Funds through regular liquidations of shares in
your accounts in 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
Additional Methods of Adding to Your Investment--Wealth Builder Option and
Investing by Exchange under How to Buy Shares, and Redemption and Exchange.

FINANCIAL INFORMATION ABOUT THE FUNDS
Each fiscal year, you will receive an audited annual report and an unaudited
semi-annual report. These reports provide detailed information about each
Fund's investments and performance. Tax-Free Fund, Inc.'s fiscal year ends on
August 31.

18
<PAGE>

Classes
of Shares
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 for Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis for
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, which 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 0.30%
(for Intermediate Fund A Class, currently no more than 0.15% pursuant to Board
action) of average daily net assets of such shares. Certain purchases of Class
A Shares qualify for reduced front-end sales charges. See Front-End Sales
Charge Alternative--Class A Shares, below. See also Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset Value
under Redemption and Exchange, and Distribution (12b-1) and Service under
Management of the Funds.

Class B Shares. An investor who elects the deferred sales charge alternative
acquires Class B Shares, which do not incur a front-end sales charge when they
are purchased, but are subject to a contingent deferred sales charge if they
are redeemed within six years of purchase in the case of USA Fund B Class and
Insured Fund B Class, or within three years of purchase in the case of
Intermediate Fund B Class. Class B Shares are subject to annual 12b-1 Plan
expenses of up to a maximum of 1% (0.25% of which are service fees to be paid
to the Distributor, dealers or others for providing personal service and/or
maintaining shareholder accounts) of average daily net assets of USA Fund B
Class and Insured Fund B Class for approximately eight years after purchase and
of Intermediate Fund B Class 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 Class A Shares. Shares of USA Fund B Class and Insured Fund B Class will
automatically be converted into Class A Shares at the end of approximately
eight years after purchase and shares of Intermediate Fund B Class will
automatically be converted into Class A Shares at the end of approximately five
years after purchase. Thereafter, for the remainder of the life of the
investment, the annual 12b-1 Plan fee of up to 0.30% (currently no more than
0.15% for Intermediate Fund A Class purusant to Board action) for Class A
Shares will apply. See Automatic Conversion of Class B Shares, below.
Class C Shares. An investor who elects the level sales charge alternative
acquires Class C Shares, which do not incur a front-end sales charge when they
are purchased, but are subject to a contingent deferred sales charge if they
are redeemed within 12 months of purchase. Class C Shares are subject to annual
12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service fees
to be paid to the Distributor, dealers or others for providing personal service
and/or maintaining shareholder accounts) of average daily net assets of 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 Class A Shares. Unlike Class B Shares, Class C Shares do
not convert to another class.

The alternative purchase arrangements described above permit investors 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 a Fund with their investment being subject
to a CDSC if they redeem shares within the applicable time periods, or purchase
Class C Shares and have the entire initial purchase amount invested in a Fund
with their investment being subject to a CDSC if they redeem shares within 12
months of purchase. In addition, investors should consider the level of annual
12b-1 Plan expenses applicable to each Class. The higher 12b-1 Plan expenses on
Class B Shares and Class C Shares will be offset to the extent a return is
realized on the additional money initially invested upon the purchase of such
shares. However, there can be no assurance as to the return, if any, that will
be realized on such additional money, and the effect of earning a return on
such additional money will diminish over time. In comparing Class B Shares to
Class C Shares,

19
<PAGE>

investors should consider the duration of the annual 12b-1 Plan expenses to
which each of the classes is subject and the desirability of an automatic
conversion feature, which is available only for Class B Shares.
Prospective investors should refer to Appendix A--Investment Illustrations to
this Prospectus for an illustration of the potential effect that each of the
purchase options may have on a long-term shareholder's investment.

For the distribution and related services provided to, and the expenses borne
on behalf of, the Funds, the Distributor and others will be paid, in the case
of Class A Shares, from the proceeds of the front-end sales charge and 12b-1
Plan fees and, in the case of Class B Shares and Class C Shares, from the
proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for selling
Class A, 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 are used to finance the distribution of the respective Classes. See
Distribution (12b-1) and Service under Management of the Funds.
Dividends paid on 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 Class B Shares and 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. Tax-Free Fund, Inc. and the Distributor intend to operate in
compliance with these rules.

FRONT-END SALES CHARGE ALTERNATIVE-- CLASS A SHARES

Class A Shares may be purchased at the offering price, which reflects a
maximum front-end sales charge of 3.75% in the case of USA Fund A Class Shares
and Insured Fund A Class Shares, or 2.75% in the case of Intermediate Fund A
Class Shares. 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.

USA FUND A CLASS AND INSURED FUND A CLASS

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dealer's
Front-End Sales Commission***
Amount of Purchase Charge as % of as % of
Offering Amount Offering
Price Invested** Price
- --------------------------------------------------------------------
USA Insured
Fund Fund
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $100,000 3.75% 3.93% 3.89% 3.25%
$100,000 but under $250,000 3.00 3.07 3.07 2.50
$250,000 but under $500,000 2.50 2.56 2.53 2.00
$500,000 but under $1,000,000* 2.00 2.05 2.08 1.75
</TABLE>

INTERMEDIATE FUND A CLASS

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dealer's
Front-End Sales Commission***
Amount of Purchase Charge as % of as % of
Offering Amount Offering
Price Invested** Price
- -----------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 2.75% 2.87% 2.35%
$100,000 but under $250,000 2.00 2.01 1.75
$250,000 but under $500,000 1.00 1.05 0.75
$500,000 but under $1,000,000* 1.00 1.05 0.75
</TABLE>

*There is no front-end sales charge on purchases of Class A Shares of
$1,000,000 or more but, under certain limited circumstances, a 1% Limited
CDSC may apply upon redemption of such shares.

**Based upon the net asset value per share of Class A Shares as of the end of
Tax-Free Fund, Inc.'s most recent fiscal year.
***Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.

- --------------------------------------------------------------------------------

A 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 such 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
commission of up to 0.15% 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 (the "1933 Act").
- --------------------------------------------------------------------------------

20
<PAGE>

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 schedules:

USA FUND A CLASS AND INSURED FUND A CLASS

<TABLE>
<CAPTION>
DEALER'S COMMISSION
AMOUNT OF PURCHASE (AS A PERCENTAGE OF AMOUNT PURCHASED)
- ------------------ -------------------------------------
<S> <C>
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
</TABLE>

INTERMEDIATE FUND A CLASS

<TABLE>
<CAPTION>
DEALER'S COMMISSION
AMOUNT OF PURCHASE (AS A PERCENTAGE OF AMOUNT PURCHASED)
- ------------------ -------------------------------------
<S> <C>
Up to $3 million 0.50%
Next $2 million up to $5 million 0.40
Amount over $5 million 0.20
</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 those of Class A Shares of a Fund.
Financial advisers also may be eligible for a dealer's commission in connection
with certain purchases made under a Letter of Intention or pursuant to an
investor's Right of Accumulation. Financial advisers should contact the
Distributor concerning the applicability and calculation of the dealer's
commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for payment of
the dealer's commission, unless a dealer's commission or similar payment has
not been previously paid on the assets being exchanged. The schedule and
program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.

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 Redemptions of Class A Shares Purchased 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 a Fund and shares of 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.
Assets held in any stable value product available through the Delaware Group
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.
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 result in 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, above.

BUYING CLASS A SHARES AT NET ASSET VALUE
Class A Shares of a Fund may be purchased at net asset value under the
Delaware Group Dividend Reinvestment Plan and, under certain circumstances, the
Exchange Privilege and the 12-Month Reinvestment 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 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, including those in retirement accounts, must be for accounts in the
name of the individual or a qualifying family member.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between

21
<PAGE>

the bank and unaffiliated brokers or dealers concerning sales of shares of
Delaware Group funds. Officers, directors and key employees of institutional
clients of the Manager or any of its affiliates may purchase Class A Shares at
net asset value. Moreover, purchases may be effected at net asset value for the
benefit of the clients of brokers, dealers and registered investment advisers
affiliated with a broker or dealer, if such broker, dealer or investment
adviser has entered into an agreement with the Distributor providing
specifically for the purchase of Class A Shares in connection with special
investment products, such as wrap accounts or similar fee based programs.

Investors in Delaware-Voyageur Unit Investment Trusts may reinvest monthly
dividend checks and/or repayment of invested capital into Class A Shares of any
of the funds in the Delaware Group at net asset value.

Shares of Intermediate Fund A Class 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 Intermediate Fund A Class;
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.
A Fund 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 a front-end sales
charge and, as a result, the full amount of the investor's purchase payment
will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling USA Fund B Class Shares and Insured
Fund B Class Shares at the time of purchase from its own assets in an amount
equal to no more than 4% of the dollar amount purchased. Such payments for
Intermediate Fund B Class shares are currently anticipated to be in an amount
equal to no more than 2%. In addition, from time to time, upon written notice
to all of its dealers, the Distributor may hold special promotions for
specified periods during which the Distributor may pay additional compensation
to dealers or brokers for selling Class B Shares at the time of purchase. As
discussed below, however, Class B Shares are subject to annual 12b-1 Plan
expenses and, if USA Fund B Class shares and Insured Fund B Class shares are
redeemed within six years of purchase and Intermediate Fund B Class shares are
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 makes it possible for a Fund to
sell Class B Shares without deducting a front-end sales charge at the time of
purchase.

Holders of Class B Shares who exercise the exchange privilege described below
will continue to be subject to the CDSC schedule for Class B Shares described
in this Prospectus, even after the exchange. USA Fund B Class' and Insured Fund
B Class' CDSC schedule may be higher than the CDSC schedule for Class B Shares
acquired as a result of the exchange. See Redemption and Exchange.

AUTOMATIC CONVERSION OF CLASS B SHARES

USA Fund B Class shares and Insured Fund B Class shares, other than shares
acquired through reinvestment of dividends, held for eight years after purchase
are eligible for automatic conversion into Class A Shares. Intermediate Fund B
Class shares, other than shares acquired through reinvestment of dividends,
held for five years after purchase are eligible for automatic conversion into
Class A Shares. Conversions of Class B Shares into Class A Shares will occur
only four times in any calendar year, on the last business day of the second
full week of March, June, September and December (each, a "Conversion Date").
If, as applicable, the eighth or 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 such anniversary occurs between Conversion Dates, an
investor's Class B Shares will be converted on the next Conversion Date after
the anniversary. Consequently, if a shareholder's 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, as applicable, the eighth or fifth
anniversary of purchase before the shares will automatically convert into Class
A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends will
convert to the corresponding Class A Shares of that fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant Class)
pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.

22
<PAGE>

LEVEL SALES CHARGE ALTERNATIVE-- CLASS C SHARES
Class C Shares may be purchased at net asset value without a front-end sales
charge and, as a result, the full amount of the investor's purchase payment
will be invested in Fund shares. The Distributor currently 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 12 months of
purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class
C Shares. Payments to the Distributor and others under the Class C 12b-1 Plan
may be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described below
will continue to be subject to the CDSC schedule for the Class C Shares as
described in this Prospectus. See Redemption and Exchange.

CONTINGENT DEFERRED SALES CHARGE-- CLASS B SHARES AND CLASS C SHARES

Class B Shares redeemed within prescribed periods after purchase may be
subject to a CDSC at the rates set forth below and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are charged
as a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time of
purchase of the shares being redeemed or the net asset value of those shares at
the time of redemption. No CDSC will be imposed on increases in net asset value
above the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through 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 Class B Shares or Class
C Shares of a Fund, 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 USA Fund B Class and
Insured Fund B Class:

<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 thereaf-
ter None
</TABLE>

During the seventh year after purchase and, thereafter, until converted
automatically into Class A shares, USA Fund B Class shares and Insured Fund B
Class 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 Class B shares will convert are subject to ongoing annual 12b-1 Plan
expenses of up to a maximum of 0.30% of average daily net assets of such
shares.

The following table sets forth the rates of the CDSC for Intermediate Fund B
Class:

During the fourth year after purchase and, thereafter, until converted
automatically into Class A shares, Intermediate Fund B Class 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 Intermediate Fund A Class shares into which
Intermediate Fund B Class shares will convert are subject to ongoing annual
12b-1 Plan expenses of up to a maximum of 0.30% (currently, no more than 0.15%)
of average daily net assets representing such shares.

In determining whether a CDSC applies to a redemption of Class B Shares, it
will be assumed that USA Fund B Class shares and Insured Fund B Class shares
held for more than six years and Intermediate Fund B Class 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 six-year or three-year period, as applicable. With respect to Class
C Shares, it will be assumed that shares held for more than 12 months are
redeemed first followed by shares acquired through the reinvestment of
dividends or distributions, and finally by shares held for 12 months or less.

23
<PAGE>

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 Contingent Deferred Sales Charge--Class B Shares and
Class C Shares under Redemption and Exchange.

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 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware 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 Conduct Rules, 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 Conduct Rules 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 Conduct Rules as
they may be amended.

24
<PAGE>

How to
Buy Shares
PURCHASE AMOUNTS

Generally, the minimum initial purchase is $1,000 for Class A Shares, Class B
Shares and Class C Shares. Subsequent purchases of shares of any Class
generally must be $100 or more. For purchases under the Uniform Gifts to Minors
Act or Uniform Transfers to Minors Act or through an Automatic Investing Plan,
there is a minimum initial purchase of $250 and a minimum subsequent purchase
of $25.
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.

INVESTING THROUGH YOUR INVESTMENT DEALER

You can make a purchase of shares of the Funds 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, the
Delaware Group 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 Fund and Class selected to Delaware
Group 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 Fund and 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 Tax-Free Fund,
Inc. 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 1412893401 (include your
name(s) and your account number for the Fund and Class in which you are
investing).

1. Initial Purchases--Before you invest, telephone the 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 for the specific Fund and Class selected to Delaware Group 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
Shareholder Service Center by telephone of each wire you send.

INVESTING BY EXCHANGE

If you have an investment in another mutual fund in the Delaware Group, you
may write and authorize an exchange of part or all of your investment into
shares of a Fund. If you wish to open an account by exchange, call the
Shareholder Service Center for more information. All exchanges are subject to
the eligibility and minimum purchase requirements set forth in each fund's
prospectus. See Redemption and Exchange for more complete information
concerning your exchange privileges.

Holders of Class A Shares of a Fund may exchange all or part of their shares
for certain of the shares of other funds in the Delaware Group, including other
Class A Shares, but may not exchange their Class A Shares for Class B Shares or
Class C Shares of the Fund or of any other fund in the Delaware Group. Holders
of Class B Shares of a Fund are permitted to exchange all or part of their
Class B Shares only into Class B Shares of other Delaware Group funds.
Similarly, holders of Class C Shares of a Fund are permitted to exchange all or
part of their Class C Shares only into Class C Shares of other Delaware Group
funds. See Appendix C -- Classes Offered for a list of Delaware Group funds and
the classes they offer. Class B Shares of a Fund and Class C Shares of a Fund
acquired by exchange will continue to carry the CDSC and, in the case of Class
B Shares, the automatic conversion schedule of the fund from which the exchange
is made. The holding period of Class B Shares of a Fund acquired by exchange
will be added

25
<PAGE>

to that of the shares that were exchanged for purposes of determining the time
of the automatic conversion into Class A Shares of a Fund.
Permissible exchanges into Class A Shares of a Fund will be made without a
front-end sales charge, except for exchanges of shares that were not previously
subject to a front-end sales charge (unless such shares were acquired through
the reinvestment of dividends). Permissible exchanges into Class B Shares or
Class C Shares of a Fund will be made without the imposition of a CDSC by the
fund from which the exchange is being made at the time of the exchange.

ADDITIONAL METHODS OF ADDING TO YOUR INVESTMENT
Call the Shareholder Service Center for more information if you wish to use
the following services:

1. Automatic Investing Plan
THE AUTOMATIC INVESTING PLAN ENABLES YOU TO MAKE REGULAR MONTHLY INVESTMENTS
WITHOUT WRITING OR MAILING CHECKS. You may authorize Tax-Free Fund, Inc. to
transfer a designated amount monthly from your checking account to your Fund
account. Many shareholders use this as an automatic savings plan. Shareholders
should allow a reasonable amount of time for initial purchases and changes to
these plans to become effective.

2. 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). Each Fund 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.

* * *

Should investments through an automatic investing plan or by direct deposit be
reclaimed or returned for some reason, Tax-Free Fund, Inc. has the right to
liquidate your Fund shares to reimburse the government or transmitting bank. If
there are insufficient funds in your account, you are obligated to reimburse
the Fund.

3. MoneyLine (SM) On Demand

Through the MoneyLine (SM) On Demand service, you or your investment dealer may
call the Fund to request a transfer of funds from your predesignated bank
account to your Fund account. See MoneyLine (SM) Services under The Delaware
Difference for additional information about this service.

4.Wealth Builder Option
You can use our Wealth Builder Option to invest in a Fund through regular
liquidations of shares in your accounts in other funds in the Delaware Group.
You may also elect to invest in other mutual funds in the Delaware Group
through the Wealth Builder Option through regular liquidations of shares in
your Fund account.

Under this automatic exchange program, you can authorize regular monthly
amounts (minimum of $100 per fund) to be liquidated from your account in one or
more funds in the Delaware Group and invested automatically into any other
account in a Delaware Group mutual fund that you may specify. If in connection
with the election of the Wealth Builder Option, you wish to open a new account
to receive the automatic investment, such new account must meet the minimum
initial purchase requirements described in the prospectus of the fund that you
select. All investments under this option are exchanges and are therefore
subject to the same conditions and limitations as other exchanges noted above.
You can terminate your participation in Wealth Builder at any time by giving
written notice to the fund from which exchanges are made. See Redemption and
Exchange.

5. 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. Or, 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 a Fund or of other
Delaware Group funds are made without a front-end sales charge. Reinvestments
of distributions into Class B Shares of a Fund or of other Delaware Group funds
or into Class C Shares of a Fund 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 Classes of Shares for
information concerning the automatic conversion of Class B Shares acquired by
reinvesting dividends.

Holders of Class A Shares of a Fund may not reinvest their distributions into
Class B Shares or Class C Shares of any fund in the Delaware Group, including
the Funds. Holders of Class B Shares of a Fund may reinvest their distributions
only into Class B Shares of the funds in the Delaware Group which offer that
class of shares. Similarly, holders of Class C Shares of a Fund may reinvest
their distributions only into Class C Shares of the funds in the Delaware Group
which offer that class of shares. See Appendix C -- Classes Offered for a list
of the funds offering those classes of shares. For more information about
reinvestments, call the Shareholder Service Center.

26
<PAGE>

PURCHASE PRICE AND EFFECTIVE DATE

The offering price and net asset value of 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 Fund in which the shares are being purchased, its
agent or designee. 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

Each 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. Each 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. Each Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to additional
bank charges for clearance and currency conversion.

Each Fund also reserves the right, following shareholder notification, to
charge a service fee on accounts that, as a result of redemption, have remained
below the minimum stated account balance for a period of three or more
consecutive months. Holders of such accounts may be notified of their
insufficient account balance and advised that they have until the end of the
current calendar quarter to raise their balance to the stated minimum. If the
account has not reached the minimum balance requirement by that time, the Fund
will charge a $9 fee for that quarter and each subsequent calendar quarter
until the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for
the previous quarter, and will be used to help defray the cost of maintaining
low-balance accounts. No fees will be charged without proper notice, and no
CDSC will apply to such assessments.
Each Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.

27
<PAGE>

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 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.
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.

Your shares will be redeemed or exchanged at a price based on the net asset
value next determined after a Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. See Purchase Price and Effective Date under
How to Buy Shares. A shareholder submitting a redemption request may indicate
that he or she wishes to receive redemption proceeds of a specific dollar
amount. In the case of such a request, a Fund will redeem the number of shares
necessary to deduct the applicable CDSC in the case of Class B and 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. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.

Except as noted below, for a redemption request to be in "good order," you
must provide your account number, account registration, and the total number of
shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800-523-1918. Each
Fund may suspend, terminate, or amend the terms of the exchange privilege upon
60 days' written notice to shareholders.
Each Fund will process written and telephone redemption requests to the extent
that the purchase orders for the shares being redeemed have already settled.
Each Fund will honor redemption requests as to shares for which a check was
tendered as payment, but a Fund will not mail the proceeds until it is
reasonably satisfied that the check has cleared, which may take up to 15 days
from the purchase date. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. Each Fund reserves the right to reject a
written or telephone redemption request or delay payment of redemption proceeds
if there has been a recent change to the shareholder's address of record.
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 shares of other funds in the Delaware Group (in each
case, "New Shares") in a permitted exchange, will not be subject to a CDSC that
might otherwise be due upon redemption of the Original Shares. However, such
shareholders will continue to be subject to the CDSC and, in the case of Class
B Shares, the automatic conversion schedule of the Original Shares as described
in this Prospectus and any CDSC assessed upon redemption will be charged by the
fund from which the Original Shares were exchanged. In an exchange of shares
from either USA Fund B Class or Insured Fund

28
<PAGE>

B Class, the CDSC schedule for such Class 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. The automatic conversion
schedule of the Original Shares of USA Fund B Class or Insured Fund B Class may
be longer than that of the New Shares. Consequently, an investment in New
Shares by exchange may subject an investor to the higher 12b-1 fees applicable
to USA Fund B Class and Insured Fund B Class shares for a longer period of time
than if the investment in New Shares were made directly.
Various redemption and exchange methods are outlined below. Except for the
CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the 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.

WRITTEN REDEMPTION
You can write to each Fund at 1818 Market Street, Philadelphia, PA 19103 to
redeem some or all of your shares. The request must be signed by all owners of
the account or your investment dealer of record. For redemptions of more than
$50,000, or when the proceeds are not sent to the shareholder(s) at the address
of record, the Funds require a signature by all owners of the account and a
signature guarantee for each owner. Each signature guarantee must be supplied
by an eligible guarantor institution. Each Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Funds may require further documentation from
corporations, executors, retirement plans, administrators, trustees or
guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate must accompany your request and also be in good order. Certificates
are issued for Class A Shares only if a shareholder submits a specific request.
Certificates are not issued for Class B Shares or Class C Shares.

WRITTEN EXCHANGE
You may also write to each Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your shares into another mutual
fund in 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 redeem or
exchange only by written request and you must return your certificates.
The Telephone Redemption--Check to Your Address of Record service and the
Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in which you have your
account in writing that you do not wish to have such services available with
respect to your account. 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 Funds by telephone during periods when market or
economic conditions lead to an unusually large volume of telephone requests.

Neither the Funds nor their Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption
or exchange of Fund shares which are reasonably believed to be genuine. With
respect to such telephone transactions, each Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. 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
after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.

29
<PAGE>

TELEPHONE REDEMPTION--PROCEEDS TO YOUR BANK

Redemption proceeds of $1,000 or more can be transferred to your predesignated
bank account by wire or by check. You should authorize this service when you
open your account. If you change your predesignated bank account, you must
complete an Authorization Form and have your signature guaranteed. For your
protection, your authorization must be on file. If you request a wire, your
funds will normally be sent the next business day. CoreStates Bank, N.A.'s fee
(currently $7.50) will be deducted from your redemption proceeds. If you ask
for a check, it will normally be mailed the next business day after receipt of
your redemption request to your predesignated bank account. There are no
separate fees for this redemption method, but the mail time may delay getting
funds into your bank account. Simply call the Shareholder Service Center prior
to the time the offering price and net asset value are determined, as noted
above.

MoneyLine SM On Demand

Through the MoneyLine SM On Demand service, you or your investment dealer may
call the Fund to request a transfer of funds from your Fund account to your
predesignated bank account. See MoneyLine SM Services under The Delaware
Difference for additional information about this service.

TELEPHONE EXCHANGE
The Telephone Exchange feature is a convenient and efficient way to adjust
your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in the Delaware Group under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.

SYSTEMATIC WITHDRAWAL PLANS

This plan provides shareholders with a consistent monthly (or quarterly)
payment. THIS IS PARTICULARLY USEFUL TO SHAREHOLDERS LIVING ON FIXED INCOMES,
SINCE IT 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 Funds do not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine SM

Direct Deposit Service. Your funds will normally be credited to your bank
account up to four business days after the payment date. There are no separate
fees for this redemption method. See MoneyLine SM Services under The Delaware
Difference for more information about this service.

* * *

Shareholders should not purchase additional shares while participating in a
Systematic Withdrawal Plan.
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 was paid on
that purchase. See Contingent Deferred Sales Charge for Certain Redemptions of
Class A Shares Purchased at Net Asset Value, below.
The applicable CDSC for Class B Shares and Class C Shares redeemed via a
Systematic Withdrawal Plan 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 Contingent Deferred Sales Charge--Class B and Class C Shares, below.
For more information on Systematic Withdrawal Plans, call the Shareholder
Service Center.

CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN REDEMPTIONS OF CLASS A SHARES
PURCHASED AT NET ASSET VALUE
A Limited CDSC will be imposed on 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 previously described. See
Classes of 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 Class A
Shares being redeemed; or (2) the net asset value of such Class A Shares at the
time of redemption. For purposes of

30
<PAGE>

this formula, the "net asset value at the time of purchase" will be the net
asset value at purchase of 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 Limited CDSC is assessed if such 12-month period is not satisfied
irrespective of whether the redemption triggering its payment is of Class A
Shares of a Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed that
shares not subject to the Limited CDSC are the first redeemed followed by other
shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the
investment occurred, will age one month on the last day of that month and each
subsequent month.

WAIVER OF LIMITED CONTINGENT DEFERRED SALES CHARGE--CLASS A SHARES

The Limited CDSC for Class A Shares on which a dealer's commission has been
paid will be waived in the following instances: (i) redemptions that result
from a Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; 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 Class A Shares at Net Asset Value under Classes of
Shares).

WAIVER OF CONTINGENT DEFERRED SALES CHARGE--CLASS B AND CLASS C SHARES
The CDSC on Class B and Class C Shares is waived in connection with the
following redemptions: (i) redemptions that result from a Fund's right to
liquidate a shareholder's account if the aggregate net asset value of the
shares held in the account is less than the then-effective minimum account
size; and (ii) distributions from an account if the redemption results
from the death of all registered owners 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.

31
<PAGE>

DIVIDENDS
AND DISTRIBUTION
Tax-Free Fund, Inc. declares a dividend on each Fund to all shareholders of
record at the time the offering price of shares is determined. See Purchase
Price and Effective Date under How to Buy Shares. Thus, when redeeming shares,
dividends continue to be credited up to and including the date of redemption.

Dividends, if any, are declared daily and paid monthly. 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.

Purchases of Fund shares by wire begin earning dividends when converted into
Federal Funds and available for investment, normally the next business day
after receipt. However, if a Fund is given prior notice of Federal Funds wire
and an acceptable written guarantee of timely receipt from an investor
satisfying 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, which is normally one business day after
receipt.
Each Class of a Fund will share proportionately in the investment income and
expenses of that Fund, except that the per share dividends from net investment
income on Class A Shares, Class B Shares and Class C Shares of a Fund 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 Funds.

Both dividends and distributions, if any, are automatically reinvested in your
account at net asset value unless you elect otherwise. Any payment by check 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 your 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 MoneyLine SM Direct Deposit
Service and have such payments transferred from your Fund account to your
predesignated bank account. See MoneyLine SM Services under The Delaware
Difference for more information about this service.
Each Fund anticipates that substantially all of its dividends from net
investment income paid to shareholders will be exempt from federal income tax.

32
<PAGE>

Taxes
The tax discussion set forth below 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 a Fund.

Each Fund 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 Fund 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 and by satisfying certain other requirements relating to the sources of
its income and diversification of its assets. Each Fund intends to distribute
substantially all of the its net investment income and net capital gains, if
any.
Each Fund 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 Fund's 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
Fund's 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 Fund 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 Fund. The Funds do not seek to realize any
particular amount of capital gains during a year; rather, realized gains are a
by-product of Fund 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 Fund 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 Fund and received by
the shareholder on December 31 of the calendar year in which they are declared.
The sale of shares of a Fund 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
a Fund and any other fund in the Delaware Group. Any loss incurred on a sale or
exchange of Fund shares that 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 Fund shares will be excluded from the
federal tax basis of any of such shares sold or exchanged within 90 days of
their purchase (for purposes of determining gain or loss upon sale of such
shares) if the sale proceeds are reinvested in a Fund 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 each 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
Fund will be tax-free for federal tax purposes. See Automatic Conversion of
Class B Shares under Classes of 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. Tax-Free Fund, Inc. will report annually the percentage of
interest income earned on the municipal obligations on a state-by-state basis
during the proceeding calendar year.
33
<PAGE>

Each year, Tax-Free Fund, Inc. will mail to you information on the tax status
of each Fund's dividends and distributions.
Tax-Free Fund, Inc. 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 Investment Application your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
See Taxes in Part B for additional information on tax matters relating to each
Fund and its shareholders.

34
<PAGE>

Calculation of
Offering Price and
Net Asset Value Per Share

The net asset value ("NAV") per share for a Fund is computed by adding the
value of all securities and other assets in that Fund's portfolio, deducting
any liabilities of that Fund (expenses and fees are accrued daily) and dividing
by the number of that Fund's shares outstanding. Debt securities are priced on
the basis of valuations provided by an independent pricing service using
methods approved by Tax-Free Fund, Inc.'s 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 Tax-Free
Fund, Inc.'s Board of Directors.

Class A Shares are purchased at the offering price per share, while Class B
Shares and Class C Shares are purchased at the NAV per share. The offering
price per share of Class A Shares consists of the NAV per share next computed
after the order is received, plus any applicable front-end sales charges.
The offering price and NAV are computed as of the close of regular trading on
the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the
Exchange is open.

The net asset values of all outstanding shares of each Class of a Fund will be
computed on a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the value of shares of
that Class. All income earned and expenses incurred by a Fund will be borne on
a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in that Fund 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 12b-1 Plans. Due to the
specific distribution expenses and other costs that may be allocable to each
Class, the dividends paid to each Class of a particular Fund may vary. However,
the NAV per share of each Class of a particular Fund is expected to be
equivalent.

35
<PAGE>

Management of
the Funds

DIRECTORS

The business and affairs of Tax-Free Fund, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Tax-Free Fund, Inc.'s directors and officers.

INVESTMENT MANAGER
The Manager furnishes investment management services to each Fund.

The Manager and its predecessors have been managing the funds in the Delaware
Group since 1938. On August 31, 1997, the Manager and its affiliates within the
Delaware Group, including Delaware International Advisers Ltd., were managing
in the aggregate more than $38 billion in assets in the various institutional
or separately managed (approximately $22,771,042,000) and investment company
(approximately $15,670,250,000) 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 indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management. In connection with the merger, new
Investment Management Agreements between Tax-Free Fund, Inc. and the Manager on
behalf of each Fund were executed following shareholder approval.

The Manager manages each Fund's portfolio and makes investment decisions which
are implemented by Tax-Free Fund, Inc.'s Trading Department. The Manager also
administers Tax-Free Fund, Inc.'s affairs and pays the salaries of all the
directors, officers and employees of Tax-Free Fund, Inc. who are affiliated
with the Manager. For these services, the annual compensation paid to the
Manager is equal to: for USA Fund, 0.60% on the first $500 million of average
daily net assets, 0.575% on the next $250 million and 0.55% on the average
daily net assets in excess of $750 million; for Insured Fund, 0.60% of the
average daily net assets of the Fund; and for Intermediate Fund, 0.50% of the
average daily net assets of the Fund, less in each case, the Fund's
proportionate share of all directors' fees paid to the unaffiliated directors
of Tax-Free Fund, Inc. The directors of Tax-Free Fund, Inc.

annually review fees paid to the Manager. The investment management fees paid
by each of USA Fund and Insured Fund for the fiscal year ended August 31, 1997
were 0.59% and 0.59%, respectively, of average daily net assets. The investment
management fees incurred by Intermediate Fund for the fiscal year ended August
31, 1997 were 0.49% of average daily net assets and no fees were paid after
considering the voluntary waiver of fees by the Manager as described below.

From the commencement of Intermediate Fund's operations through June 30, 1993,
the Manager voluntarily waived that portion, if any, of the annual management
fees payable by the Fund and reimbursed the Fund's expenses to the extent
necessary to ensure that the Total Operating Expenses of the Fund, including
the 12b-1 expenses, did not exceed 0.25%. This waiver and expense limitation
was extended to June 30, 1994, but modified, effective May 2, 1994 through
December 31, 1996, to provide that annual operating expenses would not exceed
0.10% (excluding 12b-1 fees). Because 12b-1 Plan fees have been set at 0.15% by
Tax-Free Fund, Inc.'s Board of Directors for Intermediate Fund A Class, the
amount of the voluntary waiver with respect to such Class, as modified, was
equivalent to the waiver operative through May 1, 1994. Beginning January 1,
1997, the Manager elected voluntarily to waive that portion, if any, of the
annual management fees payable by Intermediate Fund and to pay certain of the
Fund's expenses to the extent necessary to ensure that the Total Operating
Expenses of the Fund did not exceed 0.35% (excluding the 12b-1 plan expenses).
This waiver and expense limitation extended through June 30, 1997. Beginning
July 1, 1997, the Manager has elected voluntarily to waive that portion, if
any, of the annual management fees payable by Intermediate Fund and to pay
certain of the Fund's expenses to the extent necessary to ensure that the Total
Operating Expenses of the Fund do not exceed 0.45% (excluding the 12b-1 plan
expenses). This waiver and expense limitation will extend through December 31,
1997.

Patrick P. Coyne and Mitchell L. Conery, each a Vice President/Senior
Portfolio Manager of Tax-Free Fund, Inc., have primary responsibility for
making day-to-day investment decisions for each Fund. Mr. Coyne has been
manager of USA Fund and Insured Fund since July 1, 1994 and manager of
Intermediate Fund since its inception in 1993. A graduate of Harvard University
with an MBA from the University

36
<PAGE>

of Pennsylvania's Wharton School, Mr. Coyne joined the Delaware Group's fixed-
income department in 1990. Prior to joining the Delaware Group, 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. Mr. Conery joined the
Delaware Group in January 1997 at which time he became co-manager of USA Fund,
Insured Fund and Intermediate Fund. Mr. Conery holds a bachelor's degree from
Boston University and an MBA in Finance from the State University of New York
at Albany. He has served as an investment officer with Travelers Insurance and
as a research analyst with CS First Boston and MBIA Corporation.

In making investment decisions for the Funds, Mr. Coyne and Mr. Conery
regularly consult with Paul E. Suckow and other members of Delaware Group's
fixed-income department. Mr. Suckow is Executive Vice President/Chief
Investment Officer, Fixed Income of Tax-Free Fund, Inc. He is a CFA
charterholder and 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 where he served as
Executive Vice President and Director of Fixed Income.

PORTFOLIO TRADING PRACTICES

Each Fund may sell securities without regard to the length of time they have
been held. Trading will be undertaken principally to achieve a Fund's objective
in light of expected changes in interest rates. The degree of trading activity
will affect brokerage costs of a Fund and may affect taxes payable by such
Fund's shareholders. Given each Fund's investment objective, the annual
portfolio turnover rate for each Fund is not expected to exceed 100%.

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 funds in the Delaware Group of funds in
placing portfolio orders, and may place orders with broker/dealers that have
agreed to defray certain expenses of such funds, such as custodian fees.

PERFORMANCE INFORMATION
From time to time, each Fund 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. Each Fund may also publish a tax-equivalent
yield concerning a Class based on federal and, if applicable, state tax rates,
which demonstrates the taxable yield necessary to produce an after-tax yield
equivalent to such Class' yield.

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 (or life-of-fund, if applicable) periods. The Funds may,
in addition, advertise aggregate and average total return information over
additional periods of time. In addition, the Funds 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 a guarantee of future results.

DISTRIBUTION (12B-1) AND SERVICE

The Distributor, Delaware Distributors, L.P., serves as the national
distributor for each Fund's shares under separate Distribution Agreements with
Tax-Free Fund, Inc. dated April 3, 1995, as amended on November 29, 1995.
Tax-Free Fund, Inc. has adopted a separate distribution plan under Rule 12b-1
for each of the Class A Shares, Class B Shares and Class C Shares (the
"Plans"). Each Plan permits the Fund to which the Plan relates to pay the
Distributor from the assets of the Fund's respective Classes a monthly fee for
the Distributor's 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 shares of the Classes, the Distributor

37
<PAGE>

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, each Fund
may make payments from the 12b-1 Plan fees of its respective Classes directly
to others, such as banks, who aid in the distribution of Class shares or
provide services in respect of such Classes, pursuant to service agreements
with Tax-Free Fund, Inc.
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 Fund from the assets of its respective Classes to
the Distributor and others under the Plans may not exceed (i) 0.30% of Class A
Shares' average daily net assets in any year, and (ii) 1% (0.25% of which are
service fees to be paid by such Fund 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. 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 actual 12b-1 expenses assessed against USA Fund A Class and
Insured Fund A Class may be less than 0.30%, but may not be less than 0.10%,
because of the formula for calculating the fees adopted by the Board of
Directors effective June 1, 1992. On September 17, 1992, the Board of Directors
set the fee for Intermediate Fund A Class, pursuant to its Plan, at 0.15%. 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. See Part B.

While payments pursuant to the Plans may not exceed 0.30% annually with
respect to 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 Tax-Free Fund, Inc.'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 each Fund under separate
Agreements with the Funds dated June 29, 1988 for USA Fund and Insured Fund and
November 10, 1992 for Intermediate Fund. The Transfer Agent also provides
accounting services to each Fund pursuant to the terms of a separate Fund
Accounting Agreement.

The directors annually review fees paid to the Distributor and the Transfer
Agent. The Distributor and the Transfer Agent are also indirect, wholly owned
subsidiaries of DMH.

EXPENSES

Each Fund 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. For the fiscal year ended August
31, 1997, the ratios of expenses to average daily net assets for Class A
Shares, Class B Shares and Class C Shares of each Fund were as follows:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
USA Fund 0.94% 1.74% 1.74%
Insured Fund 1.05% 1.85% 1.85%
Intermediate
Fund 0.43%* 1.28%* 1.28%*
</TABLE>

*Reflects the voluntary waiver of fees by the Manager.

38
<PAGE>

SHARES
Tax-Free Fund, Inc. is an open-end management investment company. Each Fund's
portfolio of assets is nondiversified as defined by the 1940 Act. Commonly
known as a mutual fund, Tax-Free Fund, Inc. was organized as a Maryland
corporation on August 17, 1983. Tax-Free Fund, Inc. currently offers three
funds, and each Fund currently offers three classes of shares. The shares of
each Fund 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 Fund represent proportionate interests in the
assets of that Fund and have the same voting and other rights and preferences
as the other classes of shares of that Fund, except that, as a general matter,
holders of Class A Shares, Class B Shares and Class C Shares of a Fund may vote
only on matters affecting the 12b-1 Plan that relates to the class of shares
that they hold. However, Class B Shares of a Fund may vote on any proposal to
increase materially the fees to be paid by that Fund under the Rule 12b-1 Plan
relating to Class A Shares.
All shares have noncumulative voting rights which means that the holders of
more than 50% of Tax-Free Fund, Inc.'s shares voting for the election of
directors can elect 100% of the directors if they choose to do so. Shares of
each Fund have a priority over shares of any other series of the Fund in the
assets and income of that Fund, and each Fund will vote separately on any
matter which affects only that Fund. Under Maryland law, Tax-Free Fund, Inc. 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 Tax-Free Fund, Inc.'s outstanding shares
may request that a special meeting be called to consider the removal of a
director.

39
<PAGE>

Other Investment
Policies and
Risk Considerations

PRIVATE PURPOSE BONDS

The Tax Reform Act of 1986 (the "Act") limits the amount of new "private
purpose" bonds that each state can issue and subjects interest income from
these bonds to the federal alternative minimum tax. "Private purpose" bonds are
issues whose proceeds are used to finance certain nongovernment activities, and
could include some types of industrial revenue bonds such as privately-owned
sports and convention facilities. The Act also makes the tax-exempt status of
certain bonds depend on the issuer's compliance with specific requirements
after the bonds are issued.
Each Fund intends to seek to achieve a high level of tax-exempt income.
However, if a Fund invests in newly-issued private purpose bonds, a portion of
that Fund's distributions would be subject to the federal alternative minimum
tax. Each Fund may invest up to 20% of its assets in bonds the income from
which is subject to the federal alternative minimum tax.

ZERO COUPON BONDS
The Funds may 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.
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. Each Fund has qualified as a regulated investment
company under the Internal Revenue Code. Accordingly, during periods when a
Fund 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 Funds 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.

MUNICIPAL LEASES
Each Fund may also invest in municipal lease obligations primarily through
certificates of participation ("COPs"). As with its other investments, each
Fund 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 Funds 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.

40
<PAGE>

While the risk of nonappropriation is inherent to COP financing, the Funds
believe 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. ("Fitch"), 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 of
Tax Free Fund, Inc. has established guidelines to determine whether the COPs
held in the Funds' portfolios 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 Fund both in general and with respect to COPs; and (c) the extent to
which the type of COPs held by the Fund trade on the same basis and with the
same degree of dealer participation as other municipal bonds of comparable
credit rating or quality.

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 rating of triple A from S&P and Moody's.

LOWER-RATED SECURITIES
The market values of 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.
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 a Fund's net asset value. In addition, the Funds may incur
additional expenses to the extent they are required to seek recovery upon a
default in the payment of principal or interest on its portfolio holding. The
Funds will rely on the Manager's judgment, analysis and experience in
evaluating the creditworthiness of an issuer. In this evaluation, the 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.

RULE 144A SECURITIES

Each Fund may invest in restricted securities, including securities eligible
for resale without registration pursuant to Rule 144A ("Rule 144A Securities")
under the 1933 Act, as discussed more fully below. A Fund may invest no more
than 10% of the value of its net assets in illiquid securities.

Rule 144A permits many privately placed and legally restricted securities to
be freely traded among certain institutional buyers such as a Fund. 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 a Fund's 10% limitation on investments in
illiquid assets. The Board has instructed the Manager to consider the following
factors in determining the liquidity of a Rule 144A Security: (i) the frequency
of trades and trading volume for the security; (ii) whether at least three
dealers are willing to purchase or sell the security and the number of
potential purchasers; (iii) whether at least two dealers are making a market in
the security; and (iv) the

41
<PAGE>

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, a Fund's holdings
of illiquid securities exceed the Fund's 10% limit on investments in such
securities, the Manager will determine what action to take to ensure that each
Fund continues to adhere to such limitation.

WHEN-ISSUED SECURITIES
Each Fund 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 Fund does not accrue
interest, but the market value may fluctuate. This can result in a Fund's share
value increasing or decreasing. If a Fund invests in securities of this type,
it will maintain a segregated account to pay for them and mark them to market
daily.

BORROWINGS
While the Funds are permitted, they normally do not borrow money. A Fund will
not purchase investment securities while it has an outstanding borrowing.

REPURCHASE AGREEMENTS

In order to invest its cash reserves or when in a temporary defensive posture,
each Fund may enter into repurchase agreements with banks or broker/dealers
deemed to be creditworthy by the Manager, under guidelines approved by Tax-Free
Fund, Inc.'s Board of Directors. Each Fund may use repurchase agreements which
are at least 100% collateralized by securities in which a Fund can invest
directly. Not more than 10% of a Fund's assets may be invested in repurchase
agreements of over seven days' maturity or other illiquid assets.

PORTFOLIO LOAN TRANSACTIONS
Intermediate Fund may lend a portion of its assets to qualified broker/dealers
or institutional investors for their use relating to short sales or other
security transactions. See Part B for further information.

OPTIONS
Intermediate Fund may write put and call options on a covered basis only, and
will not engage in option writing strategies for speculative purposes. The Fund
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 Fund's investment objective. The Fund may
also purchase (i) call options to the extent that premiums paid for such
options do not exceed 2% of the Fund's total assets and (ii) put options to the
extent that premiums paid for such options do not exceed 2% of the Fund's total
assets.

FUTURES
Intermediate Fund 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 Fund 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 Fund of the securities called
for by the contract at a specified price during a specified future month.

INVERSE FLOATERS
Intermediate Fund 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.

* * *

Part B describes certain of these investment policies and risk considerations.
Part B also sets forth other investment policies, risk considerations and more
specific investment restrictions.

42
<PAGE>

Appendix A--
Investment Illustrations

USA FUND AND INSURED FUND
ILLUSTRATIONS OF THE POTENTIAL IMPACT ON INVESTMENT BASED ON PURCHASE OPTION

$10,000 PURCHASE

<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
NO REDEMPTION REDEEM 1ST YEAR REDEEM 3RD YEAR REDEEM 5TH YEAR
------------------------- ----------------------- ----------------------- -----------------------
YEAR CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- ---- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000 9,525 10,000 10,000 9,525 10,000 10,000
1 10,192 10,630 10,630 10,192 10,230 10,530+ 10,192 10,630 10,630 10,192 10,630 10,630
2 10,905 11,300 11,300 10,905 11,300 11,300 10,905 11,300 11,300
3 11,669 12,012 12,012 11,669 11,712 12,012+ 11,669 12,012 12,012
4 12,485 12,768 12,768 12,485 12,768 12,768
5 13,359 13,573 13,573 13,359 13,373 13,573+
6 14,294 14,428 14,428
7 15,295 15,337 15,337
8 16,366+ 16,303 16,303
9 17,511 17,444* 17,330
10 18,737 18,665* 18,422
</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 SCENARIO 4
NO REDEMPTION REDEEM 1ST YEAR REDEEM 3RD YEAR REDEEM 5TH YEAR
------------------------- ----------------------- ----------------------- ------------------------
YEAR CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- ---- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000 243,750 250,000 250,000 243,750 250,000 250,000
1 260,813 265,750 265,750 260,813 255,750 263,250+ 260,813 265,750 265,750 260,813 265,750 265,750
2 279,069 282,492 282,492 279,069 282,492 282,492 279,069 282,492 282,492
3 298,604 300,289 300,289 298,604 292,789 300,289+ 298,604 300,289 300,289
4 319,507+ 319,207 319,207 319,507+ 319,207 319,207
5 341,872 339,318 339,318 341,872 334,318 339,318
6 365,803 360,695 360,695
7 391,409 383,418 383,418
8 418,808 407,574 407,574
9 448,124 436,104* 433,251
10 479,493 466,631* 460,546
</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 (3.75% @
$10,000; 3.00% @ $100,000; 2.50% @ $250,000; 2.00% @ $500,000).
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, the holding period and the expense structure for
each Class.

43
<PAGE>

APPENDIX A--INVESTMENT ILLUSTRATIONS

INTERMEDIATE FUND
ILLUSTRATIONS OF THE POTENTIAL IMPACT ON INVESTMENT BASED ON PURCHASE OPTION

$10,000 PURCHASE

<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
NO REDEMPTION REDEEM 1ST YEAR REDEEM 3RD YEAR REDEEM 5TH YEAR
------------------------- ----------------------- ----------------------- ------------------------
YEAR CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- ---- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 9,700 10,000 10,000 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 10,185 10,415 10,415
2 10,694 10,847 10,847 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+ 11,229 11,297 11,297
4 11,790+ 11,766 11,766 11,790+ 11,766 11,766
5 12,380 12,255 12,255 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
</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 SCENARIO 4
NO REDEMPTION REDEEM 1ST YEAR REDEEM 3RD YEAR REDEEM 5TH YEAR
------------------------- ----------------------- ------------------------ ------------------------
YEAR CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- ---- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 245,000 250,000 250,000 245,000 250,000 250,000 245,000 250,000 250,000 245,000 250,000 250,000
1 257,250 260,375 260,375 257,250 255,375 257,875+ 257,250 260,375 260,375 257,250 260,375 260,375
2 270,113 271,181 271,181 270,113 271,181 271,181 270,113 271,181 271,181
3 283,618+ 282,435 282,435 283,618+ 279,935 282,435 283,618+ 282,435 282,435
4 297,799 294,156 294,156 297,799 294,156 294,156
5 312,689 306,363 306,363 312,689 306,363 306,363
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
</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 (2.75% @
$10,000; 2.00% @ $100,000; 1.00% @ $250,000; 1.00% @ $500,000).
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, the holding period and the expense structure for
each Class.

44
<PAGE>

Appendix B--

Ratings

USA Fund intends to invest at least 80% of its portfolio in debt obligations
that are rated in the top four categories by Moody's, S&P or Fitch at the time
of purchase. USA Fund may invest up to 20% of its assets in securities with a
rating lower than the top four categories and in unrated securities. The table
set forth below shows the percentage of USA Fund's securities included in each
of the specified rating categories. Certain securities may not be rated because
the rating agencies were either not asked to provide ratings (e.g., many
issuers of privately placed bonds do not seek ratings) or because the rating
agencies declined to provide a rating for some reason, such as insufficient
data. The table below shows the percentage of USA Fund's securities which are
not rated. The information contained in the table was prepared based on a
dollar weighted average of the Fund's portfolio composition based on month end
data for the fiscal year ended August 31, 1997. The paragraphs following
contain excerpts from Moody's, S&P's and Fitch's ratings descriptions. These
credit ratings evaluate only the safety of principal and interest and do not
consider the market value risk associated with high yield securities.

<TABLE>
<CAPTION>
RATING MOODY'S AVERAGE WEIGHTED
AND/OR PERCENTAGE OF
S&P PORTFOLIO
-------------- ----------------
<S> <C>
Aaa/AAA 34.2%
Aa/AA 9.0%
A/A 18.1%
Baa/BBB 24.9%
Ba/BB 5.6%
B/B 0.4%
Caa/CCC 0.0%
Not Rated/Other 7.8%
</TABLE>

*Certain of the unrated bonds held by USA Fund have been determined to be of
comparable quality to rated bonds as follows: 45.3% AAA, 9.9% BBB; 4.4% BB; and
40.5% B.

GENERAL RATING INFORMATION

BONDS

<TABLE>
<C> <C> <S>
MOODY'S INVESTORS AAA Highest quality, smallest degree of investment risk.
SERVICE, INC.
AA High quality; together with Aaa bonds, they compose the
high-grade bond group.
A Upper-medium-grade obligations; many favorable
investment attributes.
</TABLE>
<TABLE>
<C> <C> <S>
BAA Medium grade obligations; neither highly protected
nor poorly secured. Interest and principal appear
adequate for the present, but certain protective
elements may be lacking or may be unreliable over
any great length of time.
BA More uncertain with speculative elements. Protective
of interest and principal payments not well
safeguarded in good and bad times.
B Lack characteristics of desirable investment;
potentially low assurance of timely interest and
principal payments or maintenance of other contract
terms over time.
CAA Poor standing, may be in default; elements of danger
with respect to principal or interest payments.
CA Speculative in high degree; could be in default or
have other marked shortcomings.
C Lowest rated. Extremely poor prospects of ever
attaining investment standing.
STANDARD & POOR'S AAA Highest rating; extremely strong capacity to pay
CORPORATION principal and interest.
AA High quality; very strong capacity to pay principal
and interest.
A Strong capacity to pay principal and interest;
somewhat more susceptible to the adverse effects of
changing circumstances and economic conditions.
BBB Adequate capacity to pay principal and interest;
normally exhibit adequate protection parameters, but
adverse economic conditions or changing
circumstances more likely to lead to weakened
capacity to pay principal and interest than for
higher-rated bonds.
BB, B, Predominantly speculative with respect to the
CCC, CC issuer's capacity to meet required interest and
principal payments. BB--lowest degree of
speculation; CC--the highest degree of speculation.
Quality and protective characteristics outweighed by
large uncertainties or major risk exposure to
adverse conditions.
D In default.
FITCH INVESTORS AAA Highest quality; obligor has exceptionally strong
SERVICE, INC. ability to pay interest and repay principal, which
is unlikely to be affected by reasonably foreseeable
events.
AA Very high quality; obligor's ability to pay interest
and repay principal is very strong. Because bonds
rated in the AAA and AA--categories are not
significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is
generally rated F-1+.
</TABLE>

45
<PAGE>

<TABLE>
<C> <C> <S>
A High quality; obligor's ability to pay interest and repay
principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than higher-rated bonds.
BBB Satisfactory credit quality; obligor's ability to pay
interest and repay principal is considered adequate.
Unfavorable changes in economic conditions and
circumstances are more likely to adversely affect these
bonds and impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is
higher than for higher-rated bonds.
</TABLE>
<TABLE>
<C> <C> <S>
BB, Not investment grade; predominantly speculative with
CCC, respect to the issuer's capacity to repay interest and
CC, C repay principal in accordance with the terms of the
obligation for bond issues not in default. BB is the
least speculative. C is the most speculative.
</TABLE>

COMMERCIAL PAPER

<TABLE>
<S> <C> <C> <C> <C> <C>
MOODY'S S&P FITCH
------- --- -----
P-1 Superior quality A-1+ Extremely strong quality F-1+ Exceptionally strong quality
P-2 Strong quality A-1 Strong quality F-1 Very strong quality
P-3 Acceptable quality A-2 Satisfactory quality F-2 Good credit quality
A-3 Adequate quality F-3 Fair quality
B Speculative quality F-S Weak credit quality
C Doubtful quality

STATE AND MUNICIPAL NOTES

MOODY'S S&P FITCH
------- --- -----
MIG1/ VMIG1 Best quality SP1+ Very strong quality F-1+ Exceptionally strong quality
MIG2/ VMIG2 SP1 Strong grade F-1
High quality Very strong quality
MIG3/ VMIG3 SP2 Satisfactory grade F-2
Favorable quality Good credit quality
MIG4/ VMIG4 Adequate quality SP3 Speculative grade F-3 Fair credit quality
SG Speculative quality F-S Weak credit quality
</TABLE>

46
<PAGE>

Appendix C--
Classes Offered
<TABLE>
<CAPTION>
A B C CONSULTANT
CLASS CLASS CLASS CLASS
<S> <C> <C> <C> <C>
GROWTH OF CAPITAL
Aggressive Growth Fund X X X --
Trend Fund x x x --
DelCap Fund x x x --
Small Cap Value Fund x x x --
U.S. Growth Fund x x x --
Growth Stock Fund x x x --
Tax-Efficient Equity Fund x x x --
- -----------------------------------------------------------------------------
TOTAL RETURN
Blue Chip Fund x x x --
Quantum Fund x x x --
Devon Fund x x x --
Decatur Total Return Fund x x x --
Decatur Income Fund x x x --
Delaware Fund x x x --
- -----------------------------------------------------------------------------
INTERNATIONAL DIVERSIFICATION
Emerging Markets Fund x x x --
New Pacific Fund x x x --
International Equity Fund x x x --
Overseas Equity Fund x x x --
Global Assets Fund x x x --
Global Bond Fund x x x --
- -----------------------------------------------------------------------------
CURRENT INCOME
Delchester Fund x x x --
Strategic Income Fund x x x --
U.S. Government Fund x x x --
Delaware-Voyageur US Government Securities Fund x x x --
Limited-Term Government Fund x x x --
- -----------------------------------------------------------------------------
TAX-FREE CURRENT INCOME
Tax-Free Ohio Fund x x x --
Tax-Free New Jersey Fund x x x --
Tax-Free Pennsylvania Fund x x x --
Tax-Free USA Fund x x x --
Tax-Free Insured Fund x x x --
Tax-Free USA Intermediate Fund x x x --
- -----------------------------------------------------------------------------
TAX PREFERRED INCOME
National High Yield Municipal Bond Fund x x x --
Delaware-Voyageur Tax-Free Arizona Insured Fund x x x --
Delaware-Voyageur Tax-Free Arizona Fund x x x --
Delaware-Voyageur Tax-Free California Insured
Fund x x x --
Delaware-Voyageur Tax-Free California Fund x x x --
Delaware-Voyageur Tax-Free Colorado Fund x x x --
Delaware-Voyageur Tax-Free Florida Insured Fund x x x --
Delaware-Voyageur Tax-Free Florida Intermediate
Fund x x x --
Delaware-Voyageur Tax-Free Florida Fund x x x --
Delaware-Voyageur Tax-Free Idaho Fund x x x --
</TABLE>

47
<PAGE>

<TABLE>
<CAPTION>
A B C CONSULTANT
CLASS CLASS CLASS CLASS
<S> <C> <C> <C> <C>
Delaware-Voyageur Tax-Free Iowa Fund x x x --
Delaware-Voyageur Tax-Free Kansas Fund x x x --
Delaware-Voyageur Minnesota High Yield Municipal
Bond Fund x x x --
Delaware-Voyageur Minnesota Insured Fund x x x --
Delaware-Voyageur Tax-Free Minnesota Intermediate
Bond Fund x x x --
Delaware-Voyageur Tax-Free Minnesota Fund x x x --
Delaware-Voyageur Tax-Free Missouri Insured Fund x x x --
Delaware-Voyageur Tax-Free New Mexico Fund x x x --
Delaware-Voyageur Tax-Free New York Fund x x x --
Delaware-Voyageur Tax-Free North Dakota Fund x x x --
Delaware-Voyageur Tax-Free Oregon Insured Fund x x x --
Delaware-Voyageur Tax-Free Utah Fund x x x --
Delaware-Voyageur Tax-Free Washington Insured
Fund x x x --
Delaware-Voyageur Tax-Free Wisconsin Fund x x x --
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS
Delaware Cash Reserve x x x x
U.S. Government Money Fund x -- -- x
Tax-Free Money Fund x -- -- x
</TABLE>

48
<PAGE>

The Delaware Group includes funds with a wide range of investment objectives.
Stock funds, income funds, national and state-specific tax-exempt funds, money
market funds, global and international funds and closed-end funds give
investors the ability to create a portfolio that fits their personal financial
goals. For more information, 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,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103

LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103

INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103

CUSTODIAN
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10006

DELAWARE
GROUP
- ----------
Philadelphia . London

[RECYCLE LOGO APPEARS HERE] Printed in the U.S.A. on recycled paper.
P-011[--] RRD10/97
<PAGE>

The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific tax-exempt
funds, money market funds, global and international funds and closed-end funds
give investors the ability to create a portfolio that fits their personal
financial goals. For more information, 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,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103

LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103

INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103

CUSTODIAN
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10006

- ---------------------------------

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

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OCTOBER 30, 1997

DELAWARE
GROUP
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PART B--STATEMENT OF ADDITIONAL INFORMATION

OCTOBER 30, 1997

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DELAWARE GROUP TAX-FREE FUND, INC.

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1818 Market Street
Philadelphia, PA 19103
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For Prospectus and Performance:
Nationwide 800-523-4640
Information on Existing Accounts:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500
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TABLE OF CONTENTS
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Cover Page
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Investment Objectives and Policies
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Municipal Bond Insurance
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Performance Information
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Trading Practices and Brokerage
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Purchasing Shares
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Investment Plans
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Determining Offering Price and Net Asset Value
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Redemption and Repurchase
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Dividends and Realized Securities Profits Distributions
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Taxes
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Investment Management Agreements
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Officers and Directors
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Exchange Privilege
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General Information
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Appendix A--Equivalent Yields: Tax-Exempt vs. Taxable Securities
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Financial Statements
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Delaware Group Tax-Free Fund, Inc. ("Tax-Free Fund, Inc.") is a
professionally managed mutual fund of the series type which currently offers
three series of shares: the Tax-Free USA Fund series ("USA Fund"), the Tax-Free
Insured Fund series ("Insured Fund") and the Tax-Free USA Intermediate Fund
series ("Intermediate Fund") (individually, a "Fund" and collectively, the
"Funds").

Each Fund of Tax-Free Fund, Inc. offers three retail classes: Tax-Free USA
Fund A Class ("USA Fund A Class"), Tax-Free Insured Fund A Class ("Insured Fund
A Class") and Tax-Free USA Intermediate Fund A Class ("Intermediate Fund A
Class") (the "Class A Shares"); Tax-Free USA Fund B Class ("USA Fund B Class"),
Tax-Free Insured Fund B Class ("Insured Fund B Class") and Tax-Free USA
Intermediate Fund B Class ("Intermediate Fund B Class") (the "Class B Shares");
and Tax-Free USA Fund C Class ("USA Fund C Class"), Tax-Free Insured Fund C
Class ("Insured Fund C Class") and Tax-Free USA Intermediate Fund C Class
("Intermediate Fund C Class") (the "Class C Shares"). Each class is
individually referred to as a "Class" and collectively referred to as the
"Classes".

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 3.75% with respect to USA Fund and Insured
Fund and 2.75% with respect to Intermediate Fund. Class A Shares are subject to
annual 12b-1 Plan expenses which, for USA Fund A Class and Insured Fund A Class
will vary because of the formula adopted by Tax-Free Fund, Inc.'s Board of
Directors but may not exceed 0.30%, and for Intermediate Fund A Class may not
exceed 0.30% and have been fixed by the Board at 0.15%. Class B Shares are
subject to a contingent deferred sales charge ("CDSC") which may be imposed on
redemptions made within six years of purchase with respect to USA Fund and
Insured Fund and three years of purchase with respect to Intermediate Fund.
Class B Shares are subject to annual 12b-1 Plan expenses of 1%, which are
assessed for approximately eight years after purchase against Class B Shares of
USA Fund and Insured Fund and approximately five years after purchase against
Class B Shares of Intermediate Fund. See Automatic Conversion of Class B Shares
under Classes of Shares in the Prospectus. Class C Shares of each Fund are
subject to a CDSC which may be imposed on redemptions made within 12 months of
purchase and annual 12b-1 Plan expenses of 1%, which are assessed against Class
C Shares for the life of the investment.

This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectus of
the Funds dated October 30, 1997, as it may be amended from time to time. Part
B should be read in conjunction with the Funds' Prospectus. Part B is not
itself a prospectus but is, in its entirety, incorporated by reference into the
Prospectus. The Prospectus for the Funds may be obtained by writing or calling
your investment dealer or by contacting Tax-Free Fund, Inc.'s national
distributor, Delaware Distributors, L.P. (the "Distributor"), 1818 Market
Street, Philadelphia, PA 19103.

All references to "shares" in this Part B refer to all classes of shares of
Tax-Free Fund, Inc., except where noted.

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INVESTMENT OBJECTIVES AND POLICIES

The objective of USA Fund and of 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. Intermediate Fund pursues its investment objective by
investing in municipal bonds with a dollar weighted average maturity of between
three and 10 years and utilizing various investment strategies, as described
below, which differ from the strategies utilized by USA Fund and Insured Fund.
The objective of 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.
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 Fund, described above, is a matter of
fundamental policy and may not be changed without shareholder approval of the
affected Fund. There is no assurance that the objective of each Fund 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 B--Ratings in the Prospectus contains excerpts describing ratings
of municipal obligations from Standard & Poor's Ratings Group ("S&P"), Moody's
Investors Service, Inc. ("Moody's") and Fitch Investor Service, Inc.
("Fitch").

USA Fund and Insured Fund seek to achieve their respective objectives by
investing their assets in a nondiversified portfolio consisting primarily of
intermediate obligations up to 10 years and long-term obligations up to 50 years
in maturity, and 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 Fund 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 Intermediate Fund will typically have a dollar weighted
average maturity of between three and 10 years. 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 Intermediate Fund's
portfolio will be between three and 10 years, Intermediate Fund may purchase
individual securities with any maturity.

The principal risk to which a Fund is subject is price fluctuation due to
changes in interest rates caused by government policies and economic factors
which are beyond the control of Delaware Management Company, Inc. (the
"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
Fund may invest in both types of bonds.

USA Fund will normally invest at least 80% of its assets in debt
obligations, as stated above, which are rated by S&P, Moody's or Fitch at the
time of purchase as being within their top four grades. The fourth grade is
considered a medium grade and has speculative characteristics. 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 Manager considers them particularly attractive and their purchase to be
consistent with the objective of preserving capital. 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, S&P or Fitch at the time of purchase or
unrated, but in the opinion of the Manager, similar in credit quality to
obligations so rated. The fourth grade

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is considered medium grade and may have speculative characteristics.
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 Fund. 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.

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. Insured Fund may invest a portion of its assets in debt
obligations that are considered to be below investment grade. The Fund
presently intends to limit such investments to no more than 5% of its assets,
measured at the time of purchase.

Each Fund 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 commitment and the date of delivery, the Fund does not accrue interest
on the investment, but the market value of the bonds could fluctuate. This can
result in a Fund having unrealized appreciation or depreciation which could
affect the net asset value of its shares.

Each Fund will invest its assets in securities of varying maturities,
without limitation, depending on market conditions. Typically, the remaining
maturity of municipal bonds purchased by USA Fund and Insured Fund will range
between five and 30 years. Each Fund may also invest in short-term, tax-free
instruments such as tax-exempt commercial paper and general obligation, revenue
and project notes. The Funds 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 no Fund 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 Fund 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, Insured Fund may invest more than 20% of its
assets in uninsured securities which may be lower rated or unrated. Such
securities may involve increased risks or may generate taxable income, and each
Fund will only exceed 20% of its assets in such investments for temporary
defensive purposes.

Tax-Free Fund, Inc. is registered as an open-end management investment
company and each Fund's portfolio of assets is nondiversified. Each Fund has
the ability to invest as much as 50% of its assets in as few as two issuers
provided that no single issuer accounts for more than 25% of the portfolio. The
remaining 50% must be diversified so that no more than 5% is invested in the
securities of a single issuer. Because the Funds may invest their assets in
fewer issuers, the value of Fund shares may fluctuate more rapidly than if the
Funds were fully diversified. In the event a Fund invests more than 5% of its
assets in a single issuer, it would be affected more than a fully-diversified
fund if that issuer were to encounter difficulties in satisfying its financial
obligations. Except as set forth below, each Fund 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.

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Each Fund may invest more than 25% of its assets in municipal obligations
relating to similar types of projects or with other similar economic, business
or political characteristics (such as bonds of housing finance agencies or
health care facilities). In addition, each Fund may invest more than 25% of its
assets in industrial development bonds or pollution control bonds which may be
backed only by the assets and revenues of a nongovernmental issuer. A Fund 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 Funds are permitted, they normally do not borrow money or
invest in repurchase agreements. Up to 20% of each Fund's 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 Fund may be invested in
municipal bonds insured as to payment of principal and interest by a single
insurance company, which is believed by the Funds to be consistent with their
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.

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 a Fund's management fee, as well as
other operating expenses, will have the effect of reducing the yield to
investors.

Each Fund intends to seek to achieve a high level of tax-exempt income.
However, if a Fund invests in newly-issued private purpose bonds, a portion of
that Fund's distributions would be subject to the federal alternative minimum
tax.

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Repurchase Agreements

Repurchase agreements 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. A 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 a Fund to
invest temporarily available cash on a short-term basis. Generally, repurchase
agreements are of short duration often less than one week but on occasion for
longer periods. A Fund's 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 an issuer
of a repurchase agreement fail to repurchase the underlying security, the loss
to a Fund, if any, would be the difference between the repurchase price and the
market value of the security. In addition, should such an issuer default, the
Manager believes that, barring extraordinary circumstances, the Fund 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. A Fund considers the creditworthiness of the bank or dealer from
whom it purchases repurchase agreements. A Fund 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.

A Fund 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, a Fund
must have collateral of at least 100% of the repurchase price, including the
portion representing a Fund's 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 a Fund 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. A Fund 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.

Intermediate Fund

Additional Investment Strategies

In addition to the investment policies described above, Intermediate Fund
seeks to achieve its objective by pursuing the following investment strategies:

Portfolio Loan Transactions -- 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 (the "SEC" or the "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 Fund 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 Fund; 3) the Fund must be
able to terminate the loan after notice, at any time; 4) the Fund 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 Fund 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 Tax-Free Fund, Inc. know that a

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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 a Fund 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 Funds 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.

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 Fund will further evaluate these
securities. See Appendix B--Ratings in the Prospectus.

Options

Intermediate Fund may write put and call options on a covered basis only,
and will not engage in option writing strategies for speculative purposes. The
Fund 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 Fund's investment objective. The Fund may
also purchase (i) call options to the extent that premiums paid for such options
do not exceed 2% of the Fund's total assets and (ii) put options to the extent
that premiums paid for such options do not exceed 2% of the Fund's total assets.

A. Covered Call Writing - A call option gives the purchaser of such
option the right to buy, and the writer, in this case Intermediate Fund, the
obligation to sell the underlying security at the exercise price during the
option period. There is no percentage limitation on writing covered call
options.

The advantage to the Fund of writing covered calls is that the Fund
receives a premium which is additional income. The disadvantage is that if the
security rises in value the Fund will lose the appreciation.

During the option period, a covered call option writer may be assigned an
exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.

Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Fund to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Fund may realize a net
gain or loss from a closing purchase transaction depending upon whether the net
amount of the original premium received on the call option is more or less than
the cost of effecting the closing purchase transaction. Any loss incurred in a
closing purchase transaction may be partially or entirely offset by the premium
received from a sale of a different call option on the same underlying security.
Such a loss may also be wholly or partially offset by unrealized appreciation in
the market value of the underlying security. Conversely, a gain resulting from
a closing purchase transaction could be offset in whole or in part by a decline
in the market value of the underlying security.

If a call option expires unexercised, the Fund will realize a short-term
capital gain in the amount of the premium on the option less the commission
paid. Such a gain, however, may be offset by depreciation in the market value
of the underlying security during the option period. If a call option is
exercised, the Fund will realize a gain or loss from the sale of the underlying
security equal to the difference between the cost of the underlying security and
the proceeds of the sale of the security plus the amount of the premium on the
option less the commission paid.

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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
Fund will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected,
the Fund would be required to continue to hold a security which it might
otherwise wish to sell. Options written by the Fund will normally have
expiration dates between three and nine months from the date written. The
exercise price of a call option may be below, equal to or above the current
market value of the underlying security at the time the option is written.

B. Purchasing Call Options - Intermediate Fund may purchase call options
to the extent that premiums paid by the Fund do not aggregate more than 2% of
the Fund's total assets. When the Fund purchases a call option, in return for a
premium paid by the Fund to the writer of the option, the Fund obtains the right
to buy the security underlying the option at a specified exercise price at any
time during the term of the option. The writer of the call option, who receives
the premium upon writing the option, has the obligation, upon exercise of the
option, to deliver the underlying security against payment of the exercise
price. The advantage is that the Fund may hedge against an increase in the
price of securities which it ultimately wishes to buy. However, the premium
paid for the call option plus any transaction costs will reduce the benefit, if
any, realized by the Fund upon exercise of the option.

The Fund may, following the purchase of a call option, liquidate its
position by effecting a "closing sale transaction." This is accomplished by
selling an option of the same series as the option previously purchased. The
Fund will realize a profit from a closing sale transaction if the price received
on the transaction is more than the premium paid to purchase the original call
option; the Fund will realize a loss from a closing sale transaction if the
price received on the transaction is less than the premium paid to purchase the
original call option.

Although the Fund will generally purchase only those call options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market may exist. In such event, it may not be possible to
effect closing transactions in particular options, with the result that the Fund
would be required to exercise its options in order to realize any profit and
would incur brokerage commissions upon the exercise of such options and upon the
subsequent disposition of the underlying securities acquired through the
exercise of such options. Further, unless the price of the underlying security
changes sufficiently, a call option purchased by the Fund may expire without any
value to the Fund.

C. Secured Put Writing - A put option gives the purchaser of the option
the right to sell, and the writer, in this case Intermediate Fund, the
obligation to buy the underlying security at the exercise price during the
option period. During the option period, the writer of a put option may be
assigned an exercise notice by the broker/dealer through whom the option was
sold requiring the writer to make payment of the exercise price against delivery
of the underlying security. In this event, the exercise price will usually
exceed the then-market value of the underlying security. This obligation
terminates upon expiration of the put option or at such earlier time at which
the writer effects a closing purchase transaction. The operation of put options
in other respects is substantially identical to that of call options. Premiums
on outstanding put options written or purchased by the Fund may not exceed 2% of
its total assets.

The advantage to the Fund of writing such options is that it receives
premium income. The disadvantage is that the Fund may have to purchase
securities at higher prices than the current market price when the put is
exercised.

Put options will be written only on a secured basis, which means that the
Fund will maintain in a segregated account with its Custodian, the Bankers 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 Fund. Secured put options
will generally be written in

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circumstances where the Manager wishes to purchase the underlying security for
the Fund's portfolio at a price lower than the current market price of the
security. In such event, the Fund would write a secured put option at an
exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay.

D. Purchasing Put Options - Intermediate Fund may purchase put options to
the extent that premiums paid for such options do not exceed 2% of the Fund's
total assets. The Fund will, at all times during which it holds a put option,
own the security covered by such option.

The Fund intends to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise price
less the premium paid for the option ("protective puts"). The ability to
purchase put options will allow the Fund to protect unrealized gain in an
appreciated security in its portfolio without actually selling the security. In
addition, the Fund will continue to receive interest income on the security. If
the security does not drop in value, the Fund will lose the value of the premium
paid. The Fund may sell a put option which it has previously purchased prior to
the sale of the securities underlying such option. Such sales will result in a
net gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put option which
is sold.

Futures -- 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 Fund
enters into a futures transaction, it must deliver to the futures commission
merchant selected by the Fund an amount referred to as "initial margin." This
amount is maintained by the futures commission merchant in an account at the
Fund's Custodian Bank. Thereafter, a "variation margin" may be paid by the Fund
to, or drawn by the Fund from, such account in accordance with controls set for
such accounts, depending upon changes in the price of the underlying securities
subject to the futures contract.

The Fund may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities except that
options on futures give the purchaser the right, in return for the premium paid,
to assume a position in a futures contract, rather than actually to purchase or
sell the futures contract, at a specified exercise price at any time during the
period of the option.

The purpose of the purchase or sale of futures contracts for the Fund,
which consists of a substantial number of municipal securities, is to protect
the Fund against the adverse effects of fluctuations in interest rates without
actually buying or selling such securities. Similarly, when it is expected that
interest rates may decline, futures contracts may be purchased to hedge in
anticipation of subsequent purchases of municipal securities at higher prices.

With respect to options on futures contracts, when the Fund is not fully
invested, it may purchase a call option on a futures contract to hedge against a
market advance due to declining interest rates. The writing of a call option on
a futures contract constitutes a partial hedge against declining prices of the
securities which are deliverable upon exercise of the futures contract. If the
futures price at the expiration of the option is below the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the portfolio holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the securities which are deliverable upon exercise
of the futures contract. If the futures price at expiration of the option is
higher than the exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any increase in the price
of municipal securities which the Fund intends to purchase.

To the extent that the Fund purchases an option on a futures contract and
fails to exercise the option prior to the exercise date, it will suffer a loss
of the premium paid. Further, with respect to options on futures contracts, the
Fund may seek to close out an option position by writing or buying an offsetting
position covering the same securities or contracts and have the same exercise
price and expiration date. The ability to establish and close out positions on
options will be subject to the maintenance of a liquid secondary market, which
cannot be assured.

-10-
<PAGE>

The Fund will not enter into futures contracts to the extent that more than
5% of the Fund's 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 Fund's assets.

In addition, when the Fund engages in futures transactions, to the extent
required by the SEC, it will 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 Fund with respect to such futures contracts.

The Fund may enter into such futures contracts to protect against the
adverse effects of fluctuations in interest rates without actually buying or
selling the securities. For example, if interest rates are expected to
increase, the Fund might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as selling an
equivalent value of the debt securities owned by the Fund. If interest rates
did increase, the value of the debt securities in the portfolio would decline,
but the value of the futures contracts to the Fund would increase at
approximately the same rate, thereby keeping the net asset value of the Fund
from declining as much as it otherwise would have. Similarly, when it is
expected that interest rates may decline, futures contracts may be purchased to
hedge in anticipation of subsequent purchases of securities at higher prices.
Since the fluctuations in the value of futures contracts should be similar to
those of debt securities, the Fund could take advantage of the anticipated rise
in value of debt securities without actually buying them until the market had
stabilized. At that time, the futures contracts could be liquidated and the
Fund could then buy debt securities on the cash market.

With respect to options on futures contracts, when the Fund is not fully
invested, it may purchase a call option on a futures contract to hedge against a
market advance due to declining interest rates. The purchase of a call option
on a futures contract is similar in some respects to the purchase of a call
option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based, or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities. As with
the purchase of futures contracts, when the Fund is not fully invested, it may
purchase a call option on a futures contract to hedge against a market advance
due to declining interest rates.

The writing of a call option on a futures contract constitutes a partial
hedge against the declining price of the security which is deliverable upon
exercise of the futures contract. If the futures price at the expiration of the
option is below the exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any decline that may have
occurred in the Fund's portfolio holdings. The writing of a put option on a
futures contract constitutes a partial hedge against the increasing price of the
security which is deliverable upon exercise of the futures contract. If the
futures price at the expiration of the option is higher than the exercise price,
the Fund will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities which the Fund
intends to purchase.

If a put or call option the Fund has written is exercised, the Fund will
incur a loss which will be reduced by the amount of the premium it receives.
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its futures positions, the
Fund's losses from existing options on futures may, to some extent, be reduced
or increased by changes in the value of portfolio securities. The purchase of a
put option on a futures contract is similar in some respects to the purchase of
protective puts on portfolio securities. For example, the Fund will purchase a
put option on a futures contract to hedge the Fund's portfolio against the risk
of rising interest rates.

To the extent that interest rates move in an unexpected direction, the Fund
may not achieve the anticipated benefits of futures contracts or options on
futures contracts or may realize a loss. For example, if the Fund is hedged
against the possibility of an increase in interest rates which would adversely
affect the price of securities held in its portfolio and interest rates decrease
instead, the Fund will lose part or all of the benefit of the increased value of
its

-11-
<PAGE>

securities which it has because it will have offsetting losses in its futures
position. In addition, in such situations, if the Fund had insufficient cash, it
may be required to sell securities from its portfolio to meet daily variation
margin requirements. Such sales of securities may, but will not necessarily, be
at increased prices which reflect the rising market. The Fund 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 Fund may seek to
close out an option position by writing or buying an offsetting position
covering the same securities or contracts and have the same exercise price and
expiration date. The ability to establish and close out positions on options
will be subject to the maintenance of a liquid secondary market, which cannot be
assured.

Variable or Floating Rate Demand Notes -- Variable or floating rate demand
notes ("VRDNs") are tax-exempt obligations which contain a floating or variable
interest rate adjustment formula and an unconditional right of demand to receive
payment of the unpaid principal balance plus accrued interest upon a short
notice period (generally up to 30 days) prior to specified dates, either from
the issuer or by drawing on a bank letter of credit, a guarantee or insurance
issued with respect to such instrument. The interest rates are adjustable at
intervals ranging from daily to up to six months to some prevailing market rate
for similar investments, such adjustment formula being calculated to maintain
the market value of the VRDN at approximately the par value of the VRDN upon the
adjustment date. The adjustments are typically based upon the price rate of a
bank or some other appropriate interest rate adjustment index. The Manager will
decide which variable or floating rate demand instruments Intermediate Fund will
purchase in accordance with procedures prescribed by Tax-Free Fund, Inc.'s Board
of Directors to minimize credit risks. Any VRDN 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 Fund may rely only on the high quality character of the
short-term aspect of the demand instrument, i.e., the demand feature. A VRDN
which is unrated must have high quality characteristics similar to those rated
in accordance with policies and guidelines determined by Tax-Free Fund, Inc.'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 Fund must dispose of the instrument
within a reasonable period of time by exercising the demand feature or by
selling the VRDN in the secondary market, whichever is believed by the Manager
to be in the best interests of the Fund and its shareholders.

Municipal Leases -- As stated in the Prospectus, a portion of each 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 Funds intend to
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

Tax-Free Fund, Inc. has adopted the following restrictions and fundamental
policies which are applied to each Fund 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 Fund, 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 Fund which proposes to change its
fundamental policy. Investment restrictions 4, 6 and 8 listed below apply only
to USA Fund and Insured Fund.

A Fund may not under any circumstances:

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<PAGE>

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
Fund's assets, asset coverage of at least 300% is required. In the event that
such asset coverage shall at any time fall below 300%, the Fund shall, within
three days thereafter (not including Sunday or holidays) or such longer period
as the SEC may prescribe by rules and regulations, reduce the amount of its
borrowings to such an extent that the asset coverage of such borrowings shall be
at least 300%. A Fund 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 Fund may
participate as part of a group in bidding for the purchase of municipal bonds
directly from an issuer for its own portfolio in order to take advantage of the
lower purchase price available to members of such a group; nor invest more than
10% of the value of a Fund's net assets in illiquid assets.

6. Purchase or sell commodities or commodity contracts.

7. Purchase or sell real estate, but this shall not prevent a Fund from
investing in municipal bonds secured by real estate or interests therein.

8. Make loans to other persons except through the use of repurchase
agreements or the purchase of commercial paper. For these purposes, the purchase
of a portion of debt securities which is part of an issue to the public shall
not be considered the making of a loan.

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 Funds 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 Fund 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.

Tax-Free Fund, Inc. has also adopted an additional restriction applicable
only to Insured Fund. Insured Fund will not:

13. Invest more than 20% of its assets in securities (other than U.S.
government securities, securities of agencies of the U.S. government and
securities backed by the U.S. government or its agencies or instrumentalities)
which

-13-
<PAGE>

are not covered by insurance guaranteeing the payment, when due, of interest on
and the principal of such securities, except for defensive purposes.

Tax-Free Fund, Inc. also has determined that, from time to time, more than
10% of a Fund's assets may be invested in municipal bonds insured as to
principal and interest by a single insurance company. Tax-Free Fund, Inc.
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 Funds currently do
not invest their assets in real estate limited partnerships or oil, gas and
other mineral leases.

The Funds may invest in restricted securities, including unregistered
securities eligible for resale without registration pursuant to Rule 144A ("Rule
144A Securities") under the Securities Act of 1933 (the "1933 Act"). Rule 144A
Securities may be freely traded among qualified institutional investors without
registration under the 1933 Act.

Investing in Rule 144A Securities could have the effect of increasing the
level of a Fund's illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities. After the
purchase of a Rule 144A Security, however, the Board of Directors and the
Manager will continue to monitor the liquidity of that security to ensure that a
Fund has no more than 10% of its net assets invested in illiquid securities.

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<PAGE>

MUNICIPAL BOND INSURANCE

The practice has developed among municipal issuers of having their issues
insured by various companies. At the present time, the MBIA Insurance
Corporation ("MBIA"), AMBAC Indemnity Corporation ("AMBAC Indemnity"), Financial
Security Assurance ("FSA") and Financial Guaranty Insurance Company ("FGIC")
provide a substantial portion of such insurance. Accordingly, at different
times, a substantial portion of a Fund's 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 Funds
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 a Fund will
generally have been obtained by the bond issuer and attached to the bonds for
their lifetime, although the Fund may obtain insurance on bonds while they are
held by the Fund.

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.
Tax-Free Fund, Inc. believes such investments are consistent with each Fund's
fundamental investment policies and restrictions.

Similar insurance is available to a 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, 1995, MBIA Inc. had total equity
capital (GAAP) of $2,234,266,000; up 31% from December 31, 1994, and as of
December 31, 1996, MBIA Inc. had total equity capital (GAAP) of $2,479,697,000,
up 11% from December 31, 1995. For the six months ended June 30, 1997, total
equity capital (GAAP) amounted to $2,622,100,000 (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, 1995, FGIC's total
equity capital (GAAP) was $1,547,881,000; up 21% from December 31, 1994, and as
of December 31, 1996, FGIC's total equity capital (GAAP) was $1,684,400,000, up
8.8% from December 31, 1995. For the six months ended June 30, 1997, total
equity capital (GAAP) amounted to $1,783,200,000 (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, 1995, AMBAC's
total equity capital (GAAP) was $1,403,988,000; up 36% from December 31, 1994,
and as of December 31, 1996, AMBAC's total capital (GAAP) was $1,615,016,000, up
15% from December 31, 1995. For the six months ended June 30, 1997, total
equity capital (GAAP) amounted to $1,691,200,000 (unaudited).

FSA is the fourth largest insurer. As of December 31, 1995, FSA's total
equity capital (GAAP) was $777,947,000, up 43% from December 31, 1994; and as of
December 31, 1996, FSA's total equity capital (GAAP) was $801,260,000, up 3%
from December 31, 1995. For the six months ended June 30, 1997,total equity
capital (GAAP) was $841,200,000.

-15-
<PAGE>

-16-
<PAGE>

PERFORMANCE INFORMATION

From time to time, each Fund may state total return for its Classes in
advertisements and other types of literature. Any statement of total return
performance data for a Class will be accompanied by information on the average
annual compounded rate of return for that Class over, as relevant, the most
recent one-, five- and ten-year (or life of fund, if applicable) periods. Each
Fund may also advertise aggregate and average total return information for its
Classes over additional periods of time.

The average annual total rate of return for a Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:

n
P(1+T) = ERV

Where: P = a hypothetical initial purchase order of $1,000 from
which, in the case of only Class A Shares, the
maximum front-end sales charge is deducted;

T = average annual total return;

n = number of years; and

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.

In presenting performance information for 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 Classes for a
description of the Limited CDSC and the limited instances in which it applies.
All references to a CDSC in this Performance Information section will apply to
Class B Shares or Class C Shares.

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, each Fund may present total return information that does
not reflect the deduction of the maximum front-end sales charge or any
applicable CDSC.

-17-
<PAGE>

The performance of each Class of the Funds, as shown below, is the average
annual total return quotation through August 31, 1997, computed as described
above. The average annual total return for Class A Shares at offer reflects the
maximum front-end sales charge of 3.75% with respect to USA Fund Class A Shares
and Insured Fund Class A Shares and 2.75% with respect to Intermediate Fund
Class A Shares 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 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, 1997.

Securities prices fluctuated during the periods covered and past results
should not be considered as representative of future performance.

The performance of USA Fund A Class, as shown below, is the average annual
total return quotations through August 31, 1997, computed as described above.
The average annual total return for USA Fund A Class at offer reflects the
maximum front-end sales charge of 3.75% paid on the purchase of shares. The
average annual total return for USA Fund A Class at net asset value (NAV) does
not reflect any front-end sales charge. 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 A Class

Class A Shares Class A Shares
(at Offer) (1) (at NAV)
<S> <C> <C>

1 year ended 8/31/97 3.75% 7.79%

3 years ended 8/31/97 4.11% 5.45%

5 years ended 8/31/97 5.05% 5.85%

10 years ended 8/31/97 7.31% 7.73%

Period 1/11/84(2)
through 8/31/97 9.05% 9.35%
</TABLE>

(1) Effective June 9, 1997, the maximum front-end sales charge was reduced from
4.75% to 3.75%. The above performance numbers are calculated using 3.75%
as the applicable sales charge for all time periods, and are more favorable
than they would have been had they been calculated using the former front-
end sales charges.

(2) Date of initial public offering.

-18-
<PAGE>

The performance of USA Fund B Class, as shown below, is the average annual
total return quotation through August 31, 1997. The average annual total return
for USA Fund B Class including deferred sales charge reflects the deduction of
the applicable CDSC that would be paid if the shares were redeemed at August 31,
1997. The average annual total return for USA Fund B Class excluding deferred
sales charge assumes the shares were not redeemed at August 31, 1997 and
therefore does not reflect the deduction of a CDSC.

<TABLE>
<CAPTION>
Average Annual Total Return
USA Fund B Class

Class B Shares Class B Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)
<S> <C> <C>

1 year ended 8/31/97 2.94% 6.94%

3 years ended 8/31/97 3.71% 4.61%

Period 5/2/94(1)
through 8/31/97 3.80% 4.59%
</TABLE>

(1) Date of initial public offering.

The performance of USA Fund C Class, as shown below, is the average annual
total return quotation through August 31, 1997. The average annual total return
for USA Fund C Class including deferred sales charge reflects the deduction of
the applicable CDSC that would be paid if the shares were redeemed at August 31,
1997. The average annual total return for USA Fund C Class excluding deferred
sales charge assumes the shares were not redeemed at August 31, 1997 and
therefore does not reflect the deduction of a CDSC.

<TABLE>
<CAPTION>
Average Annual Total Return
USA Fund C Class

Class C Shares Class C Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)
<S> <C> <C>
1 year ended 8/31/97 5.94% 6.94%

Period 11/29/95(1)
through 8/31/97 3.03% 3.03%
</TABLE>

(1) Date of initial public offering.

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<PAGE>

The performance of Insured Fund A Class, as shown below, is the average
annual total return quotations through August 31, 1997, computed as described
above. The average annual total return for Insured Fund A Class at offer
reflects the maximum front-end sales charge of 3.75% paid on the purchase of
shares. The average annual total return for Insured Fund A Class at net asset
value (NAV) does not reflect any front-end sales charge. 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
Insured Fund A Class

Class A Shares Class A Shares
(at Offer) (1) (at NAV)
<S> <C> <C>

1 year ended 8/31/97 4.04% 8.07%

3 years ended 8/31/97 4.73% 6.08%

5 years ended 8/31/97 4.81% 5.61%

10 years ended 8/31/97 6.82% 7.23%

Period 3/25/85(2)
through 8/31/97 7.65% 7.98%

</TABLE>

(2) Date of initial public offering.

-20-
<PAGE>

The performance of Insured Fund B Class, as shown below, is the average
annual total return quotation through August 31, 1997. The average annual total
return for Insured Fund B Class including deferred sales charge reflects the
deduction of the applicable CDSC that would be paid if the shares were redeemed
at August 31, 1997. The average annual total return for Insured Fund B Class
excluding deferred sales charge assumes the shares were not redeemed at August
31, 1997 and therefore does not reflect the deduction of a CDSC.

<TABLE>
<CAPTION>
Average Annual Total Return
Insured Fund B Class

Class B Shares Class B Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)
<S> <C> <C>

1 year ended 8/31/97 3.21% 7.21%

3 years ended 8/31/97 4.32% 5.23%

Period 5/2/94(1)
through 8/31/97 4.48% 5.29%
</TABLE>

(1) Date of initial public offering.

The performance of Insured Fund C Class, as shown below, is the average
annual total return quotation through August 31, 1997. The average annual total
return for Insured Fund C Class including deferred sales charge reflects the
deduction of the applicable CDSC that would be paid if the shares were redeemed
at August 31, 1997. The average annual total return for Insured Fund C Class
excluding deferred sales charge assumes the shares were not redeemed at August
31, 1997 and therefore does not reflect the deduction of a CDSC.

<TABLE>
<CAPTION>
Average Annual Total Return
Insured Fund C Class

Class C Shares Class C Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)
<S> <C> <C>
1 year ended 8/31/97 6.21% 7.21%

Period 11/29/95(1)
through 8/31/97 4.05% 4.05%

</TABLE>

(1) Date of initial public offering.

-21-
<PAGE>

The performance of Intermediate Fund A Class, as shown below, is the
average total return quotation through August 31, 1997, computed as described
above. The average annual total return for Intermediate Fund A Class at offer
reflects the maximum front-end sales charge of 2.75% paid on the purchase of
shares. The average annual total return for Intermediate Fund A Class at net
asset value (NAV) does not reflect any front-end sales charge.

<TABLE>
<CAPTION>
Average Annual Total Return
Intermediate Fund A Class

Class A Shares Class A Shares
(at Offer)(1)(2) (at NAV)
<S> <C> <C>

1 year ended 8/31/97 3.66% 6.57%

3 years ended 8/31/97 4.86% 5.83%

Period 1/7/93(3)
through 8/31/97 5.66% 6.29%
</TABLE>

(1) The Manager elected to waive voluntarily the portion of its annual
compensation payable under its Investment Management Agreement with
Intermediate Fund to limit operating expenses of the Fund to 0.25%
(including 12b-1 expenses). That waiver was modified effective May 2, 1994
to limit operating expenses to 0.10%, exclusive of 12b-1 expenses, through
December 31, 1996. The waiver was further modified to limit operating
expenses to 0.35% (exclusive of 12b-1 expenses) for the period January 1,
1997 through June 30, 1997 and 0.45% (exclusive of 12b-1 expenses) for the
period July 1, 1997 through December 31, 1997. In the absence of such
voluntary waiver, performance would have been affected negatively.

(2) Effective June 9, 1997, the maximum front-end sales charge was reduced from
3.00% to 2.75%. The above performance numbers are calculated using 2.75%
as the applicable sales charge for all time periods, and are more favorable
than they would have been had they been calculated using the former front-
end sales charges.

(3) Date of initial public offering.

-22-
<PAGE>

The performance of Intermediate Fund B Class, as shown below, is the
average annual total return quotation through August 31, 1997. The average
annual total return for Intermediate Fund B Class including deferred sales
charge reflects the deduction of the applicable CDSC that would be paid if the
shares were redeemed at August 31, 1997. The average annual total return for
Intermediate Fund B Class excluding deferred sales charge assumes the shares
were not redeemed at August 31, 1997 and therefore does not reflect the
deduction of a CDSC.

Average Annual Total Return
Intermediate Fund B Class(1)
<TABLE>
<CAPTION>

Class B Shares Class B Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)
<S> <C> <C>

1 year ended 8/31/97 3.67% 5.67%

3 years ended 8/31/97 4.64% 4.94%

Period 5/2/94(2)
through 8/31/97 5.15% 5.15%
</TABLE>

(1) The Manager elected to waive voluntarily the portion of its annual
compensation payable under its Investment Management Agreement with the
Intermediate Fund to limit operating expenses of the Fund to 0.10%,
exclusive of 12b-1 expenses, from the commencement of the public offering
of the Class through December 31, 1996. The waiver was further modified to
limit operating expenses to 0.35% (exclusive of 12b-1 expenses) for the
period January 1, 1997 through June 30, 1997 and 0.45% (exclusive of 12b-1
expenses) for the period July 1, 1997 through December 31, 1997. In the
absence of such voluntary waiver, performance would have been affected
negatively.

(2) Date of initial public offering.

-23-
<PAGE>

The performance of Intermediate Fund C Class, as shown below, is the
average annual total return quotation through August 31, 1997. The average
annual total return for Intermediate Fund C Class including deferred sales
charge reflects the deduction of the applicable CDSC that would be paid if the
shares were redeemed at August 31, 1997. The average annual total return for
Intermediate Fund C Class excluding deferred sales charge assumes the shares
were not redeemed at August 31, 1997 and therefore does not reflect the
deduction of a CDSC.

<TABLE>
<CAPTION>
Average Annual Total Return
Intermediate Fund C Class(1)

Class C Shares Class C Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)
<S> <C> <C>
1 year ended 8/31/97 4.67% 5.67%

Period 11/29/95(2)
through 8/31/97 4.27% 4.27%
</TABLE>

(1) The Manager elected to waive voluntarily the portion of its annual
compensation payable under its Investment Management Agreement with
Intermediate Fund to limit operating expenses of the Fund to 0.10%,
exclusive of 12b-1 expenses, from the commencement of the public offering
of the Class through December 31, 1996. The waiver was further modified to
limit operating expenses to 0.35% (exclusive of 12b-1 expenses) for the
period January 1, 1997 through June 30, 1997 and 0.45% (exclusive of 12b-1
expenses) for the period July 1, 1997 through December 31, 1997. In the
absence of such voluntary waiver, performance would have been affected
negatively.

(2) Date of initial public offering.

As stated in the Funds' Prospectus, each Fund may also quote the current
yield of each of its Classes 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:

YIELD = 2[(a-b/cd + 1)/6/ - 1]

Where: a = dividends and interest earned during the period;

b = expenses accrued for the period (net of
reimbursements);

c = the average daily number of shares dividends;
and outstanding during the period that were
entitled to receive dividends; and

d = the maximum offering price per share on the last
day of the period.

-24-
<PAGE>

The above formula will be used in calculating quotations of yield for each
Class of the Funds, based on specified 30-day periods identified in advertising
by the Funds. The yields of each Class of Intermediate Fund reflect the
voluntary fee waiver undertaken by the Manager described above. Yield
calculations assume the maximum front-end sales charge in effect on June 9, 1997
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. Past performance, such as is reflected in quoted
yields, should not be considered as a representation of the results which may be
realized from an investment in any class of Tax-Free Fund, Inc. in the future.
For the 30-day period ended August 31, 1997, the yield of each Class of USA
Fund, Insured Fund and Intermediate Fund was as follows:

Class A Class B Class C
Shares Shares Shares
------ ------- -------
<S> <C> <C> <C>

USA Fund 4.35% 3.68% 3.68%

Insured Fund 3.76% 3.08% 3.08%

Intermediate Fund 3.91% 3.15% 3.15%

</TABLE>

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, 1997, the tax-equivalent yields (assuming
a federal income tax rate of 31%) of each Class of each Fund were as follows:

<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
------- ------- -------
<S> <C> <C> <C>

USA Fund 6.30% 5.33% 5.33%

Insured Fund 5.45% 4.46% 4.46%

Intermediate Fund 5.67% 4.57% 4.57%
</TABLE>

These yields were computed by dividing that portion of a Class' yield which
is tax-exempt by one minus a stated income tax rate (in this case, a federal
income tax rate of 31%) and adding the product to that portion, if any, of the
yield that is not tax-exempt. In addition, a Fund may advertise a tax-
equivalent yield assuming other income tax rates, when applicable.

Investors should note that the income earned and dividends paid by a Fund
will vary with the fluctuation of interest rates and performance of the
portfolio. The net asset value of a Fund may change. Unlike money market
funds, each Fund invests in longer-term securities that fluctuate in value and
do so in a manner inversely correlated with changing interest rates. Each
Fund's net asset value will tend to rise when interest rates fall. Conversely,
each Fund's 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 a Fund will vary from
day to day and investors should consider the volatility of a Fund's net asset
values as well as the yield before making a decision to invest.

The average weighted portfolio maturity at August 31, 1997 was 23 years for
USA Fund, 25 years for Insured Fund and 7 years for Intermediate Fund.

-25-
<PAGE>

See Appendix A--Equivalent Yields: Tax-Exempt vs. Taxable Securities for
additional yield information.

Statistical and performance information and various indices compiled and
maintained by organizations such as those listed below may also be used in
preparing exhibits comparing certain industry trends and competitive mutual fund
performance to comparable activities and performances of the Funds 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 Funds. Any
indices used are not managed for any investment goal, and a direct investment in
an index is not possible.

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. In addition, the performance
of multiple indices compiled and maintained by these firms may be combined
to create a blended performance result for comparative purposes.
Generally, the indices selected will be representative of the types of
securities in which the Funds may invest and the assumptions that were used
in calculating the blended performance will be described.

Current interest rate and yield information on government debt obligations
of various durations, as reported weekly by the Federal Reserve (Bulletin H.15),
may also be used. Also, current rate information on municipal debt obligations
of various durations, as reported daily by The Bond Buyer, may also be used.
The Bond Buyer is published daily and is an industry-accepted source for current
municipal bond market information.

From time to time, a Fund may also quote for its Classes 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

-26-
<PAGE>

not represent a return from an investment. A Fund may also promote its Classes'
total return and/or yield performance and use comparative performance
information computed by and available from certain industry and general market
research and publications, such as Lipper Analytical Services, Inc.

Total return performance for each Class of the Funds will reflect the
appreciation or depreciation of principal, reinvestment of income and any
capital gains distributions paid during any indicated period, and, in the case
of Class A Shares, the impact of the maximum front-end sales charge, if any,
paid on the illustrated investment amount, annualized. Performance of Class A
Shares may also be shown without reflecting the impact of any front-end sales
charge. Performance of Class B Shares and Class C Shares will be calculated with
both the applicable CDSC included and excluded. The results will not reflect
any income taxes, if applicable, payable by shareholders on the reinvested
distributions included in the calculations. The net asset values of the Funds
fluctuate so shares, when redeemed, may be worth more or less than the original
investment, and past performance should not be considered a guarantee of future
results.

The following tables present examples, for purposes of illustration only,
of cumulative total return performance for each Class through August 31, 1997.
For these purposes, the calculations assume the reinvestment of any capital
gains distributions and income dividends paid during the indicated periods. The
performance does not reflect any income taxes, if applicable, payable by
shareholders on the reinvested distributions included in the calculations. The
performance of Class A Shares reflects the maximum front-end sales charge paid
on the purchase of shares but may also be shown without reflecting the impact of
any front-end sales charge. The performance of Class B Shares and Class C
Shares is calculated both with the applicable CDSC included and excluded.
Comparative information on the Consumer Price Index is also included.

-27-
<PAGE>

<TABLE>
<CAPTION>
Cumulative Total Return
USA Fund A Class

Consumer
Class A Shares Price
(at Offer) (1) Index(2)
<S> <C> <C>

3 months ended 8/31/97 (1.47%) 0.44%

6 months ended 8/31/97 (0.38%)(3) 0.75%

9 months ended 8/31/97 (0.10%) 1.39%

1 year ended 8/31/97 3.75% 2.23%

3 years ended 8/31/97 12.85% 7.92%

5 years ended 8/31/97 27.92% 14.12%

10 years ended 8/31/97 102.49% 40.56%

Period 1/11/84(4)
through 8/31/97 225.99% 52.68%
</TABLE>

(2) Source--Lipper Analytical.

(3) Cumulative total return at net asset value for the six months ended August
31, 1997 was 3.47%.

(4) Date of initial public offering.

<TABLE>
<CAPTION>
Cumulative Total Return
USA Fund B Class

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 8/31/97 (1.85%) 2.15% 0.44%

6 months ended 8/31/97 (0.94%) 3.06% 0.75%

9 months ended 8/31/97 (0.80%) 3.18% 1.39%

1 year ended 8/31/97 2.94% 6.94% 2.23%

3 years ended 8/31/97 11.55% 14.47% 7.92%

Period 5/2/94(1)
through 8/31/97 13.22% 16.13% 9.09%
</TABLE>

(1) Date of initial public offering.

(2) Source--Lipper Analytical.

-28-
<PAGE>

Cumulative Total Return
USA Fund C Class
<TABLE>
<CAPTION>

Class C Shares Class C Shares
(Including (Excluding Consumer
Deferred Deferred Price
Sales Charge) Sales Charge) Index(2)
<S> <C> <C> <C>
3 months ended 8/31/97 1.15% 2.15% 0.44%

6 months ended 8/31/97 2.06% 3.06% 0.75%

9 months ended 8/31/97 2.18% 3.18% 1.39%

1 year ended 8/31/97 5.93% 6.93% 2.23%

Period 11/29/95(1)
through 8/31/97 5.39% 5.39% 4.69%
</TABLE>

(1) Date of initial public offering.
(2) Source--Lipper Analytical.

Cumulative Total Return
Insured Fund A Class
<TABLE>
<CAPTION>
Consumer
Class A Shares Price
(at Offer) (1) Index(2)
<S> <C> <C>

3 months ended 8/31/97 (1.41%) 0.44%

6 months ended 8/31/97 (0.62%)(3) 0.75%

9 months ended 8/31/97 (0.11%) 1.39%

1 year ended 8/31/97 4.04% 2.23%

3 years ended 8/31/97 14.88% 7.92%

5 years ended 8/31/97 26.45% 14.12%

10 years ended 8/31/97 93.52% 40.56%

Period 3/25/85(4)
through 8/31/97 150.12% 51.10%
</TABLE>

(2) Source--Lipper Analytical.

(3) Cumulative total return at net asset value for the six months ended August
31, 1997 was 3.82%.

(4) Date of initial public offering.

-29-
<PAGE>

Cumulative Total Return
Insured Fund B Class
<TABLE>
<CAPTION>

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 8/31/97 (1.73%) 2.27% 0.44%

6 months ended 8/31/97 (1.14%) 2.86% 0.75%

9 months ended 8/31/97 (0.84%) 3.16% 1.39%

1 year ended 8/31/97 3.21% 7.21% 2.23%

3 years ended 8/31/97 13.52% 16.52% 7.92%

Period 5/2/94(1)
through 8/31/97 15.75% 18.75% 9.09%
</TABLE>

(1) Date of initial public offering.

(2) Source--Lipper Analytical.

Cumulative Total Return
Insured Fund C Class
<TABLE>
<CAPTION>

Class C Shares Class C Shares
(Including (Excluding Consumer
Deferred Deferred Price
Sales Charge) Sales Charge) Index(2)
<S> <C> <C> <C>

3 months ended 8/31/97 1.27% 2.27% 0.44%

6 months ended 8/31/97 1.86% 2.86% 0.75%

9 months ended 8/31/97 2.16% 3.16% 1.39%

1 year ended 8/31/97 6.21% 7.21% 2.23%

Period 11/29/95(1)
through 8/31/97 7.22% 7.22% 4.69%
</TABLE>

(1) Date of initial public offering.

(2) Source--Lipper Analytical.

-30-
<PAGE>

Cumulative Total Return
Intermediate Fund A Class
<TABLE>
<CAPTION>
Consumer
Class A Shares Price
(at Offer) (1) (2) Index(3)
<S> <C> <C>

3 months ended 8/31/97 (0.86%) 0.44%

6 months ended 8/31/97 (0.43%)(4) 0.75%

9 months ended 8/31/97 0.62% 1.39%

1 year ended 8/31/97 3.66% 2.23%

3 years ended 8/31/97 15.30% 7.92%

Period 1/7/93(5)
to 8/31/97 29.20% 13.32%
</TABLE>

(1) The Manager elected to waive voluntarily the portion of its annual
compensation payable under its Investment Management Agreement with the
Intermediate Fund to limit operating expenses of the Fund to 0.25%
(including 12b-1 expenses). That waiver was modified effective May 2, 1994
to limit operating expenses to 0.10%, exclusive of 12b-1 expenses, through
December 31, 1996. The waiver was further modified to limit operating
expenses to 0.35% (exclusive of 12b-1 expenses) for the period January 1,
1997 through June 30, 1997 and 0.45% (exclusive of 12b-1 expenses) for the
period July 1, 1997 through December 31, 1997. In the absence of such
voluntary waiver, performance would have been affected negatively.

(3) Source--Lipper Analytical.

(4) Cumulative total return at net asset value for the six months ended August
31, 1997 was 2.42%.

(5) Date of initial public offering.

-31-
<PAGE>

Cumulative Total Return
Intermediate Fund B Class(1)
<TABLE>
<CAPTION>

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 8/31/97 (0.31%) 1.69% 0.44%

6 months ended 8/31/97 (0.02%) 1.98% 0.75%

9 months ended 8/31/97 0.84% 2.84% 1.39%

1 year ended 8/31/97 3.67% 5.67% 2.23%

3 years ended 8/31/97 14.57% 15.57% 7.92%

Period 5/2/94(3)
through 8/31/97 18.24% 18.24% 9.09%
</TABLE>

(2) Source--Lipper Analytical.

(3) Date of initial public offering.

-32-
<PAGE>

Cumulative Total Return
Intermediate Fund C Class(1)
<TABLE>
<CAPTION>

Class C Shares Class C Shares
(Including (Excluding Consumer
Deferred Deferred Price
Sales Charge) Sales Charge) Index(2)
<S> <C> <C> <C>

3 months ended 8/31/97 0.69% 1.69% 0.44%

6 months ended 8/31/97 0.98% 1.98% 0.75%

9 months ended 8/31/97 1.84% 2.84% 1.39%

1 year ended 8/31/97 4.67% 5.67% 2.23%

Period 11/29/95(3)
through 8/31/97 7.62% 7.62% 4.69%
</TABLE>

(2) Source--Lipper Analytical.

(3) Date of initial public offering.

Because every investor's goals and risk threshold are different, the
Distributor, as distributor for Tax-Free Fund, Inc. 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 Funds', 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.

Dollar-Cost Averaging

For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a
regular basis, that money will always buy more shares when the price is low and
fewer when the price is high. You can choose to invest at any regular interval--
for example, monthly or quarterly--as long as you stick to your regular
schedule. Dollar-cost averaging looks simple and it is, but there are important
things to remember.

Dollar-cost averaging works best over longer time periods, and it doesn't
guarantee a profit or protect against losses in declining markets. If you need
to sell your investment when prices are low, you may not realize a profit no
matter what investment strategy you utilize. That's why dollar-cost averaging
can make sense for long-term goals. Since

-33-
<PAGE>

the potential success of a dollar-cost averaging program depends on continuous
investing, even through periods of fluctuating prices, you should consider your
dollar-cost averaging program a long-term commitment and invest an amount you
can afford and probably won't need to withdraw. You also should consider your
financial ability to continue to purchase shares during periods of high fund
share prices. Delaware Group offers three services -- Automatic Investing Plan,
Direct Deposit Purchase Plan and the Wealth Builder Option -- that can help to
keep your regular investment program on track. See Investing by Electronic Fund
Transfer - Direct Deposit Purchase Plan and Automatic Investing Plan under
Investment Plans and Wealth Builder Option under Investment Plans for a complete
description of these services, including restrictions or limitations.

The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.

Number
Investment Price Per of Shares
Amount Share Purchased
<S> <C> <C> <C>
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $ 5.00 20
Month 4 $100 $10.00 10
-----------------------------------
$400 $37.50 48
</TABLE>

Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)

This example is for illustration purposes only. It is not intended to
represent the actual performance of any stock or bond fund in the Delaware Group
of Funds.

-34-
<PAGE>

THE POWER OF COMPOUNDING

When you opt to reinvest your current income for additional Fund shares,
your investment is given yet another opportunity to grow. It's called the Power
of Compounding 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:

4% Rate of Return 6% Rate of Return 8% Rate of Return
----------------- ----------------- -----------------
<S> <C> <C> <C>

1 Year $10,407 $10,617 $10,830
2 Years $10,831 $11,272 $11,729
3 Years $11,273 $11,967 $12,702
4 Years $11,732 $12,705 $13,757
5 Years $12,210 $13,488 $14,898
6 Years $12,707 $14,320 $16,135
7 Years $13,225 $15,203 $17,474
8 Years $13,764 $16,141 $18,924
9 Years $14,325 $17,137 $20,495
10 Years $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 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.

-35-
<PAGE>

TRADING PRACTICES AND BROKERAGE

Banks, brokers or dealers are selected to execute transactions on behalf of
a Fund 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 Fund 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 Fund pays a minimal share transaction cost when the transaction presents no
difficulty.

During the fiscal years ended August 31, 1995, 1996 and 1997, no brokerage
commissions were paid by USA Fund, Insured Fund or Intermediate Fund.

The Manager may allocate out of all commission business generated by all of
the funds and accounts under its management, brokerage business to brokers or
dealers who provide brokerage and research services. These services include
advice, either directly or through publications or writings, as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or purchasers or sellers of securities;
furnishing of analyses and reports concerning issuers, securities or industries;
providing information on economic factors and trends; assisting in determining
portfolio strategy; providing computer software and hardware used in security
analyses; and providing portfolio performance evaluation and technical market
analyses. Such services are used by the Manager in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.

During the fiscal year ended August 31, 1997, there were no portfolio
transactions of USA Fund, Insured Fund or Intermediate Fund resulting in
brokerage commissions directed to brokers for brokerage and research services.

As provided in the Securities Exchange Act of 1934 (the "1934 Act") and the
Investment Management Agreement for each Fund, 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 Funds believe 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 Funds 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.

-36-
<PAGE>

The Manager may place a combined order for two or more accounts or funds
engaged in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in
a manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to
participate in volume transactions will generally be beneficial to the accounts
and funds. Although it is recognized that, in some cases, the joint execution
of orders could adversely affect the price or volume of the security that a
particular account or fund may obtain, it is the opinion of the Manager and the
Board of Directors that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.

Consistent with the Conduct Rules 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
expenses of the funds in the Delaware Group of funds such as custodian fees, and
may, at the request of the Distributor, give consideration to sales of shares of
such funds as a factor in the selection of brokers and dealers to execute Fund
portfolio transactions.

Portfolio Turnover

Tax-Free Fund, Inc. anticipates that each Fund's portfolio turnover rate
will generally be less than 100%. The degree of portfolio activity may affect
taxes payable by the Funds' shareholders. A turnover rate of 100% would occur,
for example, if all the investments in a Fund's portfolio at the beginning of
the year were replaced by the end of the year. Tax-Free Fund, Inc. will not
attempt to achieve or be limited to a predetermined rate of portfolio turnover
for a Fund, such a turnover always being incidental to transactions undertaken
with a view to achieving each Fund's investment objective in relation to
anticipated movements in the general level of interest rates.

In investing for liberal current income, a Fund may hold securities for
any period of time, subject to complying with the Internal Revenue Code (the
"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 Fund shares.

The portfolio turnover rate of each Fund is calculated by dividing the
lesser of purchases or sales of portfolio securities for the particular fiscal
year by the monthly average of the value of the portfolio securities owned by
the Fund during the particular fiscal year, exclusive of securities whose
maturities at the time of acquisition are one year or less.

During the past two fiscal years, the portfolio turnover rates of the Funds
were as follows:

August 31,
1997 1996
----- -----
<S> <C> <C>

USA Fund 44% 42%
Insured Fund 42% 45%
Intermediate Fund 34% 15%
</TABLE>

-37-
<PAGE>

PURCHASING SHARES

The Distributor serves as the national distributor for each Fund's shares
and has agreed to use its best efforts to sell shares of each Fund. See the
Prospectus for additional information on how to invest. Shares of each Fund are
offered on a continuous basis and may be purchased through authorized investment
dealers or directly by contacting Tax-Free Fund, Inc. or the Distributor.

The minimum initial investment generally is $1,000 for each Class of each
Fund. Subsequent purchases of such Classes generally must be at least $100.
The initial and subsequent minimum investments 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. Shares purchased pursuant to the
Uniform Gifts to Minors Act or Uniform Transfers to Minors Act and shares
purchased in connection with an Automatic Investing Plan are subject to a
minimum initial purchase of $250 and a minimum subsequent purchase of $25.
Accounts opened under the Delaware Group Asset Planner service are subject to a
minimum initial investment of $2,000 per Asset Planner Strategy selected.

Each purchase of Class B Shares is subject to a maximum purchase limitation
of $250,000. For Class C Shares, each purchase must be in an amount that is
less than $1,000,000. Tax-Free Fund, Inc. will reject any purchase order 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. 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,
and that Class A Shares are subject to lower annual 12b-1 Plan expenses than
Class B Shares and Class C Shares and generally are not subject to a CDSC.

Selling dealers are responsible for transmitting orders promptly. Tax-Free
Fund, Inc. reserves the right to reject any order for the purchase of a Fund's
shares if in the opinion of management such rejection is in such Fund's best
interest.

The NASD has adopted Conduct Rules, as amended, relating to investment
company sales charges. Tax-Free Fund, Inc. and the Distributor intend to
operate in compliance with these rules.

Class A Shares of USA Fund and Insured Fund are purchased at the offering
price which reflects a maximum front-end sales charge of 3.75%. Shares of
Intermediate Fund A Class are also purchased at the offering price which
reflects a maximum front-end sales charge of 2.75%. Lower sales charges apply
for larger purchases. See the tables below. Class A Shares are also subject to
annual 12b-1 Plan expenses. See Plans Under Rule 12b-1 under Purchasing Shares
and Determining Offering Price and Net Asset Value.

Class B Shares of USA Fund and 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 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 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 Class B Shares for approximately five years after
purchase. See Automatic Conversion of Class B Shares under Classes of Shares in
the Prospectus.

-38-
<PAGE>

Class C Shares of each Fund are purchased at net asset value and are
subject to a CDSC of 1% if shares are redeemed within 12 months following
purchase. Class C Shares are also subject to annual 12b-1 Plan expenses for the
life of the investment which are equal to those to which Class B Shares are
subject.

See Plans under Rule 12b-1 under Purchasing Shares and Determining Offering
Price and Net Asset Value 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 full share denominations purchased by sending
a letter signed by each owner of the account to the Transfer Agent requesting
the certificate. No charge is assessed by Tax-Free Fund, Inc. for any
certificate issued. A shareholder may be subject to fees for replacement of a
lost or stolen certificate, under certain conditions, including the cost of
obtaining a bond covering the lost or stolen certificate. Please contact a Fund
for further information. Investors who hold certificates representing any of
their shares may only redeem those shares by written request. The investor's
certificate(s) must accompany such request.

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 their needs given the amount of their purchase, the length of time
they expect to hold their shares and other relevant circumstances. Investors
should determine whether, given their particular circumstances, it is more
advantageous to purchase Class A Shares and incur a front-end sales charge and
annual 12b-1 Plan expenses of up to a maximum of 0.30% of the average daily net
assets of Class A Shares (currently, no more than 0.15% of the average daily net
assets of Intermediate Fund A Class), or to purchase either Class B Shares or
Class C Shares and have the entire initial purchase amount invested in a Fund
with the investment thereafter subject to a CDSC and annual 12b-1 expenses.
Shares of USA Fund B Class and Insured Fund B Class are subject to a CDSC if the
shares are redeemed within six years of purchase. Shares of Intermediate Fund B
Class are subject to a CDSC if the shares are redeemed within three years of
purchase. Class C Shares of each Fund are subject to a CDSC if the shares are
redeemed within 12 months of purchase. Class B and Class C Shares are each
subject to annual 12b-1 Plan expenses of 1% (0.25% of which are service fees to
be paid to the Distributor, dealers and others, for providing personal service
and/or maintaining shareholder accounts) of average daily net assets of the
respective Class. Shares of USA Fund B Class and Insured Fund B Class will
automatically convert to Class A Shares of the respective Fund at the end of
approximately eight years after purchase and shares of Intermediate Fund B Class
will automatically convert to the Class A Shares of this Fund 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 0.30% of average daily net assets of
such shares. Unlike Class B Shares, Class C Shares do not convert to another
class.

Class A Shares - USA Fund, Insured Fund, Intermediate Fund

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.

-39-
<PAGE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
USA Fund and Insured Fund
Class A Shares
- -------------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as % of Commission***
Amount of Purchase Offering Amount as % of
Price Invested** Offering Price
- -------------------------------------------------------------------------------------
USA Insured
Fund Fund
<S> <C> <C> <C> <C>

Less than $100,000 3.75% 3.93% 3.89% 3.25%

$100,000 but under $250,000 3.00 3.07 3.07 2.50

$250,000 but under $500,000 2.50 2.56 2.53 2.00

$500,000 but under $1,000,000* 2.00 2.05 2.88 1.75
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Intermediate Fund
Class A Shares
- -------------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as % of Commission***
Amount of Purchase Offering Amount as % of
Price Invested** Offering Price
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 2.75% 2.87% 2.35%

$100,000 but under $250,000 2.00 2.01 1.75

$250,000 but under $500,000 1.00 1.05 1.75

$500,000 but under $1,000,000* 1.00 1.05 0.75
- -------------------------------------------------------------------------------------
</TABLE>

* There is no front-end sales charge on purchases of $1,000,000 or more of
Class A Shares 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 shares that were purchased at net asset
value and triggered the payment of a dealer's commission.

** Based on the net asset value per share of Class A Shares as of the end of
Tax-Free Fund, Inc.'s most recent fiscal year.

*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
A 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 a 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 front-end
sales charges shown above. Dealers who receive 90% or more of the sales
charge may be deemed to be underwriters under the 1933 Act.
- --------------------------------------------------------------------------------

-40-
<PAGE>

Certain dealers who enter into an agreement to provide extra training and
information on Delaware Group products and services and who increase sales of
Delaware Group funds may receive an additional commission of up to 0.15% 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 commission 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:

<TABLE>
<CAPTION>
USA Fund A Class and Insured Fund A Class

Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
------------------ -----------------
<S> <C>
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25

<CAPTION>
Intermediate Fund A Class

Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
------------------ -----------------
<S> <C>
Up to $3 million 0.50%
Next $2 million up to $5 million 0.40
Amount over $5 million 0.20
</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 Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under Redemption and
Exchange in the Prospectus) applies may be aggregated with those of Class A
Shares of a Fund. Financial advisers also may be eligible for a dealer's
commission in connection with certain purchases made under a Letter of Intention
or pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.

An exchange from other Delaware Group funds will not qualify for payment of
the dealer's commission, unless a dealer's commission or similar payment has not
been previously paid on the assets being exchanged. The schedule and program
for payment of the dealer's commission are subject to change or termination at
any time by the Distributor at its discretion.

Contingent Deferred Sales Charge - Class B Shares and Class C Shares

Class B Shares and Class C Shares are purchased without a front-end sales
charge. Class B Shares redeemed within prescribed periods after purchase may be
subject to a CDSC imposed at the rates and within the time periods set

-41-
<PAGE>

forth below, and Class C Shares redeemed within 12 months of purchase may be
subject to a CDSC of 1%. CDSCs are charged as a percentage of the dollar amount
subject to the CDSC. The charge will be assessed on an amount equal to the
lesser of the net asset value at the time of purchase of shares being redeemed
or the net asset value of those shares at the time of redemption. No CDSC will
be imposed on increases in net asset value above the initial purchase price, nor
will a CDSC be assessed on redemption of shares acquired through the
reinvestment of dividends or capital gains distributions. See Waiver of
Contingent Deferred Sales Charge - Class B and Class C Shares under Redemption
and Exchange in the Prospectus for a list of the instances in which the CDSC is
waived.

The following table sets forth the rates of the CDSC for USA Fund B Class
and Insured Fund B Class:

<TABLE>
<CAPTION>
USA Fund B Class and Insured Fund B Class

Contingent Deferred
Sales Charge
(as a Percentage of
Dollar Amount
Year After 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 Fund, USA Fund B Class
and Insured Fund B Class 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 USA Fund B
Class and Insured Fund B Class will be automatically converted into Class A
Shares of the same Fund. See Automatic Conversion of Class B Shares under
Classes of 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.

-42-
<PAGE>

The following table sets forth the rates of the CDSC for Intermediate Fund
B Class:

Intermediate Fund B Class

Contingent Deferred
Sales Charge
(as a Percentage of
Dollar Amount
Year After 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 Intermediate Fund, Class B Shares of this
Fund 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 Intermediate Fund. See Automatic Conversion of
Class B Shares under Classes of Shares in the Classes' Prospectus. Such
conversion will constitute a tax-free exchange for federal income tax purposes.
See Taxes in the Prospectus.

Plans Under Rule 12b-1

Pursuant to Rule 12b-1 under the 1940 Act, Tax-Free Fund, Inc. has adopted
a separate plan for each of the Class A Shares, Class B Shares and Class C
Shares of each Fund (the "Plans"). Each Plan permits the relevant Fund to pay
for certain distribution, promotional and related expenses involved in the
marketing of only the Class of shares to which the Plan applies.

The Plans permit a Fund, pursuant to its Distribution Agreement, 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 Class B Shares and Class C Shares are also used
to pay the Distributor for advancing the commission costs to dealers with
respect to the initial sale of such shares.

In addition, each Fund may make payments out of the assets of Class A,
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 a Fund under its Plans, and each
Fund's Distribution Agreement, is on an annual basis, up to 0.30% of average
daily net assets of Class A Shares, and up to 1% (0.25% of which are service
fees to be paid to the Distributor, dealers 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. Tax-Free Fund,
Inc.'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, Tax-Free Fund, Inc.'s Board of Directors has
determined that the annual fee, payable on a monthly basis, under the separate
Plans relating to USA Fund A Class and Insured Fund A Class, will be equal to
the sum of: (i) the amount obtained by multiplying 0.30% by the average daily
net assets represented by Class A Shares of the Fund that were acquired by
shareholders on or after June 1, 1992; and (ii) the amount obtained by
multiplying

-43-
<PAGE>

0.10% by the average daily net assets represented by Class A Shares of the Fund
that were acquired before June 1, 1992. While this is the method for calculating
the 12b-1 expenses to be paid by the USA Fund A Class and Insured Fund A Class,
the fee is a Class A Shares' expense so that all shareholders of Class A Shares
of each such Fund regardless of when they purchased their shares will bear 12b-1
expenses at the same rate. As Class A Shares of such Funds are sold on or after
June 1, 1992, the initial rate of at least 0.10% will increase over time. Thus,
as the proportion of Class A Shares purchased on or after June 1, 1992 to Class
A Shares outstanding prior to June 1, 1992 increases, the expenses attributable
to payments under the Plans will also increase (but will not exceed 0.30% of
average daily net assets). In addition, on September 17, 1992, Tax-Free Fund,
Inc.'s Board of Directors set the fee for Intermediate Fund A Class at 0.15% of
average daily net assets. While this describes the current basis for calculating
the fees which will be payable under the Plans with respect to USA Fund A Class,
Insured Fund A Class and Intermediate Fund A Class, such Plans permit a full
0.30% on all Class A Shares' assets to be paid at any time following appropriate
Board approval.

All of the distribution expenses incurred by the Distributor and others,
such as broker/dealers, in excess of the amount paid on behalf of Class A, 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, a 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 Tax Free Fund, Inc., including a majority of the
directors who are not "interested persons" (as defined in the 1940 Act) of Tax
Free Fund, Inc. 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 of each Fund 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 Shares' 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 Fund's B Class. 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 Tax-Free Fund, Inc. 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
Tax-Free Fund, Inc. 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.

-44-
<PAGE>

For the fiscal year ended August 31, 1997, payments from USA Fund A Class,
USA Fund B Class and USA Fund C Class amounted to $1,329,275, $334,523 and
$13,136, respectively. Such amounts were used for the following purposes:

USA Fund C
USA Fund A Class USA Fund B Class Class
---------------- ---------------- ---------------
<S> <C> <C> <C>
Advertising $ 2,428 --- ---
Annual/Semi-Annual Reports $ 1,966 --- ---
Broker Trails $1,117,441 $ 76,439 $1,741
Broker Sales Charges --- $118,126 $7,295
Dealer Service Expenses $ 9,173 $ 1,262 $ 330
Interest on Broker Sales
Charges --- $116,041 $ 378
Commissions to Wholesalers $ 36,834 $ 12,372 $1,711
Promotional-Broker Meetings $ 63,480 $ 4,603 $ 165
Promotional-Other $ 55,443 --- ---
Prospectus Printing $ 16,444 --- ---
Telephone $ 4,947 $ 60 $ 9
Wholesaler Expenses $ 21,119 $ 5,620 $1,507
Other --- --- ---
</TABLE>

For the fiscal year ended August 31, 1997, payments from Insured Fund A
Class, Insured Fund B Class and Insured Fund C Class amounted to $161,061,
$34,772 and $1,841, respectively. Such amounts were used for the following
purposes:

Insured Fund A Insured Fund B Insured Fund C
Class Class Class
----------------- --------------- ---------------
<S> <C> <C> <C>
Advertising $ 1,207 $ 339 ---
Annual/Semi-Annual Reports $ 1,272 --- ---
Broker Trails $133,020 $ 8,247 $749
Broker Sales Charges --- $10,065 $942
Dealer Service Expenses $ 1,028 $ 389 $ 36
Interest on Broker Sales
Charges --- $14,046 $ 63
Commissions to Wholesalers $ 2,795 $ 757 $ 30
Promotional-Broker Meetings $ 6,789 $ 478 $ 18
Promotional-Other $ 5,124 --- ---
Prospectus Printing $ 6,588 --- ---
Telephone $ 799 $ 24 $ 3
Wholesaler Expenses $ 2,439 $ 427 ---
Other --- --- ---
</TABLE>

-45-
<PAGE>

For the fiscal year ended August 31, 1997, payments from Intermediate Fund
A Class, Intermediate Fund B Class and Intermediate Fund C Class amounted to
$33,039, $15,543 and $12,177, respectively. Such amounts were used for the
following purposes:

Intermediate Fund Intermediate Fund Intermediate Fund
A Class B Class C Class
------- ------- -------
<S> <C> <C> <C>

Advertising $ 217 --- ---
Annual/Semi-Annual Reports $ 92 --- ---
Broker Trails $30,262 $1,997 $ 592
Broker Sales Charges --- $9,334 $8,413
Dealer Service Expenses --- $ 23 $ 187
Interest on Broker Sales Charges --- $1,664 $1,219
Commissions to Wholesalers $ 301 $1,364 $1,082
Promotional-Broker Meetings $ 913 $ 205 $ 57
Promotional-Other $ 914 --- ---
Prospectus Printing $ 340 --- ---
Telephone --- $ 25 $ 44
Wholesaler Expenses --- $ 931 $ 583
Other --- --- ---
</TABLE>

Tax-Free Fund, Inc. 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 0.25% of the dollar amount of such sales. The Distributor may also provide
additional promotional incentives or payments to dealers that sell shares of the
Delaware 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. 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 Class A Shares 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 Exchange
Privilege and the 12-Month Reinvestment Privilege.

Current and former officers, directors and employees of Tax-Free Fund,
Inc., 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 other funds in the Delaware Group, including any
fund that may be created at net asset value. Family members (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. Class A Shares may also be purchased at net
asset value by current and former officers, directors and employees (and members
of their families) of the Dougherty Financial Group LLC. Purchases of Class A
Shares may also be made by clients of registered representatives of an
authorized investment dealer at net asset value 12 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, contingent deferred sales
charge or other sales charge has

-46-
<PAGE>

been assessed. Purchases of Class A Shares may also be made at net asset value
by bank employees who provide services in connection with agreements between the
bank and unaffiliated brokers or dealers concerning sales of shares of the
Delaware Group funds. 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 Tax-Free Fund, Inc.
may reasonably require to establish eligibility for purchase at net asset value.

Investors in Delaware-Voyageur Unit Investment Trusts may reinvest monthly
dividend checks and/or repayment of invested capital into Class A Shares of any
of the Funds in the Delaware Group at net asset value.

Tax-Free Fund, Inc. 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 Tax-Free Fund, Inc., which provides for the
holding in escrow by the Transfer Agent, of 5% of the total amount of Class A
Shares intended to be purchased until such purchase is completed within the 13-
month period. A Letter of Intention may be dated to include shares purchased up
to 90 days prior to the date the Letter is signed. The 13-month period begins
on the date of the earliest purchase. If the intended investment is not
completed, except as noted below, the purchaser will be asked to pay an amount
equal to the difference between the front-end sales charge on Class A Shares
purchased at the reduced rate and the front-end sales charge otherwise
applicable to the total shares purchased. If such payment is not made within 20
days following the expiration of the 13-month period, the Transfer Agent will
surrender an appropriate number of the escrowed shares for redemption in order
to realize the difference. Such purchasers may include the value (at offering
price at the level designated in their Letter of Intention) of all their shares
of the Funds 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.

Combined Purchases Privilege

In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class A Shares, Class B Shares and/or Class C
Shares of the Funds, as well as 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). In addition, assets held by investment advisory clients of the Manager or
its affiliates in a stable value account may be combined with other Delaware
Group fund holdings.

The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).

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Right of Accumulation

In determining the availability of the reduced front-end sales charge with
respect to Class A Shares, purchasers may also combine any subsequent purchases
of Class A Shares, Class B Shares and Class C Shares of a Fund, as well as
shares of any other class of any of the 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). If, for example, any such purchaser has previously purchased and still
holds shares of USA Fund A Class or Insured Fund A Class 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 USA
Fund A Class or Insured Fund A Class, the charge applicable to the $60,000
purchase would be 3.00%. For the purpose of this calculation, the shares
presently held shall be valued at the public offering price that would have been
in effect were the shares purchased simultaneously with the current purchase.
Investors should refer to the table of sales charges for Class A Shares to
determine the applicability of the Right of Accumulation to their particular
circumstances.

12-Month Reinvestment Privilege

Holders of Class A Shares of a Fund who redeem such shares have one year
from the date of redemption to reinvest all or part of their redemption proceeds
in Class A Shares of that Fund 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 intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.

Investors should consult their financial advisers or the Transfer Agent,
which also serves as the Funds' shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Prospectus) in connection with the features
described above.

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INVESTMENT PLANS

Reinvestment Plan/Open Account

Unless otherwise designated by shareholders in writing, dividends from net
investment income and distributions from realized securities profits, if any,
will be automatically reinvested in additional shares of the respective Classes
in which an investor has an account (based on the net asset value of that Fund
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 specific
Fund and Class in which shares are being purchased. 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 a Fund in any of the other mutual funds in the Delaware Group, including
the Funds, 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 intended to be made before investing or
sending money. The prospectus contains more complete information about the fund,
including charges and expenses. See also Additional Methods of Adding to Your
Investment - Dividend Reinvestment Plan under How to Buy Shares in the
Prospectus.

Subject to the following limitations, dividends and/or distributions from
other funds in the Delaware Group may be invested in shares of the Funds 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. Dividends from
Class B Shares may only be directed to other Class B Shares, and dividends from
Class C Shares may only be directed to other Class C Shares. See Appendix C -
Classes Offered in the Prospectus for the funds in the Delaware Group that are
eligible for investment by holders of Fund shares.

Investing by Electronic Fund Transfer

Direct Deposit Purchase Plan--Investors may arrange for the Fund 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 Fund
account. This type of investment will be handled in either of the following
ways. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at
a specified date, although no check is required to initiate the transaction.
(2) If the shareholder's bank

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is not a member of NACHA, deductions will be made by preauthorized checks, known
as Depository Transfer Checks. Should the shareholder's bank become a member of
NACHA in the future, his or her investments would be handled electronically
through EFT.

* * *

Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such Plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.

Payments to a Fund from the federal government or its agencies on behalf of
a shareholder may be credited to the shareholder's account after such payments
should have been terminated by reason of death or otherwise. Any such payments
are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
a Fund may liquidate sufficient shares from a shareholder's account to reimburse
the government or the private source. In the event there are insufficient
shares in the shareholder's account, the shareholder is expected to reimburse
the Fund.

Direct Deposit Purchases by Mail

Shareholders may authorize a third party, such as a bank or employer, to
make investments directly to their Fund accounts. A Fund will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact Tax-Free Fund, Inc. for proper
instructions.

Wealth Builder Option

Shareholders can use the Wealth Builder Option to invest in a Class through
regular liquidations of shares in their accounts in other mutual funds in the
Delaware Group. Shareholders of each Class may also elect to invest in one or
more of the other mutual funds in the Delaware Group through our Wealth Builder
Option. See Wealth Builder Option and Redemption and Exchange in the
Prospectus.

Under this automatic exchange program, shareholders can authorize regular
monthly investments (minimum of $100 per fund) to be liquidated from their
account and invested automatically into other mutual funds in the Delaware
Group, subject to the conditions and limitations set forth in the Prospectus.
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 terminate their participation in Wealth Builder at
any time by giving written notice to the fund from which exchanges are made.

Delaware Group Asset Planner

To invest in Delaware Group funds using the Delaware Group Asset Planner
asset allocation service, you should complete a Delaware Group Asset Planner
Account Registration Form, which is available only from a financial adviser or
investment dealer. Effective September 1, 1997, the Delaware Group Asset
Planner Service is

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only available to financial advisers or investment dealers who have previously
used this service. The Delaware Group Asset Planner service offers a choice of
four predesigned asset allocation strategies (each with a different risk/reward
profile) in predetermined percentages in Delaware Group funds. With the help of
a financial adviser, you may also design a customized asset allocation strategy.

The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Group accounts into the Asset Planner service may be made at net asset value
under the circumstances described under Investing by Exchange in the Prospectus.
Also see Buying Class A Shares at Net Asset Value under Classes of Shares. The
minimum initial investment per Strategy is $2,000; subsequent investments must
be at least $100. Individual fund minimums do not apply to investments made
using the Asset Planner service. Class A, Class B and Class C Shares are
available through the Asset Planner service. Generally, only shares within the
same class may be used within the same Strategy. However, Class A Shares of a
Fund and of other funds in the Delaware Group may be used in the same Strategy
with consultant class shares that are offered by certain other Delaware Group
funds. See Appendix B - Classes Offered in the Prospectus for the funds in the
Delaware Group that offer consultant class shares.

An annual maintenance fee, currently $35 per Strategy, is due at the time
of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number.

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.

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DETERMINING OFFERING PRICE AND NET ASSET VALUE

Orders for purchases of Class A Shares are effected at the offering price
next calculated by the Fund in which shares are being purchased after receipt of
the order by the Fund or its agent. Orders for purchases of Class B Shares and
Class C Shares of each Fund are effected at the net asset value per share next
calculated by the Fund in which shares are being purchased after receipt of the
order by the Fund or its agent. Selling dealers have the responsibility of
transmitting orders promptly.

The offering price for Class A Shares consists of the net asset value per
share, plus any applicable front-end sales charges. Offering price and net asset
value are computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The New York Stock Exchange is scheduled to be open Monday through Friday
throughout the year except for New Year's Day, Martin Luther King, Jr.'s
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. When the New York Stock Exchange is closed, the
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
each Fund's financial statements which are incorporated by reference into this
Part B.

Each Fund's net asset value per share is computed by adding the value of
all securities and other assets in the portfolio of that Fund, deducting any
liabilities of the Fund and dividing by the number of Fund shares outstanding.
In determining a Fund's total net assets, portfolio securities are valued at
fair value, using methods determined in good faith by the 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
Fund are accrued daily.

Each Class of a Fund will bear, pro-rata, all of the common expenses of the
relevant Fund. The net asset values of all outstanding shares of each Class of a
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in such Fund represented by the value of shares
of that Class. All income earned and expenses incurred by a Fund will be borne
on a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in such Fund represented by the value of shares of such Classes,
except that 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 Fund may vary. However, the net asset value per share of
each Class of a Fund is expected to be equivalent.

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REDEMPTION AND REPURCHASE

Any shareholder may require his or her Fund to redeem shares by sending a
written request, signed by the record owner or owners exactly as the shares are
registered, to the Fund at 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. Certificates are issued for Class
A Shares only if a shareholder specifically requests them. Certificates are not
issued 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 request must be signed by all owners of the shares or the investment dealer
or record, but a signature guarantee is not required. 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. Each
Fund reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Funds may request further
documentation from corporations, retirement plans, executors, administrators,
trustees or guardians.

In addition to redemption of Fund shares, the Distributor, acting as agent
of the Funds, offers to repurchase Fund shares from broker/dealers acting on
behalf of shareholders. The redemption or repurchase price, which may be more or
less than the shareholder's cost, is the net asset value per share next
determined after receipt of the request in good order by the respective Fund or
its agent, subject to any applicable CDSC or Limited CDSC. This is computed and
effective at the time the offering price and net asset value are determined. See
Determining Offering Price and Net Asset Value. The Fund and the Distributor end
their business days at 5 p.m., Eastern time. This offer is discretionary and may
be completely withdrawn without further notice by the Distributor.

Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to 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 Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Prospectus. Shares of the USA Fund B Class and
Insured Fund B Class 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. Shares of the Intermediate Fund B Class 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 Fund are subject to a CDSC of 1% if shares
are redeemed within 12 months following purchase. See Contingent Deferred Sales
Charge - Class B Shares and Class C Shares under Classes of Shares in the
Prospectus. 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; provided, however, that each commitment to mail or wire
redemption proceeds by a certain time, as described below, is modified by the
qualifications described in the next paragraph.

Each Fund will process written or telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. A Fund will honor redemption requests as to shares for which a check
was

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tendered as payment, but a Fund will not mail or wire the proceeds until it is
reasonably satisfied that the check has cleared. 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 involved will automatically redeem from the shareholder's account the Fund
shares purchased by the check plus any dividends earned thereon. Shareholders
may be responsible for any losses to the Fund 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 Fund of securities owned by it is not reasonably practical, or it
is not reasonably practical for a Fund fairly to value its assets, or in the
event that the SEC has provided for such suspension for the protection of
shareholders, a Fund may postpone payment or suspend the right of redemption or
repurchase. In such case, 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, Tax-Free
Fund, Inc. has elected to be governed by Rule 18f-1 under the 1940 Act pursuant
to which the Fund is obligated to redeem Fund shares solely in cash up to the
lesser of $250,000 or 1% of the net asset value of such Fund during any 90-day
period for any one shareholder.

The value of a Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to a Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.

Small Accounts

Before a 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 Funds' Prospectus and sends the proceeds to the
shareholder, the shareholder will be notified in writing that the value of the
shares in the account is less than 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 How to Buy Shares in
the Funds' Prospectus. Any redemption in an inactive account established with a
minimum investment may trigger mandatory redemption. No CDSC or Limited CDSC
will apply to the redemptions described in this paragraph.

* * *

Each Fund has made available certain redemption privileges, as described
below. The Funds reserve 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 Fund shares of $50,000 or less for which certificates have not been
issued may call the Shareholders Service Center at 800-523-1918 prior to the
time the offering price and net asset value are determined, as noted above, and
have the proceeds mailed to them at the record address. Checks payable to the
shareholder(s) of record will normally be mailed the next business day, but no
later than seven days, after the receipt of the redemption request. This option
is only available to individual, joint and individual fiduciary-type accounts.

In addition, redemption proceeds of $1,000 or more can be transferred to
your predesignated bank account by wire or by check by calling the phone numbers
listed above. An authorization form must have been completed by the

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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 relevant
Fund and a signature guarantee may be required. Each signature guarantee must be
supplied by an eligible guarantor institution. The Funds reserve 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.

If expedited payment under these procedures could adversely affect a Fund,
the Fund may take up to seven days to pay the shareholder.

Neither the Funds nor the Funds' Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, 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, such 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 Plans

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 Funds do 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 Fund 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

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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 made concurrently with the purchase of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in a fund managed by the Manager
must be terminated before a Systematic Withdrawal Plan with respect to such
shares can take effect, except if the shareholder is a participant in one of our
retirement plans or is investing in Delaware Group funds which do not carry a
sales charge. Redemptions of Class A Shares pursuant to a Systematic Withdrawal
Plan may be subject to a Limited CDSC if the purchase was made at net asset
value and a dealer's commission has been paid on that purchase. Redemptions of
Class B Shares or Class C Shares pursuant to a Systematic Withdrawal Plan may be
subject to a CDSC, unless the annual amount selected to be withdrawn is less
than 12% of the account balance on the date that the Systematic Withdrawal Plan
was established. See Waiver of Contingent Deferred Sales Charge - Class B and
Class C Shares and Waiver of Limited Contingent Deferred Sales Charge - Class A
Shares under Redemption and Exchange in the Prospectus. Shareholders should
consult their financial advisers to determine whether a Systematic Withdrawal
Plan would be suitable for them.

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.

-56-
<PAGE>

DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS

Each Fund declares a dividend to shareholders of each Class of the
respective Fund's shares from net investment income on a daily basis. Dividends
are declared each day Tax-Free Fund, Inc. is open and cash dividends are paid
monthly. 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 Fund 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 Fund, less the estimated expenses of that Fund 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.

Each Class of shares of a Fund will share proportionately in the investment
income and expenses of that Fund, 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
Fund 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 in cash again.
If a shareholder redeems an entire account, all dividends accrued to the time of
the withdrawal will be paid by separate check at the end of that particular
monthly dividend period, consistent with the payment and mailing schedule
described above. Any check in payment of dividends or other distributions which
cannot be delivered by the United States Post Office or which remains uncashed
for a period of more than one year may be reinvested in the shareholder's
account at the then-current net asset value and the dividend option may be
changed from cash to reinvest. A Fund may deduct from a shareholder's account
the costs of the Fund's effort to locate a shareholder if a shareholder's mail
is returned by the United States Post Office or the Fund is otherwise unable to
locate the shareholder or verify the shareholder's mailing address. These costs
may include a percentage of the account when a search company charges a
percentage fee in exchange for their location services.

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, unless the shareholder elects to
receive them in cash. Tax-Free Fund, Inc. will mail a quarterly statement
showing a Class' dividends paid and all the transactions made during the period.

Tax-Free Fund, Inc. anticipates that most of each Fund's dividends paid to
shareholders will be exempt from federal income taxes.

-57-
<PAGE>

TAXES

Federal Income Tax Aspects

Each Fund 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 (the "Code"), 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 Fund of Tax-Free Fund, Inc. is treated as a single tax
entity, and any capital gains and losses for each Fund are calculated
separately. Tax-Free Fund, Inc. 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, Tax-Free Fund,
Inc. intends to offset realized securities profits to the extent of capital
losses carried forward, if any.

For the fiscal year ended August 31, 1997, Intermediate Fund had a capital
gain of $27,578. At August 31, 1997, Intermediate Fund had a capital loss
carryforward of $995,275 which expires as follows: 2002--$371,621 and 2003--
$623,654.

Distributions by a 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 a Fund representing net
interest income received by the Fund 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 Fund after April 30, 1993 and net short-term
capital gains realized by the Fund, if any, will be taxable to shareholders as
ordinary income and will not qualify for the deduction for dividends received by
corporations. Under the Taxpayer Relief Act of 1997 (the "Act"), a Fund is
required to track its sales of portfolio securities and to report to you
according to the following holding periods: (i) "Pre-Act long-term capital
gains" -- securities sold by a Fund before May 7, 1997, that were held for more
than one year. These gains will be taxable to individual investors at a maximum
rate of 28%; (ii) "Mid-term capital gains" -- securities sold after July 28,
1997, that were held for more than one year but not more than 18 months. These
gains will be taxable to individual investors at a maximum rate of 28%; (iii)
"Long-term capital gains" -- securities sold by a Fund between May 7 and July 28
that were held for more than one year, and after July 28, that were held for
more than 18 months. These gains will be taxable to individual investors at a
maximum rate of 20% for investors in the 28% or higher federal income tax
brackets, or at a maximum rate of 10% for investors in the 15% federal income
tax bracket. Distributions from long-term or mid-term capital gains realized by
a Fund, if any, will be taxable to shareholders as long-term or mid-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 a Fund may incur a tax
liability for federal, state and local taxes upon the sale or redemption of
shares of the Fund. The Internal Revenue Service has publicly ruled that 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 Code provides that interest paid on indebtedness
incurred or continued to purchase or carry obligations the interest on which is
tax-exempt, and certain expenses associated with tax-exempt income, are not
deductible. It is probable that interest on indebtedness incurred or continued
to purchase or carry shares of a Fund is not deductible.

The Funds 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 Code. Persons who
are or may be considered "substantial users" should consult their tax advisers
in this matter before purchasing shares of a Fund.

Tax-Free Fund, Inc. intends to use the "average annual" method of
allocation in the event a Fund realizes any taxable interest income. Under this
approach, the percentage of interest income earned that is deemed to be taxable
in any year will be the same for each shareholder who held shares of a Fund at
any time during the year.

Shareholders will be informed annually of the amount and nature of income
and capital gains. For fiscal year 1997, all of each Fund's dividends from net
income were exempt from federal income tax.

-58-
<PAGE>

When Intermediate Fund writes a call or put option, an amount equal to the
premium received by it is included in the Fund's 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 Fund has written either expires on
its stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund 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 Fund has written is exercised, the Fund realizes a capital gain
or loss (long-term, mid-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 Fund has written is exercised, the amount of the premium
originally received will reduce the cost of the security which the Fund
purchases upon exercise of the option.

The premium paid by Intermediate Fund for the purchase of a put option is
recorded in the section of the Fund's 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 Fund has purchased expires on the
stipulated expiration date, the Fund realizes a capital loss for federal income
tax purposes in the amount of the cost of the option. If the Fund 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 Fund
exercises a put option, it realizes a capital gain or loss (long-term, mid-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 Intermediate Fund may engage in certain transactions or invest in
certain instruments, such as futures contracts, which may result in constructive
sales of appreciated positions in securities for Federal income tax purposes.
For example, a constructive sale may occur if the Fund has entered into a
futures or forward contract to deliver the same or substantially identical
securities. If a constructive sale occurs, the Fund will recognize either
ordinary income or capital gain depending on the length of time which it held
the security which was constructively sold.

The Code includes special rules applicable to listed options which
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 Fund 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 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 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.

Tax-Free Fund, Inc. 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.

For a Fund's taxable year beginning after August 5, 1997, the requirement
that less than 30% of a Fund's gross income be derived from sales of securities
held for less than three months has been repealed for Federal income tax
purposes in order to qualify as a regulated investment company. Such
requirement, however, may still have state or local tax implications, and the
Funds intend to continue to abide by such requirement.

-59-
<PAGE>

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.

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. Tax-Free Fund, Inc. will report annually for each Fund the
percentage of interest income earned on municipal obligations on a state-by-
state basis during the preceding calendar year.

-60-
<PAGE>

INVESTMENT MANAGEMENT AGREEMENTS

The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to each Fund, subject to the
supervision and direction of the Tax-Free Fund, Inc.'s Board of Directors.

Each Fund's Investment Management Agreement is dated April 3, 1995 and was
approved by shareholders on March 29, 1995. Each Agreement has an initial term
of two years and may be renewed each year only so long as such renewal and
continuance are specifically approved at least annually by the Board of
Directors or by vote of a majority of the outstanding voting securities of the
affected Fund, and only if the terms and the renewal thereof have been approved
by vote of a majority of the directors of Tax-Free Fund, Inc. 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 Tax-Free Fund,
Inc. or by the Manager. Each Agreement will terminate automatically in the event
of its assignment.

The annual compensation paid by a Fund for investment management services
under its Investment Management Agreement is equal to, for USA Fund, 0.60% on
the first $500 million of its average daily net assets, 0.575% on the next $250
million and 0.55% on the average daily net assets in excess of $750 million; for
Insured Fund, 0.60% of its average daily net assets; and for Intermediate Fund,
0.50% of its average daily net assets, less in each case, the Fund's
proportionate share of all directors' fees paid to the unaffiliated directors of
Tax-Free Fund, Inc.

On August 31, 1997, the total net assets of Tax-Free Fund, Inc. were
$759,390,857, broken down as follows:

USA Fund $652,412,347
Insured Fund $ 82,085,259
Intermediate Fund $ 24,893,251

The Manager makes and implements all investment decisions on behalf of Tax-
Free Fund, Inc. The Manager pays Tax-Free Fund, Inc.'s rent and the salaries of
all directors, officers and employees of Tax-Free Fund, Inc. who are affiliated
with both the Manager and Tax-Free Fund, Inc. Tax-Free Fund, Inc. pays all of
its other expenses. For the fiscal years ended August 31, 1995, 1996 and 1997,
investment management fees paid by USA Fund were $4,388,886, $4,540,845 and
$4,082,683, respectively. Investment management fees paid by Insured Fund for
the fiscal years ended August 31, 1995, 1996 and 1997 amounted to $523,070,
$528,860 and $488,651, respectively. For the fiscal years ended August 31, 1995,
1996 and 1997, investment management fees that would have been payable by
Intermediate Fund amounted to $104,724, $106,549 and $125,029, respectively, but
no amount was paid by this Fund for 1995, 1996 or 1997 due to the waiver of fees
described below.

-61-
<PAGE>

Except for those expenses borne by the Manager under the Investment
Management Agreements and the Distributor under the Distribution Agreements,
Tax-Free Fund, Inc. 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.

The ratios of expenses to average daily net assets for the fiscal year
ended August 31, 1997 for each Class of USA Fund, Insured Fund and Intermediate
Fund were as follows:
<TABLE>
<CAPTION>

Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>

USA Fund 0.94% 1.74% 1.74%
Insured Fund 1.05% 1.85% 1.85%
Intermediate Fund 0.43%* 1.28%* 1.28%*
</TABLE>

* Including waivers.

The ratios for Class A Shares, Class B Shares and Class C Shares reflect
the impact of their respective 12b-1 Plans. In addition, the ratios for the
Class A Shares and the Class B Shares of Intermediate Fund reflect the waiver of
fees described below.

In connection with Intermediate Fund, the Manager elected voluntarily to
waive that portion, if any, of the annual management fees payable by this Fund
and to reimburse the Fund to the extent necessary to ensure that the Total
Operating Expenses of the Fund, including 12b-1 expenses, did not exceed 0.25%
during the period from the commencement of the public offering of the Fund
through June 30, 1993. This waiver was extended through June 30, 1994, but
modified effective May 2, 1994 through December 31, 1996 to provide that
operating expenses of the Fund would not exceed 0.10%, excluding the 12b-1
expenses. This waiver was further modified to provide those operating expenses
of the Fund did not exceed 0.35% (excluding 12b-1 payments) for the period
January 1, 1997 through June 30, 1997 and 0.45% (excluding 12b-1 payments) for
the period July 1, 1997 through December 31, 1997.

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 each Fund's 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 each Fund on
behalf of its Class A Shares, Class B Shares and Class C Shares under the 12b-1
Plans for each such Class.

Prior to January 3, 1995, Delaware Distributors, Inc. ("DDI") served as the
national distributor of each Fund's shares. On that date, Delaware Distributors,
L.P., a newly formed limited partnership, succeeded to the business of DDI. All
officers and employees of DDI became officers and employees of Delaware
Distributors, L.P. DDI is the corporate general partner of Delaware
Distributors, L.P. and both DDI and Delaware Distributors, L.P. are indirect,
wholly owned subsidiaries of Delaware Management Holdings, Inc.

The Transfer Agent, Delaware Service Company, Inc., another affiliate of
the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
each Fund's shareholder servicing, dividend disbursing and transfer agent
pursuant to a Shareholders Services Agreement dated June 29, 1988 for USA Fund
and Insured Fund and November 10, 1992 for Intermediate Fund. The Transfer Agent
also provides accounting services to the Funds pursuant to the terms of a
separate Fund Accounting Agreement. The Transfer Agent is also an indirect,
wholly owned subsidiary of Delaware Management Holdings, Inc.

-62-
<PAGE>

-63-

<PAGE>

OFFICERS AND DIRECTORS

The business and affairs of Tax-Free Fund, Inc. are managed under the
direction of its Board of Directors.

Certain officers and directors of Tax-Free Fund, Inc. hold identical
positions in each of the other funds in the Delaware Group. On September 30,
1997, Tax-Free Fund, Inc.'s officers and directors owned less than 1% of the
outstanding shares of each of the Funds' Classes.

As of September 30, 1997, management believes the following accounts held
5% or more of the outstanding shares of a Class:

Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Insured Fund A Class Merrill Lynch, Pierce, Fenner & Smith
For the Sole Benefit of its Customers
Attn: Fund Administration 4800 Deer Lake
Drive East, 3rd Floor Jacksonville, FL 32246 215,768(1) 3.07%

USA Fund B Class Merrill Lynch, Pierce, Fenner & Smith
For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246 176,362(1) 5.81%

Insured Fund B Class Merrill Lynch, Pierce, Fenner & Smith
For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246 38,356(1) 11.49%

Gerry M Fleuriet TTEE
Kenneth MacPherson
Hazel MacPherson Grantors
621 East Tyler
Harlingen, TX 78550 22,520 6.75%

Intermediate Fund Merrill Lynch, Pierce, Fenner & Smith
B Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246 43,585(1) 24.86%

Maimee G. Chapin, Merlaine G. Latham
Dolores Ann Lund and Norma J. Alguard
1301 1st Street South
Jacksonville Beach, FL 32250 11,110 6.34%

</TABLE>

(1) Tax-Free Fund, Inc. believes that these shares are held by the record owner
for the benefit of others.

-64-
<PAGE>

Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Intermediate Fund Charles D. La Motta
B Class 286 Stonegate Drive
Devon, PA 19333 9,699 5.53%

USA Fund C Class Merrill Lynch, Pierce, Fenner & Smith
For the Sole Benefit of its Customers
Attn: Fund Administration 4800 Deer Lake
Drive East, 3rd Floor Jacksonville, FL 32246 37,516(1) 28.70%

Lewis A. Lenker
Janel M. Lenker
1248 Desert View Drive
Twin Falls, ID 83301 9,839 7.53%

Jerry Tomchick and
Madeline R. Tomchick
668 South 5th Avenue
Royersford, PA 19468 8,900 6.81%

Master Builders & Specialists, Inc.
216 South Pierce Street
Lafayette, LA 70501 8,493 6.50%

Insured Fund C Class Merrill Lynch, Pierce, Fenner & Smith
For the Sole Benefit of its Customers
Attn: Fund Administration 4800 Deer Lake
Drive East, 3rd Floor Jacksonville, FL 32246 3,310(1) 41.03%

Hugh A. Lindsay
and Helen W. Lindsay
1300 Jacobs Drive
Morgantown, WV 26505 1,729 21.43%

Selvin L. Smith, Jr.
73 Delmoor Drive, NW
Atlanta, GA 30311 1,673 20.74%

Jack Hawkins and
Judy Hawkins JT WROS
4112 Beachcomber Drive
Yukon, OK 73099 856 10.61%

</TABLE>

(1) Tax-Free Fund, Inc. believes that these shares are held by the record owner
for the benefit of others.

-65-
<PAGE>

Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Insured Fund C Class Glenn Foret and Gwen Foret Community Property
9040 Briarwood Place Baton Rouge, LA 70809 477 5.92%

Intermediate Fund Emery Jahnke
Ann Jahnke JT TEN
2402 Lilac Lane
Fargo, ND 58102 24,441 17.11%

Jeanne R. Derbes
Thomas J. Derbes
2302 N. Harbour Drive
Lynn Haven, FL 32444 19,615 13.73%

Jewel Higgenbotham
9207 Pine Crest
Biloxi, MS 39532 17,121 11.99%

Merrill Lynch, Pierce, Fenner & Smith
For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246 12,773(1) 8.94%

Lewis A. Lenker
Janel M. Lenker
1248 Desert View Drive
Twin Falls, ID 83301 10,898 7.63%

Laurence Adams Malone Trust
Matthew JD Lynch
166779 Chillicothe Road
Chagrin Falls, OH 44023 9,999 7.00%

For the Benefit of Bodil B. Ottesen
6004 Hunt Ridge Road #2631
Baltimore, MD 21210 9,829 6.88%

</TABLE>

(1) Tax-Free Fund, Inc. believes that these shares are held by the record owner
for the benefit of others.

-66-
<PAGE>

DMH Corp., Delvoy, Inc., 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 Capital Management, 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 Tax-
Free Fund, Inc. on behalf of each Fund and the Manager were executed following
shareholder approval. DMH and the Manager are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National. Lincoln
National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management.

Certain officers and directors of Tax-Free Fund, Inc. hold identical
positions in each of the other funds in the Delaware Group. Directors and
principal officers of Tax-Free Fund, Inc. 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.

*Wayne A. Stork (60)

Chairman, Director and/or Trustee of Tax-Free Fund, Inc., each of the other
32 investment companies in the Delaware Group, Delaware
Distributors, Inc. and Delaware Capital Management, Inc.

Chairman, President, Chief Executive Officer, Director and/or Trustee
Delaware Management Holdings, Inc., DMH Corp., Delaware International
Holdings Ltd. and Founders Holdings, Inc.

Chairman, President, Chief Executive Officer, Chief Investment Officer and
Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware International
Advisers Ltd.

President and Chief Executive Officer of Delvoy, Inc.

Director of Delaware Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.

During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.

Richard G. Unruh, Jr. (58)

Executive Vice President of Tax-Free Fund, Inc., each of the other 32
investment companies in the Delaware Group, Delaware Management
Holdings, Inc. and Delaware Capital Management, Inc.
Executive Vice President and Director of Delaware Management Company, 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.

Paul E. Suckow (50)

Executive Vice President/Chief Investment Officer, Fixed Income of Tax-Free
Fund, Inc., each of the other 32 investment companies in the Delaware
Group, Delaware Management Company, Inc. and Delaware Management
Holdings, Inc.

Executive Vice President and Director of Founders Holdings, Inc.

Executive Vice President of Delaware Capital Management, Inc.
Director of Founders CBO Corporation.

Director of HYPPCO Finance Company Ltd.

Before returning to the Delaware Group in 1993, Mr. Suckow was Executive
Vice President and Director of Fixed Income for Oppenheimer Management
Corporation, New York, NY from 1985 to 1992. Prior to that, Mr. Suckow
was a fixed-income portfolio manager for the Delaware Group.

- ----------------------

-67-
<PAGE>

*Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the 1940 Act.

-68-
<PAGE>

Walter P. Babich (70)

Director and/or Trustee of Tax-Free Fund, Inc. and each of the other 32
investment companies 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 (58)

Director and/or Trustee of Tax-Free Fund, Inc. and each of the other 32
investment companies in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates.

From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989, he was
also a lecturer in English at the University. In addition, Mr. Knerr
was Chairman of The Publishing Group, Inc., New York, from 1988 to
1990. Mr. Knerr founded The Publishing Group, Inc. in 1988.

Ann R. Leven (56)

Director and/or Trustee of Tax-Free Fund, Inc. and each of the other 32
investment companies 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 1992, she
was Adjunct Professor of Columbia Business School.

W. Thacher Longstreth (76)

Director and/or Trustee of Tax-Free Fund, Inc. and each of the other 32
investment companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.

Thomas F. Madison (61)
Director and/or Trustee of Tax-Free Fund, Inc. and each of the other 32
investment companies in the Delaware Group.
President and Chief Executive Officer, MLM Partners, Inc.
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402.
Mr. Madison has also been Chairman of the Board of Communications Holdings,
Inc. since 1996. From February to September 1994, Mr. Madison served
as Vice Chairman--Office of the CEO of The Minnesota Mutual Life
Insurance Company and from 1988 to 1993, he was President of U.S. WEST
Communications--Markets.

-69-
<PAGE>

* Jeffrey J. Nick (44)
President, Chief Executive Officer and Director and/or Trustee of Tax-Free
Fund, Inc. and each of the other 32 investment companies in the Delaware
Group. President and Director of Delaware Management Holdings, Inc.
President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc. President of Lincoln Funds Corporation.
From 1992 to 1996, Mr. Nick was Managing Director of Lincoln National UK
plc and from 1989 to 1992, he was Senior Vice President responsible
for corporate planning and development for Lincoln National
Corporation.

Charles E. Peck (71)
Director and/or Trustee of Tax-Free Fund, Inc. and each of the other 32
investment companies in the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary/Treasurer, Enterprise Homes, Inc.

From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of The
Ryland Group, Inc., Columbia, MD.

David K. Downes (57)

Executive Vice President/Chief Operating Officer/Chief Financial Officer of
Tax-Free Fund, Inc., each of the other 32 investment companies in the
Delaware Group, Delaware Management Holdings, Inc, Founders CBO
Corporation, Delaware Capital Management, Inc. and Delaware
Distributors, L.P.

Executive Vice President, Chief Operating Officer, Chief Financial Officer
and Director of Delaware Management Company, Inc., DMH Corp., Delaware
Distributors, Inc., Founders Holdings, Inc., Delaware International
Holdings Ltd. and Delvoy, Inc.

President/Chief Executive Officer/Chief Financial Officer and Director of
Delaware Service Company, Inc. Chairman, Chief Executive Officer and
Director of Delaware Management Trust Company and Delaware Investment
& Retirement Services, 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. (50)

Senior Vice President, Secretary and General Counsel of Tax-Free Fund,
Inc., each of the other 32 investment companies in the Delaware Group,
Delaware Distributors, L.P. and Delaware Management Holdings, Inc.

Senior Vice President, Secretary, General Counsel and Director of DMH
Corp., Delaware Management Company, Inc., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Founders Holdings, Inc., Delaware
Investment & Retirement Services, Inc, Delaware Capital Management,
Inc. and Delvoy, Inc.

Executive Vice President, Secretary, General Counsel and Director of
Delaware Management Trust Company. 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.

- ----------------------

*Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the 1940 Act.

-70-
<PAGE>

Patrick P. Coyne (34)

Vice President/Senior Portfolio Manager of Tax-Free Fund, Inc., and each of
the tax-exempt and the fixed-income funds in the Delaware Group and
Delaware Capital Management, Inc.

During the past five years, Mr. Coyne has served in various capacities at
different times within the Delaware organization.

Mitchell L. Conery (38)

Vice President/Senior Portfolio Manager of Tax-Free Fund, Inc., each of the
tax-exempt and the fixed-income funds in the Delaware Group and
Delaware Capital Management.
Before joining the Delaware Group in 1997, Mr. Conery was an investment
officer with Travelers Insurance from 1995 through 1996 and a research
analyst with CS First Boston from 1992 to 1995.

Joseph H. Hastings (47)

Senior Vice President/Corporate Controller of Tax-Free Fund, Inc., each of
the other 32 investment companies in the Delaware Group and Founders
Holdings, Inc.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management Company,
Inc., Delaware Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Capital Management, Inc.,
Delaware International Holdings Ltd. and Delvoy, Inc.

Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc. Executive Vice President/Chief Financial Officer/Treasurer
of Delaware Management Trust Company. Senior Vice President/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 (35)

Senior Vice President/Treasurer of Tax-Free Fund, Inc., each of the other
32 investment companies in the Delaware Group, Delaware Distributors,
Inc. and Founders Holdings, Inc.
Senior Vice President/Investment Accounting of Delaware Management Company,
Inc. and Delaware Service Company, Inc.
Senior Vice President and Treasurer/Manager of Investment Accounting of
Delaware Distributors, L.P.
Senior Vice President and Manager of Investment Accounting of Delaware
International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.

Before joining the Delaware Group in 1995, Mr. Bishof was a Vice President
for Bankers Trust, New York, NY from 1994 to 1995, a Vice President
for CS First Boston Investment Management, New York, NY from 1993 to
1994 and an Assistant Vice President for Equitable Capital Management
Corporation, New York, NY from 1987 to 1993.

-71-
<PAGE>

The following is a compensation table listing for each director entitled to
receive compensation, the aggregate compensation received from Tax-Free Fund,
Inc. and the total compensation received from all Delaware Group funds for the
fiscal year ended August 31, 1997 and an estimate of annual benefits to be
received upon retirement under the Delaware Group Retirement Plan for
Directors/Trustees as of August 31, 1997.

Pension or
Retirement
Benefits
Aggregate Accrued Total
Compen- as Part Estimated Compensation
sation of Annual from all 33
from Tax-Free Benefits Delaware
Tax-Free Fund, Inc. Upon Group Investment
Name Fund, Inc. Expenses Retirement* Companies
<S> <C> <C> <C> <C>
W. Thacher Longstreth $3,138 None $38,000 $54,223
Ann R. Leven $3,463 None $38,000 $59,182
Walter P. Babich $3,397 None $38,000 $58,182
Anthony D. Knerr $3,397 None $38,000 $58,182
Charles E. Peck $3,041 None $38,000 $51,037
Thomas F. Madison** $836 None $38,000 $18,290

</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, 1997, he or she would be
entitled to annual payments totaling $38,000, 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.

** Thomas F. Madison joined Tax-Free Fund, Inc.'s Board of Directors on April
30, 1997.

-72-
<PAGE>

EXCHANGE PRIVILEGE

The exchange privileges available for shareholders of the Classes and for
shareholders of classes of other funds in the Delaware Group are set forth in
the relevant prospectuses for such classes. The following supplements that
information. The Funds 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
Shareholder Service Center at 800-523-1918 to effect an exchange. The
shareholder's current Fund 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 Funds 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 Funds' Prospectus, neither the Funds nor the Transfer
Agent is responsible for any shareholder loss incurred in acting upon written or
telephone instructions for redemption or exchange of Fund shares which are
reasonably believed to be genuine.

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.

-73-
<PAGE>

Each Fund reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any person whose
transactions seem to follow a timing pattern who: (i) makes an exchange request
out of the Fund within two weeks of an earlier exchange request out of the Fund,
or (ii) makes more than two exchanges out of the Fund per calendar quarter, or
(iii) exchanges shares equal in value to at least $5 million, or more than 1/4
of 1% of the Fund's net assets. Accounts under common ownership or control,
including accounts administered so as to redeem or purchase shares based upon
certain predetermined market indicators, will be aggregated for purposes of the
exchange limits.

Restrictions on Timed Exchanges

Timing Accounts operating under existing timing agreements may only execute
exchanges between the following eight Delaware Group funds: (1) Decatur Income
Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4) Limited-Term
Government Fund, (5) 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. Each 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).

Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with
a "market timing" strategy may be disruptive to a Fund and therefore may be
refused.

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 stocks issued by
emerging growth companies exhibiting strong capital appreciation potential.

Small Cap Value Fund seeks capital appreciation by investing primarily in
common stocks whose market values appear low relative to their underlying value
or future potential.

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

-74-
<PAGE>

without undue risk to principal. Blue Chip Fund seeks to achieve long-term
capital appreciation. Current income is a secondary objective. It seeks to
achieve these objectives by investing primarily in equity securities and any
securities that are convertible into equity securities. Quantum Fund seeks to
achieve long-term capital appreciation. It seeks to achieve this objective by
investing primarily in equity securities of medium- to large-sized companies
expected to grow over time that meet the Fund's "Social Criteria" strategy.

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. Tax-Free New Jersey
Fund seeks a high level of current interest income exempt from federal income
tax and New Jersey state and local taxes, consistent with preservation of
capital. Tax-Free Ohio Fund seeks a high level of current interest income
exempt from federal income tax and Ohio state and local taxes, consistent with
preservation of capital.

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. Emerging Markets Fund seeks long-
term capital appreciation by investing primarily in equity securities of issuers
located or operating in emerging countries.

U.S. Growth Fund seeks to maximize capital appreciation by investing in
companies of all sizes which have low dividend yields, strong balance sheets and
high expected earnings growth rates relative to their industry. Overseas Equity
Fund seeks to maximize total return (capital appreciation and income),
principally through investments in an internationally diversified portfolio of
equity securities. New Pacific Fund seeks long-term capital appreciation by
investing primarily in companies which are domiciled in or have their principal
business activities in the Pacific Basin.

Delaware Group Premium Fund, Inc. offers 15 funds available exclusively as
funding vehicles for certain insurance company separate accounts. Decatur
Total Return Series seeks the highest possible total rate of return by selecting
issues that exhibit the potential for capital appreciation while providing
higher than average dividend income. Delchester Series seeks as high a current
income as possible by investing in rated and unrated corporate bonds, U.S.
government securities and commercial paper. Capital Reserves Series seeks a
high stable level of current income while minimizing fluctuations in principal
by investing in a diversified portfolio of short- and intermediate-term
securities. Cash Reserve Series seeks the highest level of income consistent
with preservation of capital and liquidity through investments in short-term
money market instruments. DelCap Series seeks long-term capital appreciation by
investing

-75-
<PAGE>

its assets in a diversified portfolio of securities exhibiting the potential for
significant growth. Delaware Series seeks a balance of capital appreciation,
income and preservation of capital. It uses a dividend-oriented valuation
strategy to select securities issued by established companies that are believed
to demonstrate potential for income and capital growth. International Equity
Series seeks long-term growth without undue risk to principal by investing
primarily in equity securities of foreign issuers that provide the potential for
capital appreciation and income. Value Series seeks capital appreciation by
investing in small- to mid-cap common stocks whose market values appear low
relative to their underlying value or future earnings and growth potential.
Emphasis will also be placed on securities of companies that may be temporarily
out of favor or whose value is not yet recognized by the market. Trend Series
seeks long-term capital appreciation by investing primarily in small-cap common
stocks and convertible securities of emerging and other growth-oriented
companies. These securities will have been judged to be responsive to changes in
the market place and to have fundamental characteristics to support growth.
Income is not an objective. Global Bond Series seeks to achieve current income
consistent with the preservation of principal by investing primarily in global
fixed-income securities that may also provide the potential for capital
appreciation. Strategic Income Series seeks high current income and total return
by using a multi-sector investment approach, investing primarily in three
sectors of the fixed-income securities markets: high-yield, higher risk
securities; investment grade fixed-income securities; and foreign government and
other foreign fixed-income securities. Devon Series seeks current income and
capital appreciation by investing primarily in income-producing common stocks,
with a focus on common stocks that the investment manager believes have the
potential for above-average dividend increases over time. Emerging Markets
Series seeks to achieve long-term capital appreciation by investing primarily in
equity securities of issuers located or operating in emerging countries.
Convertible Securities Series seeks a high level of total return on its assets
through a combination of capital appreciation and current income by investing
primarily in convertible securities. Quantum Series seeks to achieve long-term
capital appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy.

Delaware-Voyageur US Government Securities Fund seeks to provide a high
level of current income consistent with the prudent investment risk by investing
in U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.

Delaware-Voyageur Tax-Free Arizona Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the Arizona personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Minnesota Insured Fund seeks to provide a high level of current income exempt
from federal income tax and the Minnesota personal income tax, consistent with
the preservation of capital.

Delaware-Voyageur Tax-Free Minnesota Intermediate Fund seeks to provide a
high level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.

Delaware-Voyageur Tax-Free California Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the California
personal income tax, consistent with the preservation of capital. Delaware-
Voyageur Tax-Free Florida Insured Fund seeks to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. The Fund will seek to select investments that will enable its shares
to be exempt from the Florida intangible personal property tax. Delaware-
Voyageur Tax-Free Florida Fund seeks to provide a high level of current income
exempt from federal income tax, consistent with the preservation of capital.
The Fund will seek to select investments that will enable its shares to be
exempt from the Florida intangible personal property tax. Delaware-Voyageur
Tax-Free Kansas Fund seeks to provide a high level of current income exempt from
federal income tax, the Kansas personal income tax and the Kansas Intangible
personal property tax, consistent with the preservation of capital. Delaware-
Voyageur Tax-

-76-
<PAGE>

Free Missouri Insured Fund seeks to provide a high level of current income
exempt from federal income tax and the Missouri personal income tax, consistent
with the preservation of capital. Delaware-Voyageur Tax-Free New Mexico Fund
seeks to provide a high level of current income exempt from federal income tax
and the New Mexico personal income tax, consistent with the preservation of
capital. Delaware-Voyageur Tax-Free Oregon Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the Oregon personal
income tax, consistent with the preservation of capital. Delaware-Voyageur Tax-
Free Utah Fund seeks to provide a high level of current income exempt from
federal income tax, consistent with the preservation of capital. Delaware-
Voyageur Tax-Free Washington Insured Fund seeks to provide a high level of
current income exempt from federal income tax, consistent with the preservation
of capital.

Delaware-Voyageur Tax-Free Florida Intermediate Fund seeks to provide a
high level of current income exempt from federal income tax, consistent with the
preservation of capital. The Fund will seek to select investments that will
enable its shares to be exempt from the Florida intangible personal property
tax. The Fund seeks to reduce market risk by maintaining an average weighted
maturity from five to ten years.

Delaware-Voyageur Tax-Free Arizona Fund seeks to provide a high level of
current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware-Voyageur Tax-Free
California Fund seeks to provide a high level of current income exempt from
federal income tax and the California personal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Iowa Fund seeks to provide
a high level of current income exempt from federal income tax and the Iowa
personal income tax, consistent with the preservation of capital. Delaware-
Voyageur Tax-Free Idaho Fund seeks to provide a high level of current income
exempt from federal income tax and the Idaho personal income tax, consistent
with the preservation of capital. Delaware-Voyageur Minnesota High Yield
Municipal Bond Fund seeks to provide a high level of current income exempt from
federal income tax and the Minnesota personal income tax primarily through
investment in medium and lower grade municipal obligations. National High Yield
Municipal Fund seeks to provide a high level of income exempt from federal
income tax, primarily through investment in medium and lower grade municipal
obligations. Delaware-Voyageur Tax-Free New York Fund seeks to provide a high
level of current income exempt from federal income tax and the personal income
tax of the state of New York and the city of New York, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Wisconsin Fund seeks to
provide a high level of current income exempt from federal income tax and the
Wisconsin personal income tax, consistent with the preservation of capital.

Delaware-Voyageur Tax-Free Colorado Fund seeks to provide a high level of
current income exempt from federal income tax and the Colorado personal income
tax, consistent with the preservation of capital.

Aggressive Growth Fund seeks long-term capital appreciation, which the Fund
attempts to achieve by investing primarily in equity securities believed to have
the potential for high earnings growth. Although the Fund, in seeking its
objective, may receive current income from dividends and interest, income is
only an incidental consideration in the selection of the Fund's investments.
Growth Stock Fund has an objective of long-term capital appreciation. The Fund
seeks to achieve its objective from equity securities diversified among
individual companies and industries. Tax-Efficient Equity Fund seeks to obtain
for taxable investors a high total return on an after-tax basis. The Fund will
attempt to achieve this objective by seeking to provide a high long-term after-
tax total return through managing its portfolio in a manner that will defer the
realization of accrued capital gains and minimize dividend income.

Delaware-Voyageur Tax-Free Minnesota Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax, consistent with the preservation of capital. Delaware-Voyageur Tax-Free
North Dakota Fund seeks to provide a high level of current income exempt from
federal income tax and the North Dakota personal income tax, consistent with the
preservation of capital.

-77-
<PAGE>

For more complete information about any of the Delaware Group 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 Fund. The Manager also
provides investment management services to certain of the other funds in the
Delaware Group. The Manager, through a separate division, also manages private
investment accounts. While investment decisions for each Fund are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for each Fund.

The Manager also manages the investment options for Delaware Medallion[sm]
III Variable Annuity. Medallion is issued by Allmerica Financial Life Insurance
and Annuity Company (First Allmerica Financial Life Insurance Company in New
York and Hawaii). Delaware Medallion offers 15 different investment series
ranging from domestic equity funds, international equity and bond funds and
domestic fixed income funds. Each investment series available through Medallion
utilizes an investment strategy and discipline the same as or similar to one of
the Delaware Group mutual funds available outside the annuity. See Delaware
Group Premium Fund, Inc., above.

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 each 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 each Fund. The
Distributor, DDLP (for all periods after January 3, 1995) and, in its capacity
as such, DDI prior to January 3, 1995, received net commissions from each Fund
on behalf of its Class A Shares, after reallowances to dealers, as follows:

USA Fund A Class

Total
Amount of Amounts Net
Fiscal Underwriting Reallowed Commission
Year Ended Commission to Dealers to Distributor
---------- ------------ ---------- --------------
<S> <C> <C> <C>
8/31/97 $615,910 $511,081 $104,829
8/31/96 1,254,767 1,039,305 215,462
8/31/95 1,466,837 1,217,558 249,279

</TABLE>

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<PAGE>

Insured Fund A Class

Total
Amount of Amounts Net
Fiscal Underwriting Reallowed Commission
Year Ended Commission to Dealers to Distributor
---------- ------------ ---------- --------------
<S> <C> <C> <C>
8/31/97 $88,637 $73,401 $15,236
8/31/96 207,649 171,130 36,519
8/31/95 162,537 134,900 27,637

</TABLE>

Intermediate Fund A Class

Total
Amount of Amounts Net
Fiscal Underwriting Reallowed Commission
Year Ended Commission to Dealers to Distributor
---------- ------------ ---------- --------------
<S> <C> <C> <C>
8/31/97 $25,579 $21,287 $4,292
8/31/96 65,201 53,230 11,971
8/31/95 48,037 39,409 8,628

</TABLE>

The Distributor and, in its capacity as such, DDI received Limited
CDSC payments with respect to Class A Shares as follows:

Limited CDSC Payments

Fiscal Intermediate
Year Ended USA Fund A Class Insured Fund A Class Fund A Class
---------- ---------------- -------------------- ------------
<S> <C> <C> <C>
8/31/97 $-0- $-0- $-0-
8/31/96 -0- 6,501 -0-
8/31/95 12,302 74 6,145

</TABLE>

-79-
<PAGE>

The Distributor and, in its capacity as such, DDI received CDSC
payments with respect to Class B Shares as follows:

CDSC Payments

Fiscal Intermediate
Year Ended USA Fund B Class Insured Fund B Class Fund B Class
---------- ---------------- -------------------- ------------
<S> <C> <C> <C>
8/31/97 $135,550 $13,948 $3,814
8/31/96 37,160 8,344 3,293
8/31/95 120,883 228 756

</TABLE>

The Distributor received CDSC payments with respect to Class C Shares as
follows:

CDSC Payments
<TABLE>
<CAPTION>

Fiscal Intermediate
Year Ended USA Fund B Class Insured Fund B Class Fund B Class
---------- ---------------- -------------------- ------------
<S> <C> <C> <C>
8/31/97 $1,522 $-0- $74
8/31/96* -0- -0- -0-

</TABLE>

*Commenced operations on November 29, 1995.

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
Fund 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 Transfer Agent also
provides accounting services to the Funds. Those services include performing
all functions related to calculating the Fund's net asset value and providing
all financial reporting services, regulatory compliance testing and other
related accounting services. For its services, the Transfer Agent is paid a fee
based on total assets of all funds in the Delaware Group for which it provides
such accounting services. Such fee is equal to 0.25% multiplied by the total
amount of assets in the complex for which the Transfer Agent furnishes
accounting services, where such aggregate complex assets are $10 billion or
less, and 0.20% of assets if such aggregate complex assets exceed $10 billion.
The fees are charged to each fund, including the Fund, on an aggregate pro-rata
basis. The asset-based fee payable to the Transfer Agent is subject to a
minimum fee calculated by determining the total number of investment portfolios
and associated classes.

The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Tax-Free Fund, Inc.'s
advisory relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Tax-Free Fund, Inc. to
delete the words "Delaware Group" from Tax-Free Fund, Inc.'s name.

Bankers Trust Company ("Bankers"), One Bankers Trust Plaza, New York, NY
10006, is custodian of each Fund's securities and cash. As custodian for each
Fund, Bankers maintains a separate account or accounts for each Fund; receives,
holds and releases portfolio securities on account of each Fund; makes receipts
and disbursements of money on

-80-
<PAGE>

behalf of each Fund; and collects and receives income and other payments and
distributions on account of each Fund's portfolio securities.

The legality of the issuance of the shares offered hereby registered,
pursuant to Rule 24f-2 under the 1940 Act, has been passed upon for Tax-Free
Fund, Inc. by Stradley, Ronon, Stevens & Young, LLP, Philadelphia, Pennsylvania.

Capitalization

Tax-Free Fund, Inc. has present authorized capitalization of five hundred
million shares of capital stock with a $0.01 par value per share. Each Fund
offers three classes of shares, each representing a proportionate interest in
the assets of that Fund, and each having the same voting and other rights and
preferences as the other classes, except that, as a general matter, shareholders
of Class A Shares, Class B Shares and Class C Shares of a Fund may vote only on
matters affecting the 12b-1 Plan that relates to the class of shares that they
hold. However, Class B Shares of a Fund may vote on any proposal to increase
materially the fees to be paid by the Fund under the Rule 12b-1 Plans relating
to its Class A Shares. General expenses of a Fund will be allocated on a pro-
rata basis to the classes according to asset size, except that expenses of the
Rule 12b-1 Plans of each Fund's Class A, Class B and Class C Shares will be
allocated solely to those classes. The Board of Directors has allocated two
hundred twenty-five million shares to USA Fund with one hundred seventy-five
million shares allocated to Class A Shares, twenty-five million shares to Class
B Shares and twenty-five million shares to Class C Shares; one hundred seventy-
five million shares to Insured Fund with one hundred twenty-five million shares
allocated to Class A Shares, twenty-five million shares to Class B Shares and
twenty-five million shares to Class C Shares; and one hundred million shares to
Intermediate Fund with fifty million shares allocated to Class A Shares, twenty-
five million shares to Class B Shares and twenty-five million shares to Class C
Shares.

All shares have no preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable.

Prior to May 2, 1994, Tax-Free USA Fund A Class was known as Tax-Free USA
Fund, and prior to June 1, 1992, it was known as USA Series. Prior to May 2,
1994, Tax-Free Insured Fund A Class was known as Tax-Free Insured Fund, and
prior to June 1, 1992, it was known as USA Insured Series. Prior to May 2,
1994, Tax-Free USA Intermediate Fund A Class was known as Tax-Free USA
Intermediate Fund.

Noncumulative Voting

Tax-Free Fund, Inc.'s shares have noncumulative voting rights which means
that the holders of more than 50% of the shares of Tax-Free Fund, Inc. 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.

-81-
<PAGE>

APPENDIX A--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.

1997 Rates

Taxable Income
Federal
Single Return Joint Return Rate Tax
------------- ------------ --------
<S> <C> <C>
$0-$24,650 $0-$41,200 15%
$24,651-$59,750 $41,201-$99,600 28%
$59,751-$124,650 $99,601-$151,750 31%
$124,651-$271,050 $151,751-$271,050 36%+
Over $271,050 Over $271,050 39.6%+

4.0%* 5.0%* 6.0%* 7.0%* 8.0%* 9.0%*
Federal Federal Federal Federal Federal Federal
Taxable Taxable Taxable Taxable Taxable Taxable
Equivalent Equivalent Equivalent Equivalent Equivalent Equivalent
- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
4.7% 5.9% 7.1% 8.2% 9.4% 10.6%
5.6% 6.9% 8.3% 9.7% 11.1% 12.5%
5.8% 7.2% 8.7% 10.1% 11.6% 13.0%
6.3% 7.8% 9.4% 10.9% 12.5% 14.1%
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% tax-free
yields. While it is expected that a Fund will invest principally in obligations
generating interest exempt from federal income tax, other income received by the
Fund may be taxable.

* This should not be considered representative of a Fund's yield at any
specific time.

+ For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax
rate. In addition, a 10% surtax (not applicable to capital gains) applies
to certain high-income taxpayers. It is computed by applying a 39.6% rate
to taxable income in excess of $271,050. The above table does not reflect
the personal exemption phaseout nor the limitations of itemized
deductions that may apply.

-82-
<PAGE>

FINANCIAL STATEMENTS

Ernst & Young LLP serves as the independent auditors for Tax-Free Fund,
Inc. and, in its capacity as such, audits the annual financial statements of
each of the Funds. The Funds' Statements of Net Assets, Statements of Assets and
Liabilities, Statements of Operations, Statements of Changes in Net Assets,
Financial Highlights and Notes to Financial Statements, as well as the report of
Ernst & Young LLP, independent auditors, for the fiscal year ended August 31,
1997, are included in the Fund's Annual Report to shareholders. The financial
statements, the notes relating thereto, financial highlights and the report of
Ernst & Young LLP, listed above are incorporated by reference from the Annual
Report into this Part B.

-83-
<PAGE>

PART C
------

Other Information
-----------------

Item 24. Financial Statements and Exhibits
---------------------------------

(a) Financial Statements:

Part A - Financial Highlights

*Part B - Statements of Net Assets
Statement of Assets and Liabilities
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 for the fiscal year ended August 31, 1997 are
incorporated by reference from the Registrant's Annual Report
into Part B.

(b) Exhibits:

(1) Articles of Incorporation.
-------------------------

(a) Articles of Incorporation, as amended and
supplemented to date, incorporated into this filing
by reference to Post-Effective Amendment No. 21 filed
November 24, 1995.

(b) Executed Articles Supplementary (November 14, 1995)
incorporated into this filing by reference to Post-
Effective Amendment No. 22 filed October 30, 1996.

(2) By-Laws. By-Laws, as amended to date, incorporated into
-------
this filing by reference to Post-Effective Amendment No.
21 filed November 24, 1995.

(3) Voting Trust Agreement. Inapplicable.
----------------------
<PAGE>

PART C - Other Information
(Continued)

(4) Copies of All Instruments Defining the Rights of Holders.
--------------------------------------------------------

(a) Articles of Incorporation, Articles Supplementary and
-----------------------------------------------------
Articles of Amendment.
---------------------

(i) 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) incorporated into this filing by
reference to Post-Effective Amendment No. 21
filed November 24, 1995.

(ii) Executed Articles Third, Fourth and Fifth of
Articles Supplementary (November 14, 1995)
incorporated into this filing by reference to
Post-Effective Amendment No. 22 filed October
30, 1996.

(b) By-Laws. Article II, Article III, as amended, and
-------
Article XIII, which was subsequently redesignated as
Article XIV, incorporated into this filing by
reference to Post-Effective Amendment No. 21 filed
November 24, 1995.

(5) Investment Management Agreements.
--------------------------------

(a) Executed Investment Management Agreement (April 3,
1995) between Delaware Management Company, Inc. and
the Registrant on behalf of Tax-Free USA Fund
incorporated into this filing by reference to Post-
Effective Amendment No. 21 filed November 24, 1995.

(b) Executed Investment Management Agreement (April 3,
1995) between Delaware Management Company, Inc. and
the Registrant on behalf of Tax-Free Insured Fund
incorporated into this filing by reference to Post-
Effective Amendment No. 21 filed November 24, 1995.

(c) Executed Investment Management Agreement (April 3,
1995) between Delaware Management Company, Inc. and
the Registrant on behalf of Tax-Free USA Intermediate
Fund incorporated into this filing by reference to
Post-Effective Amendment No. 21 filed November 24,
1995.

(6) (a) Distribution Agreements.
-----------------------

(i) Executed Distribution Agreement (April 3,
1995) between Delaware Distributors, L.P. and
the Registrant on behalf of Tax-Free USA Fund
incorporated into this filing by reference to
Post-Effective Amendment No. 22 filed October
30, 1996.
<PAGE>

PART C - Other Information
(Continued)

(ii) Executed Distribution Agreement (April 3,
1995) between Delaware Distributors, L.P. and
the Registrant on behalf of Tax-Free Insured
Fund incorporated into this filing by
reference to Post-Effective Amendment No. 22
filed October 30, 1996.

(iii) Executed Distribution Agreement (April 3,
1995) between Delaware Distributors, L.P. and
the Registrant on behalf of Tax-Free USA
Intermediate Fund incorporated into this
filing by reference to Post-Effective
Amendment No. 22 filed October 30, 1996.

(iv) Executed Amendment No. 1 to Distribution
Agreement (November 29, 1995) on behalf of
Tax-Free USA Fund incorporated into this
filing by reference to Post-Effective
Amendment No. 22 filed October 30, 1996.

(v) Executed Amendment No. 1 to Distribution
Agreement (November 29, 1995) on behalf of
Tax-Free Insured Fund incorporated into this
filing by reference to Post-Effective
Amendment No. 22 filed October 30, 1996.

(vi) Executed Amendment No. 1 to Distribution
Agreement (November 29, 1995) on behalf of
Tax-Free USA Intermediate Fund incorporated
into this filing by reference to Post-
Effective Amendment No. 22 filed October 30,
1996.

(b) Administration and Service Agreement. Form of
------------------------------------
Administration and Service Agreement (as amended
November 1995) incorporated into this filing by
reference to Post-Effective Amendment No. 21 filed
November 24, 1995.

(c) Dealer's Agreement. Dealer's Agreement (as amended
------------------
November 1995) incorporated into this filing by
reference to Post-Effective Amendment No. 21 filed
November 24, 1995.

(d) Mutual Fund Agreement for the Delaware Group of Funds
(as amended November 1995) (Module) incorporated into
this filing by reference to Post-Effective Amendment
No. 22 filed October 30, 1996.

(7) Bonus, Profit Sharing, Pension Contracts.
----------------------------------------

(a) Amended and Restated Profit Sharing Plan (November
17, 1994) incorporated into this filing by reference
to Post-Effective Amendment No. 21 filed November 24,
1995.
<PAGE>

PART C - Other Information
(Continued)

(b) Amendment to Profit Sharing Plan (December 21, 1995)
(Module) incorporated into this filing by reference
to Post-Effective Amendment No. 22 filed October 30,
1996.

(8) Custodian Agreements.
--------------------

(a) Form of Custodian Agreement (1996) between Bankers
Trust Company and the Registrant incorporated into
this filing by reference to Post-Effective Amendment
No. 22 filed October 30, 1996.

(b) Form of Securities Lending Agreement (1996) between
Bankers Trust Company and the Registrant on behalf of
Tax-Free USA Intermediate Fund incorporated into this
filing by reference to Post-Effective Amendment No.
22 filed October 30, 1996.

(9) Other Material Contracts.
------------------------

(a) Executed Shareholders Services Agreement (June 29,
1988) between Delaware Service Company, Inc. and the
Registrant on behalf of Tax-Free USA Fund
incorporated into this filing by reference to Post-
Effective Amendment No. 22 filed October 30, 1996.

(b) Executed Shareholders Services Agreement (June 29,
1988) between Delaware Service Company, Inc. and the
Registrant on behalf of Tax-Free Insured Fund
incorporated into this filing by reference to Post-
Effective Amendment No. 22 filed October 30, 1996.

(c) Executed Shareholders Services Agreement (November
10, 1992) between Delaware Service Company, Inc. and
the Registrant on behalf of USA Fund incorporated
into this filing by reference to Post-Effective
Amendment No. 22 filed October 30, 1996.

(d) Executed Delaware Group of Funds Fund Accounting
Agreement (August 19, 1996) between Delaware Service
Company, Inc. and the Registrant (Module)
incorporated into this filing by reference to Post-
Effective Amendment No. 22 filed October 30, 1996.

(i) Executed Amendment No. 1 (September 30, 1996)
to Delaware Group of Funds Fund Accounting
Agreement included as Exhibit.

(ii) Executed Amendment No. 2 (November 29, 1996)
to Delaware Group of Funds Fund Accounting
Agreement included as Exhibit.

(iii) Executed Amendment No. 3 (December 27, 1996)
to Delaware Group of Funds Fund Accounting
Agreement included as Exhibit.

(iv) Executed Amendment No. 4 (February 24, 1997)
to Delaware Group of Funds Fund Accounting
Agreement included as Exhibit.

<PAGE>

PART C - Other Information
(Continued)
(v) Executed Amendment No. 4A (April 14, 1997) to
Delaware Group of Funds Fund Accounting
Agreement included as Exhibit.

(vi) Executed Amendment No. 5 (May 1, 1997) to
Delaware Group of Funds Fund Accounting
Agreement included as Exhibit.

(vii) Executed Amendment No. 6 (July 21, 1997) to
Delaware Group of Funds Fund Accounting
Agreement included as Exhibit.

(10) Opinion of Counsel. Inapplicable.
------------------

(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) Executed Plan under Rule 12b-1 for Tax-Free USA Fund
A Class (November 29, 1995) incorporated into this
filing by reference to Post-Effective Amendment No.
22 filed October 30, 1996.

(b) Executed Plan under Rule 12b-1 for Tax-Free USA Fund
B Class (November 29, 1995) incorporated into this
filing by reference to Post-Effective Amendment No.
22 filed October 30, 1996.

(c) Executed Plan under Rule 12b-1 for Tax-Free USA Fund
C Class (November 29, 1995) incorporated into this
filing by reference to Post-Effective Amendment No.
22 filed October 30, 1996.

(d) Executed Plan under Rule 12b-1 for Tax-Free Insured
Fund A Class (November 29, 1995) incorporated into
this filing by reference to Post-Effective Amendment
No. 22 filed October 30, 1996.

(e) Executed Plan under Rule 12b-1 for Tax-Free Insured
Fund B Class (November 29, 1995) incorporated into
this filing by reference to Post-Effective Amendment
No. 22 filed October 30, 1996.

(f) Executed Plan under Rule 12b-1 for Tax-Free Insured
Fund C Class (November 29, 1995) incorporated into
this filing by reference to Post-Effective Amendment
No. 22 filed October 30, 1996.
<PAGE>

PART C - Other Information
(Continued)
(g) Executed Plan under Rule 12b-1 for Tax-Free USA
Intermediate Fund A Class (November 29, 1995)
incorporated into this filing by reference to Post-
Effective Amendment No. 22 filed October 30, 1996.

(h) Executed Plan under Rule 12b-1 for Tax-Free USA
Intermediate Fund B Class (November 29, 1995)
incorporated into this filing by reference to Post-
Effective Amendment No. 22 filed October 30, 1996.

(i) Executed Plan under Rule 12b-1 for Tax-Free USA
Intermediate Fund C Class (November 29, 1995)
incorporated into this filing by reference to Post-
Effective Amendment No. 22 filed October 30, 1996.

(16) Schedules of Computation for each Performance Quotation.
-------------------------------------------------------

(a) Schedules of Computation for each Performance
Quotation incorporated into this filing by reference
to Post-Effective Amendment No. 21 filed November 24,
1995 and Post-Effective Amendment No. 22 filed
October 30, 1996.

(b) Schedules of Computation for periods not previously
shown attached as Exhibit.

(17) Financial Data Schedules. Attached as Exhibit.
------------------------

(18) Inapplicable.

(19) Other: Directors' Power of Attorney.
----------------------------

(a) Incorporated into this filing by reference to Post-
Effective Amendment No. 21 filed November 24, 1995.

(b) Power of Attorney for Thomas F. Madison and
Jeffrey J. Nick attached as Exhibit.

Item 25. Persons Controlled by or under Common Control with Registrant. None.
-------------------------------------------------------------
<PAGE>

PART C - Other Information
(Continued)

Item 26. Number of Holders of Securities.
-------------------------------
<TABLE>
<CAPTION>
(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 14,097 Accounts as of
$.01 Per Share September 30, 1997

Tax-Free USA Fund B Class
Common Stock Par Value 815 Accounts as of
$.01 Per Share September 30, 1997

Tax-Free USA Fund C Class
Common Stock Par Value 47 Accounts as of
$.01 Per Share September 30, 1997

Delaware Group Tax-Free Fund, Inc.'s
Tax-Free Insured Fund series:

Tax-Free Insured Fund A Class
Common Stock Par Value 1,728 Accounts as of
$.01 Per Share September 30, 1997

Tax-Free Insured Fund B Class
Common Stock Par Value 84 Accounts as of
$.01 Per Share September 30, 1997

Tax-Free Insured Fund C Class
Common Stock Par Value 7 Accounts as of
$.01 Per Share September 30, 1997

Delaware Group Tax-Free Fund, Inc.'s
Tax-Free USA Intermediate Fund series:

Tax-Free USA Intermediate Fund A Class
Common Stock Par Value 553 Accounts as of
$.01 Per Share September 30, 1997

Tax-Free USA Intermediate Fund B Class
Common Stock Par Value 59 Accounts as of
$.01 Per Share September 30, 1997
</TABLE>
<PAGE>

PART C - Other Information
(Continued)

<TABLE>
<CAPTION>
(1) (2)

Number of
Title of Class Record Holders
-------------- --------------
<S> <C>

Tax-Free USA Intermediate Fund C Class
Common Stock Par Value 30 Accounts as of
$.01 Per Share September 30, 1997
</TABLE>

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).
<PAGE>

PART C - Other Information
(Continued)

Item 28. Business and Other Connections of Investment Adviser.
----------------------------------------------------

Delaware Management Company, Inc. (the "Manager") serves as
investment manager to the Registrant and also serves as investment manager or
sub-adviser to certain of the other funds in the Delaware Group (Delaware Group
Equity Funds I, Inc., Delaware Group Equity Funds II, Inc., Delaware Group
Equity Funds III, Inc., Delaware Group Equity Funds IV, Inc., Delaware Group
Equity Funds V, Inc., Delaware Group Government Fund, Inc., Delaware Group
Income Funds, Inc., Delaware Group Limited-Term Government Funds, Inc., Delaware
Group Cash Reserve, Inc., Delaware Group State Tax-Free Income Trust, Delaware
Group Tax-Free Money Fund, Inc., Delaware Group Premium Fund, Inc., Delaware
Group Global & International Funds, Inc., Delaware Pooled Trust, Inc., Delaware
Group Adviser Funds, Inc., Delaware Group Dividend and Income Fund, Inc.,
Delaware Group Global Dividend and Income Fund, Inc., Voyageur Tax-Free Funds,
Inc., Voyageur Intermediate Tax-Free Funds, Inc., Voyageur Insured Funds, Inc.,
Voyageur Funds, Inc., Voyageur Investment Trust, Voyageur Investment Trust II,
Voyageur Mutual Funds, Inc., Voyageur Mutual Funds II, Inc., Voyageur Mutual
Funds III, Inc., Voyageur Arizona Municipal Income Fund, Inc., Voyageur Colorado
Insured Municipal Income Fund, Inc., Voyageur Florida Insured Municipal Income
Fund, Voyageur Minnesota Municipal Fund, Inc., Voyageur Minnesota Municipal Fund
II, Inc. and Voyageur Minnesota Municipal Fund III, 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 services, dividend disbursing, accounting servicing and transfer
agent for all of the mutual funds in the Delaware Group.

The following persons serving as directors or officers of the Manager
have held the following positions during the past two years:

Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------

Wayne A. Stork Chairman of the Board, President, Chief Executive Officer,
Chief Investment Officer and Director of Delaware
Management Company, Inc.; Chairman of the Board and
Director of the Registrant and each of the other funds in
the Delaware Group and Delaware Capital Management, Inc.;
Chairman of the Board, President, Chief Executive Officer
and Director of DMH Corp., Delaware International Holdings
Ltd., Delaware Distributors, Inc. and Founders Holdings,
Inc.; President and Chief Executive Officer of Delvoy,
Inc.; Chairman of Delaware Distributors, L.P. Director of
Delaware Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.; and Chairman, Chief Executive
Officer and Director of Delaware Management Holdings, Inc.
and Delaware International Advisers Ltd.

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>

PART C - Other Information
(Continued)

Richard G. Unruh, Jr. Executive Vice President and Director of Delaware
Management Company, Inc.; Executive Vice President of
the Registrant, each of the other funds in the Delaware
Group, Delaware Management Holdings, Inc. and Delaware
Capital Management, 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, AAA Mid Atlantic, Inc. since 1989,
2040 Market Street, Philadelphia, PA; Board of
Directors, Metron, Inc. since 1995, 11911 Freedom Drive,
Reston, VA

Paul E. Suckow Executive 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.; Executive
Vice President and Director of Founders Holdings, Inc.;
Executive Vice President of Delaware Capital Management,
Inc.; and Director of Founders CBO Corporation

Director, HYPPCO Finance Company Ltd.

David K. Downes Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Director of Delaware Management
Company, Inc., DMH Corp, Delaware Distributors, Inc.,
Founders Holdings, Inc., Delaware International Holdings
Ltd. and Delvoy, Inc.; Executive Vice President, Chief
Operating Officer and Chief Financial Officer of the
Registrant and each of the other funds in the Delaware
Group, Delaware Management Holdings, Inc., Founders CBO
Corporation, Delaware Capital Management, Inc. and
Delaware Distributors, L.P.; President, Chief Executive
Officer, Chief Financial Officer and Director of
Delaware Service Company, Inc.; Chairman, Chief
Executive Officer and Director of Delaware Investment &
Retirement Services, Inc.; Chairman and Director of
Delaware Management Trust Company; and Director of
Delaware International Advisers Ltd.

Chief Executive Officer and Director of Forewarn, Inc.
since 1993, 8 Clayton Place, Newtown Square, PA

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>

PART C - Other Information
(Continued)

Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------

George M. Senior Vice President, General Counsel, Secretary and
Chamberlain, Jr. Director of Delaware Management Company, Inc., DMH Corp.,
Delaware Distributors, Inc., Delaware Service Company,
Inc., Founders Holdings, Inc., Delaware Capital Management,
Inc., Delaware Investment & Retirement Services, Inc. and
Delvoy, Inc.; Senior Vice President, Secretary and General
Counsel of the Registrant, each of the other funds in the
Delaware Group, Delaware Distributors, L.P. and Delaware
Management Holdings, Inc.; Executive Vice President,
Secretary, General Counsel and Director of Delaware
Management Trust Company; Secretary and Director of
Delaware International Holdings Ltd.; and Director of
Delaware International Advisers Ltd.

Richard J. Flannery Senior Vice President/Corporate and International Affairs
of the Registrant, each of the other funds in the Delaware
Group, Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Company, Inc., Delaware Distributors,
Inc., Delaware Distributors, L.P., Delaware Management
Trust Company, Delaware Capital Management, Inc., Delaware
Service Company, Inc. and Delaware Investment & Retirement
Services, Inc.; Senior Vice President/Corporate and
International Affairs and Director of Founders Holdings,
Inc., Delaware International Holdings Ltd. and Delvoy,
Inc.; Senior Vice President of Founders CBO Corporation;
and Director of Delaware International Advisers Ltd.

Director, HYPPCO Finance Company 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 Senior Vice President and Treasurer of the Registrant, each
of the other funds in the Delaware Group, Delaware
Distributors, Inc. and Founders Holdings, Inc.; Senior Vice
President/Investment Accounting of Delaware Management
Company, Inc. and Delaware Service Company, Inc.; Senior
Vice President and Treasurer/ Manager, Investment
Accounting of Delaware Distributors, L.P.; Assistant
Treasurer of Founders CBO Corporation; and Senior Vice
President and Manager of Investment Accounting of Delaware
International Holdings Ltd.

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>

PART C - Other Information
(Continued)

Joseph H. Hastings Senior Vice President/Corporate Controller and Treasurer of
Delaware Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc.,
Delaware Capital Management, Inc., Delaware Distributors,
L.P., Delaware Service Company, Inc., Delaware
International Holdings Ltd. and Delvoy, Inc.; Senior Vice
President/Corporate Controller of the Registrant, each of
the other funds in the Delaware Group and Founders
Holdings, Inc.; Executive Vice President, Chief Financial
Officer and Treasurer of Delaware Management Trust Company;
Chief Financial Officer and Treasurer of Delaware
Investment & Retirement Services, Inc.; and Senior Vice
President/Assistant Treasurer of Founders CBO Corporation

Michael T. Taggart Senior Vice President/Facilities Management and
Administrative Services of Delaware Management Company,
Inc.

Douglas L. Anderson Senior Vice President/Operations of Delaware Management
Company, Inc., Delaware Investment and Retirement Services,
Inc. and Delaware Service Company, Inc.; and Senior Vice
President/Operations and Director of Delaware Management
Trust Company

James L. Shields Senior Vice President/Chief Information Officer of Delaware
Management Company, Inc., Delaware Service Company, Inc.
and Delaware Investment & Retirement Services, Inc.

Eric E. Miller Vice President, Assistant Secretary and Deputy General
Counsel of the Registrant and each of the other funds in
the Delaware Group, 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,
Founders Holdings, Inc., Delaware Capital Management, Inc.
and Delaware Investment & Retirement Services, Inc.; and
Vice President and Assistant Secretary of Delvoy, 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 Capital Management,
Inc., Delaware Investment & Retirement Services, Inc.,
Founders Holdings, Inc. and Delvoy, Inc.; Secretary of
Founders CBO Corporation; and Assistant Secretary of
Delaware International Holdings Ltd.

Partner of Tri-R Associates since 1989, 10001 Sandmeyer
Lane, Philadelphia, PA

Richard Salus/1/ Vice President/Assistant Controller of Delaware Management
Company, Inc. and Delaware Management Trust Company

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>

PART C - Other Information
(Continued)

Bruce A. Ulmer Vice President/Director of LNC Internal Audit of Delaware
Management Company, Inc., the Registrant, each of the other
funds in the Delaware Group, Delaware Management Holdings,
Inc., DMH Corp., Delaware Management Trust Company,
Delaware Investment & Retirement Services, Inc. and Delvoy,
Inc.

Steven T. Lampe/2/ Vice President/Taxation 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, Founders Holdings, Inc., Founders CBO
Corporation, Delaware Capital Management, Inc., Delaware
Investment & Retirement Services, Inc. and Delvoy, Inc.

Christopher Adams/3/ Vice President/Strategic Planning of Delaware Management
Company, Inc. and Delaware Service Company, Inc.

Susan L. Hanson Vice President/Strategic Planning of Delaware Management
Company, Inc. and Delaware Service Company, Inc.

Dennis J. Mara/4/ Vice President/Acquisitions of Delaware Management Company,
Inc.

Scott Metzger Vice President/Business Development of Delaware Management
Company, Inc. and Delaware Service Company, Inc.

Lisa O. Brinkley 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, Delaware Capital
Management, Inc., Delaware Investment & Retirement
Services, Inc. and Delvoy, Inc.

Rosemary E. Milner Vice President/Legal Registrations of Delaware Management
Company, Inc., the Registrant, each of the other funds in
the Delaware Group, Delaware Distributors, L.P. and
Delaware Distributors, Inc.

Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc. and 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, Assistant Secretary and Director of Founders
CBO Corporation

Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc. and 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.

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>

PART C - Other Information
(Continued)

Gary A. Reed Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., each of the tax-exempt funds and
the fixed income funds in the Delaware Group and Delaware
Capital Management, Inc.

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 and Delaware Capital Management, Inc.

Roger A. Early Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc. and each of the tax-exempt funds
and the fixed income funds in the Delaware Group

Mitchell L. Conery/5/ Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant and each of the
tax-exempt and fixed income 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. and each of the equity funds in
the Delaware Group and Delaware Capital Management, Inc.

Gerald S. Frey/6/ Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc. and each of the equity funds in
the Delaware Group

Christopher Beck/7/ Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc. and each of the equity funds in
the Delaware Group

Paul Grillo Vice President/Portfolio Manager of Delaware Management
Company, Inc. and each of the tax-exempt and fixed income
funds in the Delaware Group

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.

1 SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
2 TAX MANAGER, Price Waterhouse LLP prior to October 1995.
3 SENIOR ASSOCIATE, FAS, Coopers & Lybrand LLP prior to October 1995.
4 CORPORATE CONTROLLER, IIS prior to July 1997 and DIRECTOR, FINANCIAL
PLANNING, Decision One prior to March 1996.
5 INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
6 SENIOR DIRECTOR, Morgan Grenfell Capital Management prior to June
1996.
7 SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May 1997.
<PAGE>

PART C - Other Information
(Continued)

Item 29. Principal Underwriters.
----------------------

(a) Delaware Distributors, L.P. serves as principal under-
writer 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 Capital
Management, Inc. Limited Partner None

Wayne A. Stork Chairman Chairman

Bruce D. Barton President and Chief None
Executive Officer

David K. Downes Senior Vice President, Executive Vice
Chief Administrative President/Chief
Officer and Chief Operating Officer/
Financial Officer Chief Financial Officer

George M. Chamberlain, Jr. Senior Vice President/ Senior Vice President/
Secretary/General Secretary/General
Counsel Counsel

Terrence P. Cunningham Senior Vice President/ None
Financial Institutions

Thomas E. Sawyer Senior Vice President/ None
National Sales Director

Dana B. Hall Senior Vice President/ None
Key Accounts

Mac McAuliffe Senior Vice President/ None
Sales Manager, Western
Division

William F. Hostler Senior Vice President/ None
Marketing Services

J. Chris Meyer Senior Vice President/ None
Director Product
Management
</TABLE>

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>

PART C - Other Information
(Continued)
<TABLE>
<CAPTION>

Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------- ---------------
<S> <C> <C>
Stephen H. Slack Senior Vice President/ None
Wholesaler

William M. Kimbrough Senior Vice President/ None
Wholesaler

Daniel J. Brooks Senior Vice President/ None
Wholesaler

Richard J. Flannery Senior Vice President/ Senior Vice President/
Corporate and Corporate and
International Affairs International Affairs

Bradley L. Kolstoe Senior Vice President/ None
Western Division Sales
Manager

Henry W. Orvin Senior Vice President/ None
Eastern Division Sales
Manager - Wire/Regional
Channel

Michael P. Bishof Senior Vice President and Senior Vice President/
Treasurer/ Manager, Treasurer
Investment Accounting

Eric E. Miller Vice President/Assistant Vice President/
Secretary/Deputy General Assistant Secretary/
Counsel Deputy General Counsel

Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary

Steven T. Lampe Vice President/Taxation Vice President/Taxation

Joseph H. Hastings Vice President/Corporate Senior Vice President/
Controller & Treasurer Corporate Controller

Lisa O. Brinkley Vice President/Compliance Vice President/
Compliance

Rosemary E. Milner Vice President/Legal Vice President/Legal
Registrations Registrations

Daniel H. Carlson Vice President/Strategic None
Marketing

Diane M. Anderson Vice President/Plan Record None
Keeping and Administration
</TABLE>

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>

PART C - Other Information
(Continued)
<TABLE>
<CAPTION>

Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------- ---------------
<S> <C> <C>
Anthony J. Scalia Vice President/Defined None
Contribution Sales,
SW Territory

Courtney S. West Vice President/Defined None
Contribution Sales,
NE Territory

Denise F. Guerriere Vice President/Client None
Services

Gordon E. Searles Vice President/Client None
Services

Julia R. Vander Els Vice President/ None
Participant Services

Jerome J. Alrutz Vice President/Retail None
Sales

Joanne A. Mettenheimer Vice President/New None
Business Development

Scott Metzger Vice President/Business Vice President/Business
Development Development

Stephen C. Hall Vice President/ None
Institutional Sales

Gregory J. McMillan Vice President/National None
Accounts

Christopher H. Price Vice President/Manager, None
Insurance

Stephen J. DeAngelis Vice President/Product None
Development

Zina DeVassal Vice President/Financial None
Institutions

Andrew W. Whitaker Vice President/Financial None
Institutions

Jesse Emery Vice President/ Marketing None
Communications

Darryl S. Grayson Vice President, Broker/ None
Dealer Internal Sales

Susan T. Friestedt Vice President/Client None
Service
</TABLE>

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>

PART C - Other Information
(Continued)
<TABLE>
<CAPTION>

Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------- ---------------
<S> <C> <C>
Dinah J. Huntoon Vice President/Product None
Manager Equity

Soohee Lee Vice President/Fixed None
Income Product Management

Michael J. Woods Vice President/UIT None
Product Management

Ellen M. Krott Vice President/Marketing None

Dale L. Kurtz Vice President/Marketing None
Support

Holly W. Reimel Vice President/Manager, None
Key Accounts

David P. Anderson Vice President/Wholesaler None

Lee D. Beck Vice President/Wholesaler None

Gabriella Bercze Vice President/Wholesaler None

Terrence L. Bussard Vice President/Wholesaler None

William S. Carroll Vice President/Wholesaler None

William L. Castetter Vice President/Wholesaler None

Thomas J. Chadie Vice President/Wholesaler None

Thomas C. Gallagher Vice President/Wholesaler None

Douglas R. Glennon Vice President/Wholesaler None

Ronald A. Haimowitz Vice President/Wholesaler None

Christopher L. Johnston Vice President/Wholesaler None

Michael P. Jordan Vice President/Wholesaler None

Jeffrey A. Keinert Vice President/Wholesaler None

Thomas P. Kennett Vice President/Wholesaler None
</TABLE>

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>

PART C - Other Information
(Continued)
<TABLE>
<CAPTION>

Nathan W. Medin Vice President/Wholesaler None

Roger J. Miller Vice President/Wholesaler None

Patrick L. Murphy Vice President/Wholesaler None

Stephen C. Nell Vice President/Wholesaler None

Julia A. Nye Vice President/Wholesaler None

Joseph T. Owczarek Vice President/Wholesaler None

Mary Ellen Pernice-Fadden Vice President/Wholesaler None

Mark A. Pletts Vice President/Wholesaler None

Philip G. Rickards Vice President/Wholesaler None

Laura E. Roman Vice President/Wholesaler None

Linda Schulz Vice President/Wholesaler None

Edward B. Sheridan Vice President/Wholesaler None

Robert E. Stansbury Vice President/Wholesaler None

Julia A. Stanton Vice President/Wholesaler None

Larry D. Stone Vice President/Wholesaler None

Edward J. Wagner Vice President/Wholesaler None

Wayne W. Wagner Vice President/Wholesaler None

John A. Wells Vice President/Marketing None
Technology

Scott Whitehouse Vice President/Wholesaler None

Frank C. Tonnemaker Vice President None
</TABLE>

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.

INDEX TO EXHIBITS

Exhibit No. Exhibit
- ----------- -------

EX-99.B9DI Executed Amendment No. 1 to Delaware Group of
Agreement Funds Fund Accounting Agreement

EX--99.B9DII Executed Amendment No. 2 to Delaware Group of
Agreement Funds Fund Accounting Agreement

EX--99.B9DIII Executed Amendment No. 3 to Delaware Group of
Agreement Funds Fund Accounting Agreement

EX--99.B9DIV Executed Amendment No. 4 to Delaware Group of
Agreement Funds Fund Accounting Agreement

EX--99.B9DV Executed Amendment No. 4A to Delaware Group of
Agreement Funds Fund Accounting Agreement

EX--99.B9DVI Executed Amendment No. 5 to Delaware Group of
Agreement Funds Fund Accounting Agreement

EX-99.B9DVII Executed Amendment No. 6 to Delaware Group of
Agreement Funds Fund Accounting Agreement

EX-99.B11 Consent of Auditors

EX-99.B16B Schedules of Computation for periods not previously
shown

EX-27 Financial Data Schedules

EX-99.B19B Power of Attorney for Thomas F. Madison and Jeffrey
J. Nick

<PAGE>

AMENDMENT NO. 1 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT

Delaware Group Cash Reserve, Inc.

Delaware Group Decatur Fund, Inc.

Decatur Income Fund
Decatur Total Return Fund

Delaware Group Delaware Fund, Inc.

Delaware Fund
Devon Fund

Delaware Group Tax-Free Money Fund, Inc.

Delaware Group Tax-Free Fund, Inc.

Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund

Delaware Group Limited-Term Government Funds, Inc.

Limited-Term Government Fund
U.S. Government Money Fund

Delaware Group Trend Fund, Inc.

Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)

DMC Tax-Free Income Trust - Pennsylvania

*Except as otherwise noted, all Portfolios included on this Schedule A are
Existing Portfolios for purposes of the compensation described on Schedule B to
that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>

Delaware Group Value Fund, Inc.

Delaware Group Global & International Funds, Inc.

International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)

Delaware Group DelCap Fund, Inc.

Delaware Pooled Trust, Inc.

The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio (New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)

Delaware Group Premium Fund, Inc.

Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)

Delaware Group Government Fund, Inc.

-2-
<PAGE>

Delaware Group Adviser Funds, Inc.

Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund

Dated as of: September 30, 1996
--------------------

-3-
<PAGE>

DELAWARE SERVICE COMPANY, INC.

By:/s/ David K. Downes
-----------------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer

DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND,INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.

By: /s/ Wayne A. Stork
------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer

DELAWARE POOLED TRUST, INC.

By: /s/ Wayne A. Stork
------------------------
Wayne A. Stork
Chairman

-4-

<PAGE>

AMENDMENT NO. 2 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT

Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund

Delaware Group Cash Reserve, Inc.

Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund

Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund

Delaware Group Equity Funds IV, Inc.
Capital Appreciation Fund (New)
DelCap Fund

Delaware Group Equity Funds V, Inc.
Retirement Income Fund (New)
Value Fund

1
<PAGE>

Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund

Delaware Group Government Fund, Inc.

Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)

Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund

Delaware Group Premium Fund, Inc.
Capital Reserves Series
Emerging Growth Series
Equity/Income Series
Global Bond Series (New)
Growth Series
High Yield Series
International Equity Series
Money Market Series
Multiple Strategy Series
Value Series

Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund

Delaware Group Tax-Free Money Fund, Inc.

Delaware Group Trend Fund, Inc.

Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)

2
<PAGE>

The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio

DMC Tax-Free Income Trust - Pennsylvania

Dated as of: November 29, 1996
-------------------

3
<PAGE>

DELAWARE SERVICE COMPANY, INC.

By: /s/ David K. Downes
-------------------
David K. Downes
Senior Vice President/
Chief Administrative Officer/
Chief Financial Officer

DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA

By: /s/ Wayne A. Stork
------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer

DELAWARE POOLED TRUST, INC.

By: /s/ Wayne A. Stork
------------------
Wayne A. Stork
Chairman

<PAGE>

AMENDMENT NO.3 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT

Delaware Group Cash Reserve, Inc.

Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund

Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund

Delaware Group Tax-Free Money Fund, Inc.

Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund

Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund

Delaware Group Trend Fund, Inc.

Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)

1
<PAGE>

DMC Tax-Free Income Trust - Pennsylvania

Delaware Group Value Fund, Inc.
Value Fund
Retirement Income Fund (New)

Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)

Delaware Group Equity Funds IV, Inc.
DelCap Fund
Multi-Cap Equity Fund (New)

Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio (New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)

Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)

2
<PAGE>

Delaware Group Government Fund, Inc.

Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund

Dated as of: December 27, 1996

3
<PAGE>

DELAWARE SERVICE COMPANY, INC.

By: /s/ David K. Downes
--------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.

By: /s/ Wayne A. Stork
----------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer

DELAWARE POOLED TRUST, INC.

By: /s/ Wayne A. Stork
------------------------
Wayne A. Stork
Chairman

<PAGE>

AMENDMENT NO. 4 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT

Delaware Group Cash Reserve, Inc.

Delaware Group Equity Funds II, Inc.
Decatur Income Fund
Decatur Total Return Fund
Blue Chip Fund (New)
Quantum Fund (New)

Delaware Group Equity Funds I, Inc.
Delaware Fund
Devon Fund

Delaware Group Tax-Free Money Fund, Inc.

Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund

Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund

Delaware Group Trend Fund, Inc.

Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund
High-Yield Opportunities Fund (New)

- -------------------------
*Except as otherwise noted, all Portfolios included on this Schedule A are
Existing Portfolios for purposes of the compensation described on Schedule B to
that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
DMC Tax-Free Income Trust - Pennsylvania

1
<PAGE>

Delaware Group Equity Funds V, Inc.
Value Fund
Retirement Income Fund

Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund

Delaware Group Equity Funds IV, Inc.
DelCap Fund
Capital Appreciation Fund

Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio
The Defensive Equity Utility Portfolio
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio
The Global Fixed Income Portfolio
The International Fixed Income Portfolio
The High-Yield Bond Portfolio

Delaware Group Government Fund, Inc.

2
<PAGE>

Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund

Dated as of: FEBRUARY 24, 1997
-------------------

DELAWARE SERVICE COMPANY, INC.

By: /s/ David K. Downes
----------------------------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.

By: /s/ Wayne A. Stork
---------------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer

DELAWARE POOLED TRUST, INC.

By: /s/ Wayne A. Stork
---------------------------------------------
Wayne A. Stork
Chairman

<PAGE>

AMENDMENT NO. 4A
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT

Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund

Delaware Group Cash Reserve, Inc.

Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund

Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)

Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund

Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)

Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)

- -------------

Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund

Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)

Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund

Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio

Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Decatur Total Return Series
Delaware Series
Delchester Series
DelCap Series
Global Bond Series (New)
International Equity Series
Trend Series
Value Series

2
<PAGE>

Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund

Delaware Group Tax-Free Money Fund, Inc.

Delaware Group Trend Fund, Inc.

DMC Tax-Free Income Trust - Pennsylvania (doing business as Tax-Free
Pennsylvania Fund)

Dated as of: April 14, 1997
--------------

3
<PAGE>

DELAWARE SERVICE COMPANY, INC.

By: /s/ David K. Downes
----------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer

By: /s/ Wayne A. Stork
------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer

DELAWARE POOLED TRUST, INC.

By: /s/ Wayne A. Stork
------------------------
Wayne A. Stork
President and
Chief Executive Officer

<PAGE>

AMENDMENT NO. 5
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT

Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund

Delaware Group Cash Reserve, Inc.

Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund

Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)

Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund

Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)

Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)

- ----------------

Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund

Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)

Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund

Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio

Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series

2
<PAGE>

Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund

Delaware Group Tax-Free Money Fund, Inc.

Delaware Group Trend Fund, Inc.

DMC Tax-Free Income Trust-Pennsylvania (doing business as Tax-Free Pennsylvania
Fund)

Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)

Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)

Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)

Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)

Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)

3
<PAGE>

Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)

Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)

Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)

Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)

Dated as of May 1, 1997
<PAGE>

DELAWARE SERVICE COMPANY, INC.

By: /s/ David K. Downes
-----------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer

DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED -TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.

By: /s/ Wayne A. Stork
-------------------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer

<PAGE>

AMENDMENT NO. 6
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT

Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund

Delaware Group Cash Reserve, Inc.

Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund

Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)

Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund

Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)

Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)

- -------------
*Except as otherwise noted, all Portfolios included on this Schedule A are
Existing Portfolios for purposes of the compensation described on Schedule B to
that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>

Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)

Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)

Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund

2
<PAGE>

Trend Series
Value Series

Delaware Group State Tax-Free Income Trust
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Tax-Free Pennsylvania Fund

Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund

Delaware Group Tax-Free Money Fund, Inc.

Delaware Group Trend Fund, Inc.

Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)

Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)

Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)

Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)

Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)

Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)

Dated as of July 21, 1997
<PAGE>

DELAWARE SERVICE COMPANY, INC.

By: /s/ David K. Downes
-------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer

By: /s/ Wayne A. Stork
------------------------------------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer

<PAGE>

Consent of Ernst & Young LLP, Independent Auditors

We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 23 to the Registration Statement (Form N-1A)
(No.2-86606) of Delaware Group Tax-Free Fund, Inc. of our report dated
October 8, 1997, included in the 1997 Annual Report to shareholders.

/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP

Philadelphia, Pennsylvania
October 28, 1997

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Directors
Delaware Group Tax-Free Fund, Inc.

We have audited the accompanying statements of net assets of Delaware Group
Tax-Free Fund, Inc. (comprised of the Tax-Free USA Fund, the Tax-Free Insured
Fund, and the Tax-Free USA Intermediate Fund) as of August 31, 1997, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated therein. 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 and financial highlights. Our procedures included confirmation of
securities owned as of August 31, 1997, by correspondence with the Fund's
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, for each of the respective
portfolios constituting the Delaware Group Tax-Free Fund, Inc. at August 31,
1997, their financial position, the results of their operations for the year
then ended, the changes in their assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles.

/s/ Ernst & Young LLP
----------------------
Ernst & Young LLP

October 8, 1997

<PAGE>

Delaware Group Tax-Free Intermediate Fund- Class B
Total Return Performance
Cumulative Total Return (With CDSC)
THREE YEARS Ended 8/31/97
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning NAV $10.32
Initial Shares 96.899
</TABLE>

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
- -----------------------------------------------------------------------------------------
1996 101.374 $0.463 4.601 105.975
- -----------------------------------------------------------------------------------------
1997 105.975 $0.436 4.514 110.489
- -----------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Ending Shares 110.489
Ending NAV x $10.46
------------
$1,155.71
Less CDSC $10.00
------------
Investment Return $1,145.71

Total Return Performance
- ------------------------
Investment Return $1,145.71
Less Initial Investment $1,000.00
------------
$145.71 / $1,000.00 x 100

Total Return: 14.57%
</TABLE>
<PAGE>

Delaware Group Tax-Free Intermediate Fund- Class B
Total Return Performance
Average Annual Compounded Rate of Return (With CDSC)
THREE YEARS Ended 8/31/97
- --------------------------------------------------------------------------------

n
P(1 + T) = ERV

THREE
YEARS
- -----------------

3
$1000(1 + T) = $1,145.71

T = 4.64%

<PAGE>

Delaware Group Tax-Free Intermediate Fund- Class B
Total Return Performance
Cumulative Total Return (Without CDSC)
THREE YEARS Ended 8/31/97
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning NAV $10.32
Initial Shares 96.899
</TABLE>

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
- -------------------------------------------------------------------------------------------
1996 101.374 $0.463 4.601 105.975
- -------------------------------------------------------------------------------------------
1997 105.975 $0.436 4.514 110.489
- -------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Ending Shares 110.489
Ending NAV x $10.46
----------
Investment Return $1,155.71

Total Return Performance
- ------------------------
Investment Return $1,155.71
Less Initial Investment $1,000.00
----------
$155.71 / $1,000.00 x 100

Total Return: 15.57%
</TABLE>
<PAGE>

Delaware Group Tax-Free Intermediate Fund- Class B
Total Return Performance
Average Annual Compounded Rate of Return (Without CDSC)
THREE YEARS Ended 8/31/97
- --------------------------------------------------------------------------------

n
P(1 + T) = ERV

THREE
YEARS
- -------------------
3
$1000(1 + T) = $1,155.71

T = 4.94%

<PAGE>

Delaware Group Tax-Free Intermediate Fund- Class C
Total Return Performance
Average Annual Compounded Rate of Return (With CDSC)
ONE YEAR Ended 8/31/97
- --------------------------------------------------------------------------------

n
P(1 + T) = ERV

ONE
YEAR
- ---------------
1
$1000(1 + T) = $1,046.74

T = 4.67%
<PAGE>

Delaware Group Tax-Free Intermediate Fund- Class C
Total Return Performance
Cumulative Total Return (With CDSC)
ONE YEAR Ended 8/31/97
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning NAV $10.32
Initial Shares 96.899
</TABLE>

Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares

- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 96.899 $0.436 4.128 101.027
- --------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Ending Shares 101.027
Ending NAV x $10.46
-------------
$1,056.74
Less CDSC $10.00
-------------
Investment Return $1,046.74

Total Return Performance
- ------------------------
Investment Return $1,046.74
Less Initial Investment $1,000.00
------------
$46.74 / $1,000.00 x 100

Total Return: 4.67%
</TABLE>
<PAGE>

Delaware Group Tax-Free Intermediate Fund- Class C
Total Return Performance
Cumulative Total Return (Without CDSC)
ONE YEAR Ended 8/31/97
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning NAV $10.32
Initial Shares 96.899
</TABLE>

Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares

- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 96.899 $0.436 4.128 101.027
- ---------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Ending Shares 101.027
Ending NAV x $10.46
-----------
Investment Return $1,056.74

Total Return Performance
- ------------------------
Investment Return $1,056.74
Less Initial Investment $1,000.00
-----------
$56.74 / $1,000.00 x 100

Total Return: 5.67%
</TABLE>
<PAGE>

Delaware Group Tax-Free Intermediate Fund- Class C
Total Return Performance
Average Annual Compounded Rate of Return (Without CDSC)
ONE YEAR Ended 8/31/97
- -----------------------------------------------------------------------------

n
P(1 + T) = ERV

THREE
YEARS
- ------------------
1
$1000(1 + T) = $1,056.74

T = 5.67%

<PAGE>

Delaware Group Tax-Free
USA Fund B Class
Total Return Performance
Average Annual Compounded Rate of Return (With CDSC)
THREE YEARS Ended 8/31/97
- -------------------------------------------------------------------------------

n
P(1 + T) = ERV

THREE
YEARS
- -----------------
3
$1000(1 + T) = $1,115.50

T = 3.71%

<PAGE>

Delaware Group Tax-Free Funds, Inc.-
USA Fund B Class
Total Return Performance
Cumulative Total Return (With CDSC)
THREE YEARS Ended 8/31/97
- -------------------------------------------------------------------------------

<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning NAV $12.04
Initial Shares 83.056
</TABLE>

Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares

- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 83.056 $0.649 4.662 87.718
- ----------------------------------------------------------------------------------------------------
1996 87.718 $0.660 4.961 92.679
- ----------------------------------------------------------------------------------------------------
1997 92.679 $0.623 5.073 97.752
- ----------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Ending Shares 97.752
Ending NAV x $11.71
----------
$1,144.68
Less CDSC $29.18
----------
Investment Return $1,115.50

Total Return Performance
- ------------------------
Investment Return $1,115.50
Less Initial Investment $1,000.00
----------
$115.50 / $1,000.00 x 100

Total Return: 11.55%
</TABLE>
<PAGE>

Delaware Group Tax-Free Funds, Inc.-
USA Fund B Class
Total Return Performance
Average Annual Compounded Rate of Return (Without CDSC)
THREE YEARS Ended 8/31/97
- -------------------------------------------------------------------------------

n
P(1 + T) = ERV

THREE
YEARS
- ------------
3
$1000(1 + T) = $1,144.68

T = 4.61%
<PAGE>

Delaware Group Tax-Free Funds, Inc.-
USA Fund B Class
Total Return Performance
Cumulative Total Return (Without CDSC)
THREE YEARS Ended 8/31/97
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning NAV $12.04
Initial Shares 83.056
</TABLE>

Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares

- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 83.056 $0.649 4.662 87.718
- --------------------------------------------------------------------------------------------------
1996 87.718 $0.660 4.979 92.697
- --------------------------------------------------------------------------------------------------
1997 92.697 $0.623 5.055 97.752
- --------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Ending Shares 97.752
Ending NAV x $11.71
----------
Investment Return $1,144.68

Total Return Performance
- ------------------------
Investment Return $1,144.68
Less Initial Investment $1,000.00
----------
$144.68 / $1,000.00 x 100

Total Return: 14.47%
</TABLE>
<PAGE>

Delaware Group Tax Free Funds, Inc.
USA Fund- Class C
Total Return Performance
Average Annual Compounded Rate of Return (Without CDSC)
ONE YEAR Ended 8/31/97
- ----------------------------------------------------------------------------

n
P(1 + T) = ERV

ONE
YEAR
- ------------
1
$1000(1 + T) = $1,069.32

T = 6.93%

<PAGE>

Delaware Group Tax Free Funds, Inc.
USA Fund- Class C
Total Return Performance
Cumulative Total Return (Without CDSC)
ONE YEAR Ended 8/31/97
- -------------------------------------------------------------------------------

<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning NAV $11.55
Initial Shares 86.580
</TABLE>

Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares

- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 86.580 $0.623 4.737 91.317
- -------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Ending Shares 91.317
Ending NAV x $11.71
-----------
Investment Return $1,069.32

Total Return Performance
- ------------------------
Investment Return $1,069.32
Less Initial Investment $1,000.00
-----------
$69.32 / $1,000.00 x 100

Total Return: 6.93%
</TABLE>
<PAGE>

n
P(1 + T) = ERV

ONE
YEAR
- ------------
1
$1000(1 + T) = $1,059.32

T = 5.93%

<PAGE>

Delaware Group Tax Free Funds, Inc.
USA Fund- Class C
Total Return Performance
Cumulative Total Return (With CDSC)
ONE YEAR Ended 8/31/97
- -------------------------------------------------------------------------------

<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning NAV $11.55
Initial Shares 86.580
</TABLE>

Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares

<TABLE>
<S> <C>
Ending Shares 91.317
Ending NAV x $11.71
----------
$1,069.32
Less CDSC $10.00
----------
Investment Return $1,059.32

Total Return Performance
- ------------------------
Investment Return $1,059.32
Less Initial Investment $1,000.00
----------
$59.32 / $1,000.00 x 100

Total Return: 5.93%
</TABLE>
<PAGE>

Delaware Group Tax Free Funds, Inc.
USA Fund- Class C
Total Return Performance
Cumulative Total Return (With CDSC)
NINE MONTHS Ended 8/31/97
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning NAV $11.77
Initial Shares 84.962
</TABLE>

Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares

- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 84.962 $0.424 3.149 88.111
- -------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Ending Shares 88.111
Ending NAV x $11.71
-----------
$1,031.78
Less CDSC $10.00
-----------
Investment Return $1,021.78

Total Return Performance
- ------------------------
Investment Return $1,021.78
Less Initial Investment $1,000.00
-----------
$21.78 / $1,000.00 x 100

Total Return: 2.18%
</TABLE>
<PAGE>

Delaware Group Tax Free Funds, Inc.
USA Fund- Class C
Total Return Performance
Cumulative Total Return (Without CDSC)
NINE MONTHS Ended 8/31/97
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning NAV $11.77
Initial Shares 84.962
</TABLE>

Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares

<TABLE>
<S> <C>
Ending Shares 88.111
Ending NAV x $11.71
-----------
Investment Return $1,031.78

Total Return Performance
- ------------------------
Investment Return $1,031.78
Less Initial Investment $1,000.00
-----------
$31.78 / $1,000.00 x 100

Total Return: 3.18%
</TABLE>
<PAGE>

Delaware Group Tax-Free Funds, Inc.-
USA Insured Fund B Class
Total Return Performance
Average Annual Compounded Rate of Return (Without CDSC)
THREE YEARS Ended 8/31/97
- -------------------------------------------------------------------------------

n
P(1 + T) = ERV

THREE
YEARS
- ------------
3
$1000(1 + T) = $1,135.20

T = 4.32%
<PAGE>

Delaware Group Tax-Free Funds, Inc.-
USA Insured Fund B Class
Total Return Performance
Cumulative Total Return (With CDSC)
THREE YEARS Ended 8/31/97
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning NAV $11.02
Initial Shares 90.744
</TABLE>

Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares

- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 90.744 $0.550 4.703 95.447
- --------------------------------------------------------------------------------------------------------
1996 95.447 $0.529 4.631 100.078
- --------------------------------------------------------------------------------------------------------
1997 100.078 $0.576 5.370 105.448
- --------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Ending Shares 105.448
Ending NAV x $11.05
-----------
$1,165.20
Less CDSC $30.00
-----------
Investment Return $1,135.20

Total Return Performance
- ------------------------
Investment Return $1,135.20
Less Initial Investment $1,000.00
-----------
$135.20 / $1,000.00 x 100

Total Return: 13.52%
</TABLE>
<PAGE>

n
P(1 + T) = ERV

THREE
YEARS
- ------------
3
$1000(1 + T) = $1,165.20

T = 5.23%
<PAGE>

Delaware Group Tax-Free Funds, Inc.-
USA Insured Fund B Class
Total Return Performance
Cumulative Total Return (Without CDSC)
THREE YEARS Ended 8/31/97
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning NAV $ 11.02
Initial Shares 90.744
</TABLE>

Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares

- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 90.744 $0.550 4.703 95.447
- --------------------------------------------------------------------------------------------
1996 95.447 $0.529 4.631 100.078
- --------------------------------------------------------------------------------------------
1997 100.078 $0.576 5.370 105.448
- --------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Ending Shares 105.448
Ending NAV x $11.05
-----------
Investment Return $1,165.20

Total Return Performance
- ------------------------
Investment Return $1,165.20
Less Initial Investment $1,000.00
-----------
$165.20 / $1,000.00 x 100

Total Return: 16.52%
</TABLE>
<PAGE>

Delaware Group Tax Free Funds, Inc.
USA Insured Fund- Class C
Total Return Performance
Average Annual Compounded Rate of Return (Without CDSC)
ONE YEAR Ended 8/31/97
- ----------------------------------------------------------------------------

n
P(1 + T) = ERV

ONE
YEAR
- ------------
1
$1000(1 + T) = $1,062.09

T = 6.21%

<PAGE>

Delaware Group Tax Free Funds, Inc.
USA Insured Fund- Class C
Total Return Performance
Cumulative Total Return (With CDSC)
ONE YEAR Ended 8/31/97
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning NAV $10.86
Initial Shares 92.081
</TABLE>

Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares

- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 92.081 $0.576 4.941 97.022
- -------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Ending Shares 97.022
Ending NAV x $11.05
-----------
$1,072.09
Less CDSC $10.00
-----------
Investment Return $1,062.09

Total Return Performance
- ------------------------
Investment Return $1,062.09
Less Initial Investment $1,000.00
-----------
$62.09 / $1,000.00 x 100

Total Return: 6.21%
</TABLE>
<PAGE>

n
P(1 + T) = ERV

ONE
YEAR
- ------------
1
$1000(1 + T) = $1,072.09

T = 7.21%

<PAGE>

Delaware Group Tax Free Funds, Inc.
USA Insured Fund- Class C
Total Return Performance
Cumulative Total Return (Without CDSC)
ONE YEAR Ended 8/31/97
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning NAV $10.86
Initial Shares 92.081
</TABLE>

Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares

<TABLE>
<S> <C>
Ending Shares 97.022
Ending NAV x $11.05
-----------
Investment Return $1,072.09

Total Return Performance
- ------------------------
Investment Return $1,072.09
Less Initial Investment $1,000.00
-----------
$72.09 / $1,000.00 x 100

Total Return: 7.21%
</TABLE>

<PAGE>

POWER OF ATTORNEY

The undersigned, a member of the Boards of Directors/Trustees of the
Delaware Group Funds listed on Exhibit A to this Power of Attorney, 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 has executed this instrument as of this
1st day of May, 1997.

/s/ Thomas F. Madison
- -------------------------
Thomas F. Madison
<PAGE>

POWER OF ATTORNEY

EXHIBIT A
DELAWARE GROUP FUNDS

DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.
<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has executed this instrument as of this
1st day of May, 1997.

/s/ Jeffrey J. Nick
- -------------------------
Jeffrey J. Nick
<PAGE>

POWER OF ATTORNEY

EXHIBIT A
DELAWARE GROUP FUNDS

<PAGE>
<ARTICLE> 6
<CIK> 0000728352
<NAME> DELAWARE 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-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 239,989,949
<INVESTMENTS-AT-VALUE> 24,788,222
<RECEIVABLES> 578,870
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 165,454
<TOTAL-ASSETS> 25,532,546
<PAYABLE-FOR-SECURITIES> 530,424
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 108,870
<TOTAL-LIABILITIES> 639,294
<SENIOR-EQUITY> 23,800
<PAID-IN-CAPITAL-COMMON> 25,066,562
<SHARES-COMMON-STOCK> 2,068,562
<SHARES-COMMON-PRIOR> 2,191,333
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (995,275)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 798,273
<NET-ASSETS> 21,635,397
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,403,670
<OTHER-INCOME> 0
<EXPENSES-NET> 136,500
<NET-INVESTMENT-INCOME> 1,267,170
<REALIZED-GAINS-CURRENT> 27,578
<APPREC-INCREASE-CURRENT> 305,500
<NET-CHANGE-FROM-OPS> 1,600,248
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,147,363
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 694,060
<NUMBER-OF-SHARES-REDEEMED> 886,958
<SHARES-REINVESTED> 70,127
<NET-CHANGE-IN-ASSETS> 593,250
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,022,853)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 125,029
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 287,326
<AVERAGE-NET-ASSETS> 22,799,626
<PER-SHARE-NAV-BEGIN> 10.320
<PER-SHARE-NII> 0.524
<PER-SHARE-GAIN-APPREC> 0.140
<PER-SHARE-DIVIDEND> 0.524
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.460
<EXPENSE-RATIO> 0.43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<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-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 239,989,949
<INVESTMENTS-AT-VALUE> 24,788,222
<RECEIVABLES> 578,870
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 165,454
<TOTAL-ASSETS> 25,532,546
<PAYABLE-FOR-SECURITIES> 530,424
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 108,870
<TOTAL-LIABILITIES> 639,294
<SENIOR-EQUITY> 23,800
<PAID-IN-CAPITAL-COMMON> 25,066,562
<SHARES-COMMON-STOCK> 175,189
<SHARES-COMMON-PRIOR> 144,374
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (995,275)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 798,273
<NET-ASSETS> 1,832,332
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,403,670
<OTHER-INCOME> 0
<EXPENSES-NET> 136,500
<NET-INVESTMENT-INCOME> 1,267,170
<REALIZED-GAINS-CURRENT> 27,578
<APPREC-INCREASE-CURRENT> 305,500
<NET-CHANGE-FROM-OPS> 1,600,248
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 65,780
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 71,587
<NUMBER-OF-SHARES-REDEEMED> 45,185
<SHARES-REINVESTED> 4,414
<NET-CHANGE-IN-ASSETS> 593,250
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,022,853)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 125,029
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 287,326
<AVERAGE-NET-ASSETS> 1,581,935
<PER-SHARE-NAV-BEGIN> 10.320
<PER-SHARE-NII> 0.436
<PER-SHARE-GAIN-APPREC> 0.140
<PER-SHARE-DIVIDEND> 0.436
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.460
<EXPENSE-RATIO> 1.28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000728352
<NAME> DELAWARE GROUP TAX-FREE FUND, INC.
<SERIES>
<NUMBER> 033
<NAME> TAX-FREE USA INTERMEDIATE FUND C CLASS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 239,989,949
<INVESTMENTS-AT-VALUE> 24,788,222
<RECEIVABLES> 578,870
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 165,454
<TOTAL-ASSETS> 25,532,546
<PAYABLE-FOR-SECURITIES> 530,424
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 108,870
<TOTAL-LIABILITIES> 639,294
<SENIOR-EQUITY> 23,800
<PAID-IN-CAPITAL-COMMON> 25,066,562
<SHARES-COMMON-STOCK> 136,294
<SHARES-COMMON-PRIOR> 18,728
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (995,275)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 798,273
<NET-ASSETS> 1,425,523
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,403,670
<OTHER-INCOME> 0
<EXPENSES-NET> 136,500
<NET-INVESTMENT-INCOME> 1,267,170
<REALIZED-GAINS-CURRENT> 27,578
<APPREC-INCREASE-CURRENT> 305,500
<NET-CHANGE-FROM-OPS> 1,600,248
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 54,027
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 216,266
<NUMBER-OF-SHARES-REDEEMED> 103,591
<SHARES-REINVESTED> 4,931
<NET-CHANGE-IN-ASSETS> 593,250
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,022,853)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 125,029
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 287,326
<AVERAGE-NET-ASSETS> 1,332,024
<PER-SHARE-NAV-BEGIN> 10.320
<PER-SHARE-NII> 0.436
<PER-SHARE-GAIN-APPREC> 0.140
<PER-SHARE-DIVIDEND> 0.436
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.460
<EXPENSE-RATIO> 1.28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<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-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 78,620,748
<INVESTMENTS-AT-VALUE> 82,005,206
<RECEIVABLES> 1,652,252
<ASSETS-OTHER> 813
<OTHER-ITEMS-ASSETS> 54,951
<TOTAL-ASSETS> 83,713,222
<PAYABLE-FOR-SECURITIES> 1,398,908
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 229,056
<TOTAL-LIABILITIES> 1,627,964
<SENIOR-EQUITY> 74,307
<PAID-IN-CAPITAL-COMMON> 77,629,620
<SHARES-COMMON-STOCK> 7,095,034
<SHARES-COMMON-PRIOR> 7,475,095
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 996,874
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,384,458
<NET-ASSETS> 78,376,990
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,158,252
<OTHER-INCOME> 0
<EXPENSES-NET> 893,333
<NET-INVESTMENT-INCOME> 4,264,919
<REALIZED-GAINS-CURRENT> 1,042,113
<APPREC-INCREASE-CURRENT> 1,099,718
<NET-CHANGE-FROM-OPS> 6,406,750
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,105,498
<DISTRIBUTIONS-OF-GAINS> 657,491
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 757,507
<NUMBER-OF-SHARES-REDEEMED> 1,368,970
<SHARES-REINVESTED> 231,402
<NET-CHANGE-IN-ASSETS> (2,559,159)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 641,503
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 488,651
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 893,333
<AVERAGE-NET-ASSETS> 78,551,384
<PER-SHARE-NAV-BEGIN> 10.860
<PER-SHARE-NII> 0.573
<PER-SHARE-GAIN-APPREC> 0.281
<PER-SHARE-DIVIDEND> 0.573
<PER-SHARE-DISTRIBUTIONS> 0.091
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.050
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<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-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 78,620,748
<INVESTMENTS-AT-VALUE> 82,005,206
<RECEIVABLES> 1,652,252
<ASSETS-OTHER> 813
<OTHER-ITEMS-ASSETS> 54,951
<TOTAL-ASSETS> 83,713,222
<PAYABLE-FOR-SECURITIES> 1,398,908
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 229,056
<TOTAL-LIABILITIES> 1,627,964
<SENIOR-EQUITY> 74,307
<PAID-IN-CAPITAL-COMMON> 77,629,620
<SHARES-COMMON-STOCK> 327,644
<SHARES-COMMON-PRIOR> 310,903
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 996,874
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,384,458
<NET-ASSETS> 3,619,398
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,158,252
<OTHER-INCOME> 0
<EXPENSES-NET> 893,333
<NET-INVESTMENT-INCOME> 4,264,919
<REALIZED-GAINS-CURRENT> 1,042,113
<APPREC-INCREASE-CURRENT> 1,099,718
<NET-CHANGE-FROM-OPS> 6,406,750
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 153,999
<DISTRIBUTIONS-OF-GAINS> 28,164
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 106,909
<NUMBER-OF-SHARES-REDEEMED> 99,060
<SHARES-REINVESTED> 8,892
<NET-CHANGE-IN-ASSETS> (2,559,159)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 641,503
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 488,651
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 893,333
<AVERAGE-NET-ASSETS> 78,551,384
<PER-SHARE-NAV-BEGIN> 10.860
<PER-SHARE-NII> 0.485
<PER-SHARE-GAIN-APPREC> 0.281
<PER-SHARE-DIVIDEND> 0.485
<PER-SHARE-DISTRIBUTIONS> 0.091
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.050
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000728352
<NAME> DELAWARE GROUP TAX-FREE FUND, INC.
<SERIES>
<NUMBER> 023
<NAME> TAX-FREE INSURED FUND C CLASS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 78,620,748
<INVESTMENTS-AT-VALUE> 82,005,206
<RECEIVABLES> 1,652,252
<ASSETS-OTHER> 813
<OTHER-ITEMS-ASSETS> 54,951
<TOTAL-ASSETS> 83,713,222
<PAYABLE-FOR-SECURITIES> 1,398,908
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 229,056
<TOTAL-LIABILITIES> 1,627,964
<SENIOR-EQUITY> 74,307
<PAID-IN-CAPITAL-COMMON> 77,629,620
<SHARES-COMMON-STOCK> 8,045
<SHARES-COMMON-PRIOR> 11,046
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 996,874
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,384,458
<NET-ASSETS> 88,871
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,158,252
<OTHER-INCOME> 0
<EXPENSES-NET> 893,333
<NET-INVESTMENT-INCOME> 4,264,919
<REALIZED-GAINS-CURRENT> 1,042,113
<APPREC-INCREASE-CURRENT> 1,099,718
<NET-CHANGE-FROM-OPS> 6,406,750
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,423
<DISTRIBUTIONS-OF-GAINS> 1,087
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,691
<NUMBER-OF-SHARES-REDEEMED> 5,274
<SHARES-REINVESTED> 582
<NET-CHANGE-IN-ASSETS> (2,559,159)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 641,503
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 488,651
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 893,333
<AVERAGE-NET-ASSETS> 78,551,384
<PER-SHARE-NAV-BEGIN> 10.860
<PER-SHARE-NII> 0.485
<PER-SHARE-GAIN-APPREC> 0.281
<PER-SHARE-DIVIDEND> 0.485
<PER-SHARE-DISTRIBUTIONS> 0.091
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.050
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<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-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 620,853,893
<INVESTMENTS-AT-VALUE> 644,039,539
<RECEIVABLES> 10,415,265
<ASSETS-OTHER> 6,907
<OTHER-ITEMS-ASSETS> 187,377
<TOTAL-ASSETS> 654,649,088
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,372,808
<TOTAL-LIABILITIES> 8,372,808
<SENIOR-EQUITY> 557,015
<PAID-IN-CAPITAL-COMMON> 620,021,626
<SHARES-COMMON-STOCK> 52,581,057
<SHARES-COMMON-PRIOR> 60,689,827
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,648,060
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,185,646
<NET-ASSETS> 615,852,536
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 46,032,921
<OTHER-INCOME> 0
<EXPENSES-NET> 6,766,929
<NET-INVESTMENT-INCOME> 39,265,992
<REALIZED-GAINS-CURRENT> 10,051,521
<APPREC-INCREASE-CURRENT> 2,978,780
<NET-CHANGE-FROM-OPS> 52,296,293
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 37,562,093
<DISTRIBUTIONS-OF-GAINS> 2,961,519
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,645,645
<NUMBER-OF-SHARES-REDEEMED> 15,671,660
<SHARES-REINVESTED> 1,917,246
<NET-CHANGE-IN-ASSETS> (79,019,139)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,701,413
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<PER-SHARE-NII> 0.666
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<EXPENSE-RATIO> 0.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<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-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 620,853,893
<INVESTMENTS-AT-VALUE> 644,039,539
<RECEIVABLES> 10,415,265
<ASSETS-OTHER> 6,907
<OTHER-ITEMS-ASSETS> 187,377
<TOTAL-ASSETS> 654,649,088
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<OTHER-ITEMS-LIABILITIES> 8,372,808
<TOTAL-LIABILITIES> 8,372,808
<SENIOR-EQUITY> 557,015
<PAID-IN-CAPITAL-COMMON> 620,021,626
<SHARES-COMMON-STOCK> 2,992,940
<SHARES-COMMON-PRIOR> 2,578,182
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,648,060
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,185,646
<NET-ASSETS> 35,054,634
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 46,032,921
<OTHER-INCOME> 0
<EXPENSES-NET> 6,766,929
<NET-INVESTMENT-INCOME> 39,265,992
<REALIZED-GAINS-CURRENT> 10,051,521
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,645,084
<DISTRIBUTIONS-OF-GAINS> 138,398
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,015,397
<NUMBER-OF-SHARES-REDEEMED> 686,818
<SHARES-REINVESTED> 86,179
<NET-CHANGE-IN-ASSETS> (79,019,139)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,710,413
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 4,082,688
<INTEREST-EXPENSE> 0
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<AVERAGE-NET-ASSETS> 33,497,903
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<PER-SHARE-NII> 0.573
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<PER-SHARE-DIVIDEND> 0.573
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<PER-SHARE-NAV-END> 11.710
<EXPENSE-RATIO> 1.740
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000728352
<NAME> DELAWARE GROUP TAX-FREE FUND, INC.
<SERIES>
<NUMBER> 013
<NAME> TAX-FREE USA FUND C CLASS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 620,853,893
<INVESTMENTS-AT-VALUE> 644,039,539
<RECEIVABLES> 10,415,265
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,185,646
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<DIVIDEND-INCOME> 0
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<OTHER-INCOME> 0
<EXPENSES-NET> 6,766,929
<NET-INVESTMENT-INCOME> 39,265,992
<REALIZED-GAINS-CURRENT> 10,051,521
<APPREC-INCREASE-CURRENT> 2,978,780
<NET-CHANGE-FROM-OPS> 52,296,293
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 58,814
<DISTRIBUTIONS-OF-GAINS> 4,957
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 89,711
<NUMBER-OF-SHARES-REDEEMED> 35,231
<SHARES-REINVESTED> 4,299
<NET-CHANGE-IN-ASSETS> (79,019,139)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,701,413
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
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<PER-SHARE-NAV-BEGIN> 11.550
<PER-SHARE-NII> 0.573
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.710
<EXPENSE-RATIO> 1.740
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>