Delaware Tax-Free USA Fund


Delaware Tax-Free USA Fund seeks as high a level of current interest income exempt from federal income tax as is available from municipal obligations and as is consistent with prudent investment management and preservation of capital.


The Fund primarily invests in U.S. state and local municipal bonds issued to raise funds for public purposes such as hospitals, schools, and general capital expense.

Fund information
Inception date12/31/2008
Dividends paid (if any)Monthly
Capital gains paid (if any)December
Fund identifiers

Institutional Class shares are only available to certain investors. See the prospectus for more information. 

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 (09/30/2015)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.00%3.78%2.99%4.83%n/a7.29%12/31/2008
Average annual total return as of quarter-end (09/30/2015)
Current quarterYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.43%2.00%3.78%2.99%4.83%n/a7.29%12/31/2008

Returns for less than one year are not annualized.

Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.

Expense ratio

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from Dec. 29, 2014 through Dec. 29, 2015. Please see the fee table in the Fund’s prospectus for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return

Institutional Class shares are only available to certain investors. See the prospectus for more information. 

Portfolio characteristics - as of 08/31/2015
Number of holdings157
Effective maturity (weighted average) (view definition)6.28 years
Modified duration (view definition)4.70 years
Annualized standard deviation, 3 years (view definition)4.44
SEC 30-day yield with waiver (view definition)2.28%
SEC 30-day yield without waiver (view definition)2.10%
Portfolio turnover (last fiscal year)34%
Portfolio composition as of 09/30/2015Total may not equal 100% due to rounding.
Municipal bonds98.3%
Cash and cash equivalents1.7%

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

Top 10 holdings as of 09/30/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Oklahoma Turnpike Authority 6.000 1/1/20223.0%
State of North Carolina 5.000 5/1/20202.2%
New York City Transitional Finance Authority Future Tax Secured Revenue 5.000 11/1/20422.0%
Golden State Tobacco Securitization Corp. 5.000 6/1/20452.0%
County of Fairfax VA 5.000 10/1/20191.8%
Brooklyn Arena Local Development Corp. 6.500 7/15/20301.7%
City Public Service Board of San Antonio TX 5.250 2/1/20241.6%
City of New York NY 5.000 10/1/20361.3%
Golden State Tobacco Securitization Corp. 5.750 6/1/20471.3%
Missouri Highway & Transportation Commission 5.000 5/1/20241.3%
Total % Portfolio in Top 10 holdings18.2%

Holdings are as of the date indicated and subject to change.

Top sectors as of 08/31/2015
List excludes cash, accruals on bonds, and cash equivalents.
Sector% of portfolio
IDR/PCR (corporate)13.7%
Special tax12.3%
Local general obligations7.0%
State general obligations6.8%
Water & sewer5.0%
Top 10 states as of 09/30/2015
State% of portfolio
New York19.3%
New Jersey6.7%
North Carolina3.4%
Distribution history - annual distributions (Institutional Class)1,2
Distributions ($ per share)
YearCapital gains3Net investment

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.

Institutional Class shares are only available to certain investors. See the prospectus for more information. 

Joe Baxter

Joe Baxter  

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

Start date on the Fund: January 2003

Years of industry experience: 31

(View bio)

Steve Czepiel

Steve Czepiel  

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: July 2007

Years of industry experience: 33

(View bio)

Greg Gizzi

Greg Gizzi 

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: December 2012

Years of industry experience: 31

(View bio)

Institutional Class shares are only available to certain investors. See the prospectus for more information. 

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 pricenone
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) feesnone
Other expenses0.17%
Total annual fund operating expenses0.72%
Fee waivers and expense reimbursements(0.16%)
Total annual fund operating expenses after fee waivers and expense reimbursements0.56%

Institutional Class shares are only available to certain investors. See the prospectus for more information. 

1The Fund's investment manager, Delaware Management Company (Manager), has contractually agreed to waive all or a portion of its investment advisory fees and/or pay/reimburse expenses (excluding any 12b-1 fees, acquired fund fees and expenses, taxes, interest, inverse floater program 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) in order to prevent total annual fund operating expenses from exceeding 0.56% of the Fund's average daily net assets from Dec. 29, 2014 through Dec. 29, 2015. These waivers and reimbursements may only be terminated by agreement of the Manager and the Fund.

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Delaware Tax-Free USA Fund Quarterly commentary June 30, 2015


Interest rates rose and the yield curve steepened during the second quarter of 2015 despite a spike in global risk sentiment caused by long-festering credit issues in Greece and Puerto Rico. Meanwhile, the Federal Reserve appeared to grow more dovish despite improved U.S. growth prospects. Although inflation (as measured by the core personal consumption expenditures deflator) remained well contained, inflation hawks typically react adversely to a dovish Fed and thus sold the longer end of the yield curve more intensely than the shorter end.

Municipal bond rates rose across the yield curve during the quarter, and the municipal market, as measured by the Barclays Municipal Bond Index, returned -0.89%. The benchmark’s year-to-date return was essentially flat at +0.11%. The municipal bond curve steepened, with yields rising 12 basis points for 1-year bonds, 32 basis points for 10-year bonds, and 48 basis points for 30-year bonds. (One basis point equals a hundredth of a percentage point.) In a reversal of recent patterns, higher-grade municipal bonds outperformed lower-rated municipals as the “risk off” rally driven by Puerto Rico dominated the last few trading sessions.

The second quarter followed yet another stretch of tepid winter economic activity, with U.S. gross domestic product (GDP) shrinking by 0.2% in the first quarter, according to the U.S. Commerce Department’s revised estimate. Possible explanations included a port strike on the West Coast, bad weather in the Northeast, and uncertain seasonal adjustments. Some investors wondered, however, if the U.S. economy was shifting into a sustained period of slow growth. Meanwhile, initial second-quarter data also were weak and consensus expectations for GDP growth at one time were below 2%. As the quarter progressed, however, the economic data turned more positive, with continued strong payroll growth and an uptick in personal spending. Current estimates for second-quarter GDP growth are in the 2.5–3.0% range.

At its June meeting, the Federal Open Market Committee (FOMC) kept interest rates and monetary policy unchanged. The FOMC also released new economic projections, as well as participants’ assessments of appropriate monetary policy. While policy makers maintained a median expectation for two 25-basis-point rate hikes in 2015, they also lowered rate hike expectations by a quarter point over 2016 and 2017. Investors viewed the revised projections as dovish and responded with a curve-steepening trade. Also, with the exception of Greece, the quantitative-easing program that began in Europe during the first quarter appeared to be working as intended, with early signs of inflation stabilization (as opposed to potential deflation) and a small increase in growth.

On June 26, debt relief and budget deficit target negotiations broke down between Greece and the lending Troika of the European Central Bank, the European Union, and the International Monetary Fund. Greek leaders had walked out of negotiations and called for a Greek voter referendum on whether to accept the Troika’s terms.

Over the same weekend, the governor of Puerto Rico stated in a New York Times interview that the commonwealth’s debt was “not payable.” The Government Development Bank for Puerto Rico (GDB) also released a report requesting voluntary debt restructuring. Publication of the GDB report had significant consequences: prices on Puerto Rico bonds plunged, Fitch downgraded Puerto Rico debt to CC, and Standard & Poor’s lowered its credit rating to CCC-. The bellwether Puerto Rico general obligation 8% coupon maturing in 2035 fell 9.5 points over the last two trading sessions of the quarter and finished the period at $67.50 to yield 12.44%. For the quarter, Puerto Rico securities, which reside primarily in the Barclays High-Yield Municipal Bond Index, fell 8.94% and were down 10.99% year to date. Since Puerto Rico securities make up more than 25% of the Barclays benchmark, the index was down 3.00% for the quarter and down 1.92% year to date.

This risk-off trade also had adverse residual effects on below-investment-grade Master Settlement Agreement (MSA) tobacco securities, and on the relationship between AAA and BBB securities. Tobacco bonds are often sold into risk-off markets because they are liquid and consistently quoted. MSA tobacco bonds were down 2.37% for the quarter; however, tobacco bond credit fundamentals actually have improved over the last year. The BBB-rated tranche of the Barclays Municipal Bond Index returned -1.04% for the second quarter, compared to -0.74% for the AAA tranche. This was the first quarter since the fourth quarter of 2013 that AAA-rated securities have outperformed BBB-rated securities, a reversal that did not occur until the last two trading sessions.

Within the Fund

For the second quarter of 2015, Delaware Tax-Free USA Fund Institutional Class shares outperformed the Fund’s benchmark, the Barclays Municipal Bond Index. The Fund’s Class A shares at net asset value underperformed the index.

The primary drivers of performance for the period were the Fund’s out-of-benchmark and lower-investment-grade positions. Conversely, the Fund’s overweight position in the 30-plus-year maturity bucket detracted from performance for the quarter.


While the market’s primary focus is on the Fed and interest rate policy, we believe that credit issues in Puerto Rico and Greece will remain in the news and be a source of volatility for some time to come. In our opinion, Puerto Rico poses the greater risk to the municipal bond market because of its role as a potential catalyst for mutual fund outflows like those that occurred in 2013. Based on recent performance monitoring, fewer tax-exempt funds have large exposures to Puerto Rico securities and therefore pose less systemic risk to the municipal market. We would view any dislocation due to credit concerns over Puerto Rico, or overall credit problems in the market, as a buying opportunity. We continue to believe that income will be the primary driver of total return for the foreseeable future.

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.


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 800 362-7500. 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.

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.

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

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.

All third-party marks cited are the property of their respective owners.

The Funds are distributed by Delaware Distributors L.P., an affiliate of Delaware Management Holdings, Inc., and Macquarie Group Limited.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 10/02/2015)

Institutional ClassPriceNet changeYTD
Max offer price$11.97n/an/a

Total net assets (as of 09/30/2015)

$562.8 million all share classes

Overall Morningstar RatingTM

Institutional Class shares (as of 08/31/2015)
RatingNo. of funds
3 Yrs4191
5 Yrs4180
10 Yrs4146
Morningstar categoryMuni National Long

(View Morningstar disclosure)

Lipper ranking (as of 08/31/2015)

YTD ranking17 / 263
1 year34 / 255
3 years81 / 227
5 years38 / 205
10 yearsn/a
Lipper classificationGen & Ins Muni Debt Fds

(View Lipper disclosure)

Benchmark, peer group

Barclays Municipal Bond Index (view definition)

Lipper General & Insured Municipal Debt Funds Average (view definition)

Additional information