Delaware National High-Yield Municipal Bond Fund

Client-focused consistency

Get a firsthand look at the Delaware Investments municipal bond group and see what drives its passion for performance.

Watch the video

Objective

Delaware National High-Yield Municipal Bond Fund seeks a high level of current income exempt from federal income tax primarily through investment in medium- and lower-grade municipal obligations.

Strategy

The Fund primarily invests in high-yield U.S. state and local municipal bonds of various maturities, the income from which is exempt from federal income taxes.

Fund information
Inception date09/22/1986
Dividends paid (if any)Monthly
Capital gains paid (if any)December
Fund identifiers
NASDAQCXHYX
CUSIP928928241
Investment minimums
Initial investment$1,000
Subsequent Investments$100
Systematic withdrawal balance$5,000
Account features
CheckwritingNo
Payroll DeductionYes
IRAsNo

On Sept. 25, 2014, Class B shares of the Fund converted to Class A shares.

The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.

Total returns may reflect waivers and/or expense reimbursements by the manager and/or distributor for some or all of the periods shown. Performance would have been lower without such waivers and reimbursements.

Average annual total return as of month-end (11/30/2014)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)14.64%14.36%8.24%7.84%5.67%6.44%09/22/1986
Max offer price9.48%9.25%6.58%6.85%5.18%6.26%
Barclays Municipal Bond Index8.50%8.23%4.78%5.12%4.81%n/a
Average annual total return as of quarter-end (09/30/2014)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.36%12.85%13.21%7.65%7.07%5.67%6.42%09/22/1986
Max offer price-2.28%n/a8.15%6.02%6.09%5.18%6.24%
Barclays Municipal Bond Index1.49%7.58%7.93%4.56%4.67%4.72%n/a

Returns for less than one year are not annualized.

Class A shares have a maximum up-front sales charge of 4.50% and are subject to an annual distribution fee.

Expense ratio
Gross0.99%
Net0.85%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from Dec. 27, 2013 through Dec. 29, 2014. Please see the fee table in the Fund’s prospectus for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20145.25%4.75%2.36%n/an/a
20131.19%-5.17%-2.69%0.32%-6.33%
20125.13%3.94%3.71%1.90%15.47%
2011-1.54%5.09%4.38%2.22%10.40%
20103.17%2.99%5.18%-6.00%5.04%
20097.04%7.65%14.79%-0.59%31.49%
2008-1.81%0.93%-4.84%-14.15%-19.04%
20071.16%0.10%-0.66%-0.97%-0.38%
20060.67%0.57%3.16%1.64%6.16%
20051.22%2.99%0.62%0.97%5.92%
20042.53%-1.12%2.99%2.82%7.36%
Portfolio characteristics - as of 11/30/2014
Share assets$211.6 million
Number of holdings335
Effective maturity (weighted average) (view definition)8.92 years
Modified duration (view definition)5.82 years
Annualized standard deviation, 3 years (view definition)5.92
SEC 30-day yield with waiver (view definition)3.01%
SEC 30-day yield without waiver (view definition)2.89%
Portfolio turnover (last fiscal year)31%
Portfolio composition as of 11/30/2014Total may not equal 100% due to rounding.
Municipal bonds96.5%
Cash and cash equivalents3.5%

Cash and cash equivalents include accruals on bonds and long-term receivables.

Top 10 holdings as of 11/30/2014
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Golden State Tobacco Securitization Corp. 5.750 6/1/20471.6%
Buckeye Tobacco Settlement Financing Authority 5.875 6/1/20471.6%
County of Jefferson AL Sewer Revenue 6.500 10/1/20531.3%
Tobacco Settlement Financing Corp/NJ 5.000 6/1/20411.2%
Salt Verde Financial Corp. 5.000 12/1/20371.2%
Texas Private Activity Bond Surface Transportation Corp. 7.000 6/30/20401.1%
Virginia Public Building Authority 5.000 8/1/20201.1%
Commonwealth of Massachusetts 5.000 11/1/20231.1%
North Texas Tollway Authority 5.750 1/1/20381.0%
Commonwealth of Pennsylvania 5.000 11/15/20161.0%
Total % Portfolio in Top 10 holdings12.2%
Top sectors as of 11/30/2014
List excludes cash, accruals on bonds, and cash equivalents.
Sector% of portfolio
Hospital23.5%
Corporate20.7%
Education16.0%
Special tax8.6%
Transportation8.1%
Leasing5.0%
State general obligations4.2%
Local general obligations3.4%
Water & sewer3.0%
Housing1.6%
Top 10 states as of 11/30/2014
State% of portfolio
California13.7%
New York10.9%
Texas7.8%
Pennsylvania6.4%
New Jersey4.9%
Maryland4.9%
Ohio4.2%
Minnesota3.7%
Florida3.6%
Illinois3.6%
Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
20140.0000.400
20130.0000.445
20120.0000.482
20110.0000.478
20100.0000.500
20090.0000.511
20080.0000.487
20070.0000.484
20060.0000.477
20050.0000.492
20040.0000.501

1If a Fund makes a distribution from any source other than net income, it is required to provide shareholders with a notice disclosing the source of such distribution (each a "Notice"). The amounts and sources of distributions reported above and in each Notice are only estimates and are not provided for tax reporting purposes. Each Fund will send each shareholder a Form 1099 DIV for the calendar year that will provide definitive information on how to report the Fund's distributions for federal income tax purposes. The information in the table above will not be updated to reflect any subsequent recharacterization of dividends and distributions. Click here to see recent Notices pertaining to the Fund (if any).

2Information on return of capital distributions (if any) is only provided from June 1, 2014 onward.

3Includes both short- and long-term capital gains.

Joe Baxter

Joe Baxter  

Senior Vice President, Head of Municipal Bond Department, Senior Portfolio Manager

Start date on the Fund: May 2003

Years of industry experience: 30

(View bio)


Steve Czepiel

Steve Czepiel  

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: July 2007

Years of industry experience: 32

(View bio)


Greg Gizzi

Greg Gizzi 

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: December 2012

Years of industry experience: 30

(View bio)


You may qualify for sales-charge discounts if you and your family invest, or agree to invest in the future, at least $100,000 in Delaware Investments® Funds. More information about these and other discounts is available from your financial advisor, in the Fund's prospectus under the section entitled "About your account," and in the Fund's statement of additional information under the section entitled "Purchasing shares."

The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.

Shareholder fees
Maximum sales charge (load) imposed on purchases as a percentage of offering price4.50%
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lowernone
Annual fund operating expenses
Management fees0.55%
Distribution and service (12b-1) fees0.25%
Other expenses0.19%
Total annual fund operating expenses0.99%
Fee waivers and expense reimbursements(0.14%)
Total annual fund operating expenses after fee waivers and expense reimbursements0.85%

1The Fund's investment manager, Delaware Management Company (Manager), is contractually waiving its investment advisory fees and/or paying expenses (excluding any 12b-1 fees, taxes, interest, inverse floater program expenses, acquired fund fees and expenses, short sale and dividend interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) to the extent necessary to prevent total annual fund operating expenses from exceeding 0.60% of the Fund's average daily net assets from Dec. 27, 2013 through Dec. 29, 2014. These waivers and reimbursements may only be terminated by agreement of the Manager or Distributor, as applicable, and the Fund.

View printable commentary E-mail this page

This commentary is currently not available. Please check back later.

Delaware National High-Yield Municipal Bond Fund Quarterly commentary September 30, 2014

Overview

The municipal bond yield curve flattened during the third quarter of 2014. Yields declined 19–23 basis points on bonds with maturities of 20 years and longer, while bond yields in 1- to 3-year maturities rose 2–4 basis points. (A basis point equals one one-hundredth of a percentage point.) This was against the backdrop of the same directional trade in U.S. Treasurys, although short-maturity yields rose more and long-end yields declined less in the government market. As a result, the municipal bond market outperformed Treasurys, with ratios tightening across the yield curve. The municipal market was characterized by continued positive mutual fund inflows and moderate new-issue supply. As measured by the Barclays Municipal Bond Index, the market returned 1.49% for the quarter, bringing the year-to-date return to 7.58%. The Barclays High-Yield Municipal Bond Index returned 4.61% and 12.48%, respectively, for the same time periods. In addition, Puerto Rico debt was again in the news, yet it returned 10.08% for the quarter, providing the strongest returns in the municipal market.

The bond market action unfolded as one would expect given the news and events that dominated the quarter. The short end of the yield curve sold off and rates rose as the primary monetary policy debate during the period was how soon and how much the U.S. Federal Reserve would tighten after it ended its quantitative-easing program. The Federal Open Market Committee (FOMC) statement declared there will be “considerable time” between the end of quantitative easing and the first hike in the federal funds rate. Fed Chairwoman Janet Yellen has stated that this time period will be “data dependent.” However, many financial market participants, for better or worse, have tended to define “considerable time” as six months. With the end of quantitative easing expected to occur in October and stronger domestic data during the quarter — including final second-quarter gross domestic product growth of 4.6%, according to the U.S. Commerce Department — the markets looked for clues in the September FOMC statement about the timing of tightening and the potential for the FOMC to drop the “considerable time” phrase from the statement. The “considerable time” language remained, however, and thus the market debate and uncertainty continues as we head into October.

The municipal bond market continued to experience good technical conditions. New-issue supply was moderate, printing at approximately -2.5% versus the same time last year, but this is against a backdrop of supply being down approximately 11% year-to-date (source: The Bond Buyer). Demand remained strong and accelerated during the quarter as measured by mutual fund flows. Of the $12.6 billion in positive flows year-to-date, approximately $6.7 billion occurred during the third quarter (source: J.P. Morgan and Lipper).

Within the Fund

Delaware National High-Yield Municipal Bond Fund (Class A and Institutional Class shares at net asset value) outperformed its benchmark, the Barclays Municipal Bond Index, for the third quarter.

The primary contributor of performance for the quarter was the Fund’s overweight positions in bonds with maturities of 20 years and longer, as these securities outperformed the return of the index for the period. Additionally, out-of-benchmark positions in below-investment-grade bonds and an overweight position in BBB-rated debt positively influenced Fund performance.

Sectors that benefited performance include hospital, education, and industrial development revenue / pollution control revenue (IDR/PCR). Conversely, the Fund’s underweight in the transportation sector detracted from performance during the quarter.

Outlook

We continue to find the same dynamics driving the markets: decent domestic growth offset by geopolitical concerns and foreign economic weakness. Although the FOMC appears ready to end quantitative easing, it does not appear ready to remove stimulus by hiking the fed funds rate in the near term. In our opinion, this should keep the bond market in a trading range with limited upside and limited downside potential. Therefore, we believe the primary driver of total return should be income. We believe the Fund is positioned correctly for this environment.

The Barclays High-Yield Municipal Bond Index is composed of U.S. dollar–denominated, noninvestment grade, tax-exempt bonds for which the middle rating among Moody’s Investors Service, Inc., Fitch, Inc., and Standard & Poor’s is Ba1/BB+/BB+ or below.

Bond ratings are determined by a nationally recognized statistical rating organization (NRSRO).

Per Standard & Poor’s credit rating agency, bonds rated below AAA are more susceptible to the adverse effects of changes in circumstances and economic conditions than those in higher-rated categories, but the obligor’s capacity to meet its financial commitment on the obligation is still strong. Bonds rated BBB exhibit adequate protection parameters, although adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments. Bonds rated BB, B, and CCC are regarded as having significant speculative characteristics, with BB indicating the least degree of speculation of the three.

[13368]

The views expressed represent the Manager's assessment of the Fund and market environment as of the date indicated, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Information is as of the date indicated and subject to change.

Document must be used in its entirety.

Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by clicking the prospectus link located in the right-hand sidebar or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.

Investing involves risk, including the possible loss of principal.

Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.

The Fund may also be subject to prepayment risk, the risk that the principal of a fixed income security that is held by the Fund may be prepaid prior to maturity, potentially forcing the Fund to reinvest that money at a lower interest rate.

High yielding, noninvestment grade bonds (junk bonds) involve higher risk than investment grade bonds.

Substantially all dividend income derived from tax-free funds is exempt from federal income tax. Some income may be subject to the federal alternative minimum tax (AMT) that applies to certain investors. Capital gains, if any, are taxable.

Duration number will change as market conditions change. Therefore, duration should not be solely relied upon to indicate a municipal bond fund’s potential volatility.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 12/19/2014)

Class APriceNet changeYTD
NAV$10.82no chg15.42%
Max offer price$11.33n/an/a

Total net assets (as of 11/30/2014)

$749.3 million all share classes

Overall Morningstar RatingTM

Load waived

With load

Class A shares (as of 11/30/2014)

Load waivedWith loadNo. of funds
Overall54155
3 Yrs43155
5 Yrs43135
10 Yrs5491
Morningstar categoryHigh Yield Muni

(View Morningstar disclosure)

Lipper ranking (as of 11/30/2014)

YTD ranking41 / 136
1 year34 / 133
3 years29 / 112
5 years15 / 98
10 years2 / 61
Lipper classificationHi Yld Muni Debt Funds

(View Lipper disclosure)

Benchmark, peer group

Barclays Municipal Bond Index (view)

Lipper High Yield Municipal Debt Funds Average (view)

Additional information