Delaware National High-Yield Municipal Bond Fund Class A shares returned -0.38% at net asset value and -4.88% at maximum offer price (both returns include distributions reinvested) for the fiscal year ended Aug. 31, 2009. For the same period, the Fund’s benchmark, the Barclays Capital Municipal Bond Index, returned +5.67%. For complete annualized performance for Delaware National High-Yield Municipal Bond Fund, please see the table on page 14.
The 12-month period included one of the most difficult economic and investment climates the portfolio management team has ever seen, followed by a considerable recovery within the municipal bond market and across fixed income markets more broadly.
The financial markets’ troubles date back to 2007 and turmoil continued into the start of the reporting period in September 2008:
Several weeks into the period, the financial markets received a jolt with the bankruptcy of storied Wall Street investment bank Lehman Brothers. This event, followed soon after by the near bankruptcy (and ultimate federal bailout) of insurance giant American International Group (AIG), sent
the markets into a near panic. Stock and bond prices virtually collapsed, while credit became even less available. On the whole, businesses began to cut their capital spending, and large-scale job losses ensued.
By early 2009, both stock and bond valuations had fallen extremely from their highs, reflecting investors’ fears of an economic depression. Though the “worst-case scenarios” that many may have envisioned did not materialize, the U.S. economy did experience its most severe downturn in decades. Gross domestic product (GDP) — a widely used measure of economic activity — fell by 5.4% and 6.4% in the fourth quarter of 2008 and the first quarter of 2009, respectively. It was the country’s worst two-quarter economic performance in more than 50 years.
Within this environment, the Federal Reserve and federal government took a series of steps to loosen tight credit markets and avert a worst-case scenario for the economy. The Fed significantly expanded its balance sheet during the fiscal year. Notably, it employed one of the lesser-used tools that it has at its disposal, in purchasing hundreds of billions of dollars worth of longer-term U.S. Treasury debt as well as agency mortgage-backed securities. In December 2008, the Federal Open Market Committee (FOMC) cut the target federal funds rate to a range of zero to 0.25% — an all-time low. For its part, the federal government passed the Troubled Asset Relief Program (TARP), a $700 billion package designed to shore up financial institutions, in October 2008. Several months later, the Obama administration followed up with the American Recovery and Reinvestment Act of 2009, a nearly $800 billion economic stimulus package. (Source: Bloomberg.)
As the period came to a close, the economy was, if not improving, declining at a far slower pace, and, based on our research, many analysts were anticipating a near-term end to the long recession. During the second quarter of 2009, GDP fell by an estimated 1%. This figure was still weak, but it was the best economic performance seen in a year.
The municipal bond market
In our view, the most notable trend within the municipal bond market during the period was the widening performance gap between higher-rated and lower-rated bonds. Demand remained strong for securities with the high (AA or better) credit ratings, for example, but was weak for those in all other rating categories, particularly securities rated BBB or below. As a result, lower-rated bonds dramatically underperformed their higher-grade counterparts — especially in the first few months of the period when investor confidence was lowest.
This bifurcation, or divergence of performance, within the municipal market largely resulted from the continued financial troubles for monoline municipal bond insurers. For many years, these companies — which insure municipal bond principal and interest payments — received AAA ratings from the major credit rating agencies. As a result, many investors were willing to buy lower-quality bonds as long as they carried this AAA-rated insurance guarantee. Beginning in 2007, however, as credit conditions worsened, many of these monoline insurance companies saw their credit ratings cut dramatically.
Severe capitalization constraints within the investment banking community compounded the municipal markets’ problems during
3
Portfolio management review
Delaware National Tax-Free Funds
approximately the first half of the fiscal period. Once investment banks’ capital positions were compromised, most banks were less willing to provide liquidity to help bolster the municipal market.
With municipal bond yields high and their prices at historic lows (bond yields and prices move in opposite directions), investors slowly began to return to the tax-exempt bond market beginning in mid-December 2008. At first, they favored highly rated bonds generally associated with minimal credit risk. By the year’s second calendar quarter, as optimism about the economy grew, municipal bond issuance began to grow, and for the first time in months we began to see increased new supply that stemmed from lower-rated, higher-yielding deals.
In this environment, lower-rated bonds generally enjoyed more-favorable performance, and even rallied in the summer months. Credit spreads — which can be interpreted as the additional income paid to investors in exchange for investing in riskier bonds — narrowed sharply from their peak in early January, indicating some initial easing of the general risk aversion that characterized fixed income markets for so long.
Besides generally avoiding credit risk, many municipal bond investors sought to minimize interest rate risk as well during the period. This was indicated by the fact that the yield curve, or the difference in yield offered by shorter-dated AAA-rated general obligation bonds relative to comparable longer-dated issues, rose steadily during the fiscal period. In fact, it reached a high of nearly four percentage points in August 2009 — almost double the historical average. (Source: Barclays Capital.)
Tactical portfolio shifts
Entering the reporting period, we sought to take advantage of market conditions by positioning the Funds more conservatively. We were emphasizing higher-rated securities as well as those with intermediate maturities. As the credit crisis deepened, this conservative stance generally contributed to the Funds’ performance versus our peers, especially in the fourth quarter of 2008 and first quarter of 2009.
Beginning early in 2009 and continuing through the end of the fiscal period, we became somewhat more confident, as we perceived a positive shift in the outlook for municipal bonds. Believing that municipal bond investors were being unusually well compensated for taking on credit risk, we began to selectively invest more of the Funds’ assets in lower-rated, higher-yielding bonds. Where appropriate, we also increasingly focused on longer-dated issues — an approach that enabled us to lock higher interest rates into the portfolios for an extended time.
Our approach during approximately the second half of the fiscal year (selectively investing across the credit spectrum) is more representative of how we manage the Funds during more-normalized market conditions. We are bottom-up investors, meaning that we evaluate securities one by one, based on thorough fundamental research to help ensure our comfort with the credit quality of each issuer. We believe that this approach may enable us to uncover value potential that investors with less experience or a less rigorous dedication to research might not be able to identify.
4
We believe this shift in Fund positioning was well timed. Early on, when the Funds emphasized higher-quality, intermediate-maturity debt, the securities we owned were often less affected by the worst of the market turmoil. As we gradually positioned the Funds more aggressively in a more favorable investment environment, we generally benefited from having security selection to the types of fundamentally solid, yet higher-than-average yielding bonds that we have historically favored.
Notable sectors and securities
Given the challenging market conditions overall, it’s not surprising that the best-performing sectors in all three Funds were those with a significant proportion of high-quality bonds — state general obligation bonds and pre-refunded bonds. Pre-refunded debt did particularly well. These securities are found on the short-maturity end of the yield curve and have historically faced little if any credit risk. This is because they are backed by the invested debt proceeds of a second bond issue, which consists of U.S. Treasury securities. Given investors’ tremendous risk aversion during much of the period, Treasurys performed extremely well, boosting the performance of pre-refunded bonds.
The general obligation and pre-refunded bond sectors were significant contributors to the performance of the National High-Yield Municipal Bond Fund. Neither is typically an area of emphasis for the Fund, which on the whole focuses on lower-rated debt. However, given the highly unusual market conditions combined with what we viewed as more attractive relative-value opportunities we saw in these sectors, we invested in these areas when we felt market conditions warranted, eventually shifting back toward higher-yielding, lower-rated investments more typically seen in a high yield municipal bond portfolio.
In all three Funds, many of our best individual-performing securities were those we were able to purchase near the market’s bottom, and that soon managed to recover off their lows. In the Tax-Free USA Fund, for example, these included bonds issued by Harvard University as well as New York City water bonds, both of which were highly rated. In both cases, we bought the bonds with high yields relative to historical norms at low points in the municipal marketplace. When investors returned to the municipal market, the bonds’ prices recovered, providing a healthy return to the Fund.
The Tax-Free USA Intermediate Fund benefited from a highly rated Connecticut state general obligation bond issue that started to recover its lost value shortly after we purchased it in early 2009. The Fund also was helped by an A-rated Minnesota hospital bond issue, Fairview Health Services, which we purchased in the fourth quarter of 2008 when the security was offering exceptional value, in our opinion. Although this security took some time to recover, it did so toward the end of the period and contributed significantly to the Fund’s performance.
Alternatively, all three Funds were hurt by their exposure to the industrial development revenue (IDR) bond category, which consists of corporate-backed bonds, many of which were lower rated. All three Funds, for example, were hurt by positions in Brazos River Authority, Texas, IDR bonds issued for Texas Utilities, which were rated below investment grade. Texas Utilities went through a leveraged buyout in 2007 and recently saw its credit rating downgraded several times.
5
Portfolio management review
Delaware National Tax-Free Funds
The Tax-Free USA Fund and Tax-Free USA Intermediate Fund also were hampered by our allocation to municipal leases — a category that tends to consist primarily of lower-rated, longer-maturity debt, two characteristics that were largely out of favor with investors.
Both the Tax-Free USA Fund and National High-Yield Municipal Bond Fund were weighed down by their allocation to land-transaction bonds, sometimes called “dirt bonds.” These issues, which help finance property developments, were particularly challenged in the regions that experienced the biggest housing boom and subsequent bust. Henderson, Nevada Local Improvement District land transaction bonds were particularly poor performers for the two Funds. These securities suffered significant price declines as the housing market declined and this development project remained unbuilt for a lack of demand and financing.
The Tax-Free USA Intermediate Fund was further hurt by its holdings in bonds issued for the Heldrich Center in central New Jersey. This new conference center opened in early 2008 and was weighed down by the declining economy, which resulted in fewer corporate meetings and therefore reduced conference-related revenue.
6
| Performance summaries | |
| Delaware Tax-Free USA Fund | Aug. 31, 2009 |
The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Please obtain the performance data for the most recent month end by calling 800 523-1918 or visiting our Web site at www.delawareinvestments.com/performance. Current performance may be lower or higher than the performance data quoted.
You should consider the investment objectives, risks, charges, and expenses of the investment company carefully before investing. The Delaware Tax-Free USA Fund prospectus contains this and other important information about the investment company. Please request a prospectus through your financial advisor or by calling 800 523-1918 or visiting our Web site at www.delawareinvestments.com. Read the prospectus carefully before you invest or send money.
A rise or fall in interest rates can have a significant impact on bond prices and the net asset value (NAV) of the Fund. Funds that invest in bonds can lose their value as interest rates rise, and an investor can lose principal.
| Fund performance | | Average annual total returns through Aug. 31, 2009 |
| | 1 year | | 5 years | | 10 years | | Lifetime |
| Class A (Est. Jan. 11, 1984) | | | | | | | | | | | | | | | | | | | | |
| Excluding sales charge | | | +3.91 | % | | | | +3.27 | % | | | | +4.76 | % | | | | +6.99 | % | |
| Including sales charge | | | -0.80 | % | | | | +2.32 | % | | | | +4.28 | % | | | | +6.80 | % | |
| Class B (Est. May 2, 1994) | | | | | | | | | | | | | | | | | | | | |
| Excluding sales charge | | | +3.13 | % | | | | +2.47 | % | | | | +4.10 | % | | | | +4.16 | % | |
| Including sales charge | | | -0.84 | % | | | | +2.21 | % | | | | +4.10 | % | | | | +4.16 | % | |
| Class C (Est. Nov. 29, 1995) | | | | | | | | | | | | | | | | | | | | |
| Excluding sales charge | | | +3.13 | % | | | | +2.48 | % | | | | +3.96 | % | | | | +3.49 | % | |
| Including sales charge | | | +2.13 | % | | | | +2.48 | % | | | | +3.96 | % | | | | +3.49 | % | |
| Institutional Class (Est. Dec. 31, 2008) | | | | | | | | | | | | | | | | | | | | |
| Excluding sales charge | | | n/a | | | | | n/a | | | | | n/a | | | | | +12.15 | % | |
| Including sales charge | | | n/a | | | | | n/a | | | | | n/a | | | | | +12.15 | % | |
Returns reflect the reinvestment of all distributions and any applicable sales charges as noted in the following paragraphs.
Performance for Class B and C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Expense limitations were in effect for all classes during the periods shown in the Fund performance chart and in the “Performance of a $10,000 investment” chart. The current expenses for each class are listed on the “Fund expenses” chart. (Note that all charts and graphs referred to in the “Performance summary” section of this report are found on pages 7 through 10.) Performance would have been lower had the expense limitation not been in effect.
7
Performance summaries
Delaware Tax-Free USA Fund
The Fund offers Class A, B, C, and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of up to 4.50%, and have an annual distribution and service fee of up to 0.24% of average daily net assets.
Class B shares may only be purchased through dividend reinvestment and certain permitted exchanges as described in the prospectus. Please see the prospectus for additional information on Class B purchase and sales charges. Class B shares have a contingent deferred sales charge that declines from 4.00% to zero depending on the period of time the shares are held.
Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. They are also subject to an annual distribution and service fee of up to 1.00% of average daily net assets.
The Board of Trustees has adopted a formula for calculating 12b-1 fees for the Fund’s Class A shares that went into effect on June 1, 1992. The total 12b-1 fees to be paid by Class A shareholders of the Fund will be the sum of 0.10% of the average daily net assets representing shares that were acquired prior to June 1, 1992, and 0.30% of the average daily net assets representing shares that were acquired on or after June 1, 1992. Effective April 21, 2006, the maximum amount of the Class A 12b-1 fees was reduced to 0.25%, and the total 12b-1 fees to be paid by Class A shareholders of the Fund will be the sum of 0.10% of the average daily net assets representing shares that were acquired prior to June 1, 1992, and 0.25% of the average daily net assets representing shares that were acquired on or after June 1, 1992. All Class A shareholders will bear 12b-1 fees at the same rate, the blended rate based upon the allocation of the 0.10% and 0.25% rates described above.
Ten-year and lifetime performance figures for Class B shares reflect conversion to Class A shares after approximately eight years.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets.
Institutional Class shares were first made available Dec. 31, 2008, and are available without sales or asset-based distribution charges only to certain eligible institutional accounts.
The “Fund performance” table and the “Performance of a $10,000 investment” graph do not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares.
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. High yielding, noninvestment grade bonds (junk bonds) involve higher risk than investment grade bonds.
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 that applies to certain investors. Capital gains, if any, are taxable.
8
The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table. Delaware Investments has agreed to reimburse certain expenses and/or waive certain fees from Jan. 1, 2009, through Dec. 31, 2009. Please see the most recent prospectus for additional information on these fee waivers and/or reimbursements.
| Fund expense ratios | Class A | | Class B | | Class C | | Institutional Class |
| Total annual operating expenses | 0.94% | | 1.70% | | 1.70% | | 0.70% |
| (without fee waivers) | | | | | | | |
| Net expenses | 0.84% | | 1.60% | | 1.60% | | 0.60% |
| (including fee waivers, if any) | | | | | | | |
| Type of waiver | Contractual | | Contractual | | Contractual | | Contractual |
Performance of a $10,000 investment
Average annual total returns from Aug. 31, 1999, through Aug. 31, 2009
| For period beginning Aug. 31, 1999, through Aug. 31, 2009 | Starting value | Ending value |
| | Barclays Capital Municipal Bond Index | $10,000 | $16,924 |
| | Delaware Tax-Free USA Fund — Class A Shares | $9,550 | $15,191 |
The chart assumes $10,000 invested in the Fund on Aug. 31, 1999 and includes the effect of a 4.50% front-end sales charge and the reinvestment of all distributions. Please note additional details on these fees in the “Performance summary” section of this report, which includes pages 7 through 10.
The chart also assumes $10,000 invested in the Barclays Capital Municipal Bond Index as of Aug. 31, 1999. The Barclays Capital Municipal Bond Index, formerly the Lehman Brothers Municipal Bond Index, measures the total return performance of the long-term, investment grade tax-exempt bond market.
9
Performance summaries
Delaware Tax-Free USA Fund
An index is unmanaged and does not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. You cannot invest directly in an index.
Performance of other Fund classes will vary due to different charges and expenses.
The “Fund performance” chart and the “Performance of a $10,000 investment” graph do not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares. Past performance does not guarantee future results.
| Stock symbols and CUSIP numbers |
| | | Nasdaq symbols | | CUSIPs | |
| Class A | | | DMTFX | | | 245909106 | |
| Class B | | | DTFCX | | | 245909403 | |
| Class C | | | DUSCX | | | 245909700 | |
| Institutional Class | | | DTFIX | | | 24610H104 | |
10
| Delaware Tax-Free USA Intermediate Fund | Aug. 31, 2009 |
The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Please obtain the performance data for the most recent month end by calling 800 523-1918 or visiting our Web site at www.delawareinvestments.com/performance. Current performance may be lower or higher than the performance data quoted.
You should consider the investment objectives, risks, charges, and expenses of the investment company carefully before investing. The Delaware Tax-Free USA Intermediate Fund prospectus contains this and other important information about the investment company. Please request a prospectus through your financial advisor or by calling 800 523-1918 or visiting our Web site at www.delawareinvestments.com. Read the prospectus carefully before you invest or send money.
A rise or fall in interest rates can have a significant impact on bond prices and the net asset value (NAV) of the Fund. Funds that invest in bonds can lose their value as interest rates rise, and an investor can lose principal.
| Fund performance | | Average annual total returns through Aug. 31, 2009 |
| | 1 year | | 5 years | | 10 years | | Lifetime |
| Class A (Est. Jan. 7, 1993) | | | | | | | | | | | | | | | | | | | | |
| Excluding sales charge | | | +5.49 | % | | | | +3.72 | % | | | | +5.10 | % | | | | +5.27 | % | |
| Including sales charge | | | +2.57 | % | | | | +3.15 | % | | | | +4.81 | % | | | | +5.09 | % | |
| Class B (Est. May 2, 1994) | | | | | | | | | | | | | | | | | | | | |
| Excluding sales charge | | | +4.61 | % | | | | +2.85 | % | | | | +4.65 | % | | | | +4.83 | % | |
| Including sales charge | | | +2.61 | % | | | | +2.85 | % | | | | +4.65 | % | | | | +4.83 | % | |
| Class C (Est. Nov. 29, 1995) | | | | | | | | | | | | | | | | | | | | |
| Excluding sales charge | | | +4.60 | % | | | | +2.83 | % | | | | +4.20 | % | | | | +4.02 | % | |
| Including sales charge | | | +3.60 | % | | | | +2.83 | % | | | | +4.20 | % | | | | +4.02 | % | |
| Institutional Class (Est. Dec. 31, 2008) | | | | | | | | | | | | | | | | | | | | |
| Excluding sales charge | | | n/a | | | | | n/a | | | | | n/a | | | | | +8.68 | % | |
| Including sales charge | | | n/a | | | | | n/a | | | | | n/a | | | | | +8.68 | % | |
Returns reflect the reinvestment of all distributions and any applicable sales charges as noted in the following paragraphs.
Performance for Class B and C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Expense limitations were in effect for all classes during the periods shown in the Fund performance chart and in the “Performance of a $10,000 investment” chart. The current expenses for each class are listed on the “Fund expenses” chart. (Note that all charts and graphs referred to in the “Performance summary” section of this report are found on pages 11 through 13.) Performance would have been lower had the expense limitation not been in effect.
11
Performance summaries
Delaware Tax-Free USA Intermediate Fund
The Fund offers Class A, B, C, and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of up to 2.75%, and have an annual distribution and service fee of up to 0.30% of average daily net assets.
Class B shares may only be purchased through dividend reinvestment and certain permitted exchanges as described in the prospectus. Please see the prospectus for additional information on Class B purchase and sales charges. Class B shares have a contingent deferred sales charge that declines from 2.00% to zero depending on the period of time the shares are held.
Class B shares will automatically convert to Class A shares on a quarterly basis approximately five years after purchase. They are also subject to an annual distribution and service fee of up to 1.00% of average daily net assets.
Ten-year and lifetime performance figures for Class B shares reflect conversion to Class A shares after approximately five years.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets.
Institutional Class shares were first made available Dec. 31, 2008, and are available without sales or asset-based distribution charges only to certain eligible institutional accounts.
The “Fund performance” table and the “Performance of a $10,000 investment” graph do not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares.
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. High yielding, noninvestment grade bonds (junk bonds) involve higher risk than investment grade bonds.
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 that applies to certain investors. Capital gains, if any, are taxable.
The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table. Delaware Investments has agreed to reimburse certain expenses and/or waive certain fees from Jan. 1, 2009, through Dec. 31, 2009. Please see the most recent prospectus for additional information on these fee waivers and/or reimbursements.
| Fund expense ratios | Class A | | Class B | | Class C | | Institutional Class |
| Total annual operating expenses | 1.03% | | 1.73% | | 1.73% | | 0.73% |
| (without fee waivers) | | | | | | | |
| Net expenses | 0.75% | | 1.60% | | 1.60% | | 0.60% |
| (including fee waivers, if any) | | | | | | | |
| Type of waiver | Contractual | | Contractual | | Contractual | | Contractual |
12
Performance of a $10,000 investment
Average annual total returns from Aug. 31, 1999, through Aug. 31, 2009
| For period beginning Aug. 31, 1999, through Aug. 31, 2009 | Starting value | Ending value |
| | Barclays Capital 3–15 Year Municipal Bond Index | $10,000 | $16,917 |
| | Delaware Tax-Free USA
Intermediate Fund — Class A Shares | $9,725 | $15,975 |
The chart assumes $10,000 invested in the Fund on Aug. 31, 1999, and includes the effect of a 2.75% front-end sales charge and the reinvestment of all distributions. Please note additional details on these fees in the “Performance summary” section of this report, which includes pages 11 through 13.
The chart also assumes $10,000 invested in the Barclays Capital 3–15 Year Municipal Bond Index as of Aug. 31, 1999. The Barclays Capital 3–15 Year Municipal Bond Index, formerly the Lehman Brothers 3–15 Year Municipal Bond Index, measures the total return performance of investment grade, U.S. tax-exempt bonds with maturities from 2 to 17 years.
An index is unmanaged and does not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. You cannot invest directly in an index.
Performance of other Fund classes will vary due to different charges and expenses.
The “Fund performance” chart and the “Performance of a $10,000 investment” graph do not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares.
Past performance does not guarantee future results.
| Stock symbols and CUSIP numbers |
| | | Nasdaq symbols | | CUSIPs | |
| Class A | | | DMUSX | | | 245909304 | |
| Class B | | | DUIBX | | | 245909601 | |
| Class C | | | DUICX | | | 245909882 | |
| Institutional Class | | | DUSIX | | | 24610H203 | |
13
| Performance summaries | |
| Delaware National High-Yield Municipal Bond Fund | Aug. 31, 2009 |
The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Please obtain the performance data for the most recent month end by calling 800 523-1918 or visiting our Web site at www.delawareinvestments.com/performance. Current performance may be lower or higher than the performance data quoted.
You should consider the investment objectives, risks, charges, and expenses of the investment company carefully before investing. The Delaware National High-Yield Municipal Bond Fund prospectus contains this and other important information about the investment company. Please request a prospectus through your financial advisor or by calling 800 523-1918 or visiting our Web site at www.delawareinvestments.com. Read the prospectus carefully before you invest or send money.
A rise or fall in interest rates can have a significant impact on bond prices and the net asset value (NAV) of the Fund. Funds that invest in bonds can lose their value as interest rates rise, and an investor can lose principal.
| Fund performance | | Average annual total returns through Aug. 31, 2009 |
| | 1 year | | 5 years | | 10 years | | Lifetime |
| Class A (Est. Sept. 22, 1986) | | | | | | | | | | | | | | | | | |
| Excluding sales charge | | | -0.38 | % | | | | +2.77 | % | | | | +3.81 | % | | | | +5.94 | % | |
| Including sales charge | | | -4.88 | % | | | | +1.83 | % | | | | +3.33 | % | | | | +5.73 | % | |
| Class B (Est. Dec. 18, 1996) | | | | | | | | | | | | | | | | | |
| Excluding sales charge | | | -1.11 | % | | | | +2.00 | % | | | | +3.17 | % | | | | +3.82 | % | |
| Including sales charge | | | -4.86 | % | | | | +1.75 | % | | | | +3.17 | % | | | | +3.82 | % | |
| Class C (Est. May 26, 1997) | | | | | | | | | | | | | | | | | |
| Excluding sales charge | | | -1.11 | % | | | | +2.02 | % | | | | +3.04 | % | | | | +3.42 | % | |
| Including sales charge | | | -2.04 | % | | | | +2.02 | % | | | | +3.04 | % | | | | +3.42 | % | |
| Institutional Class (Est. Dec. 31, 2008) | | | | | | | | | | | | | | | | | |
| Excluding sales charge | | | n/a | | | | | n/a | | | | | n/a | | | | | +22.55 | % | |
| Including sales charge | | | n/a | | | | | n/a | | | | | n/a | | | | | +22.55 | % | |
Returns reflect the reinvestment of all distributions and any applicable sales charges as noted in the following paragraphs.
Performance for Class B and C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Expense limitations were in effect for all classes during the periods shown in the Fund performance chart and in the “Performance of a $10,000 investment” chart. The current expenses for each class are listed on the “Fund expenses” chart. (Note that all charts and graphs referred to in the “Performance summary” section of this report are found on pages 14 through 17.) Performance would have been lower had the expense limitation not been in effect.
14
The Fund offers Class A, B, C, and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of up to 4.50%, and have an annual distribution and service fee of up to 0.25% of average daily net assets.
Class B shares may only be purchased through dividend reinvestment and certain permitted exchanges as described in the prospectus. Please see the prospectus for additional information on Class B purchase and sales charges. Class B shares have a contingent deferred sales charge that declines from 4.00% to zero depending on the period of time the shares are held.
Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. They are also subject to an annual distribution and service fee of up to 1.00% of average daily net assets.
Class B shares may only be purchased through dividend reinvestment and certain permitted exchanges as described in the prospectus. Please see the prospectus for additional information on Class B purchase and sales charges. Class B shares have a contingent deferred sales charge that declines from 4.00% to zero depending on the period of time the shares are held.
Ten-year and lifetime performance figures for Class B shares reflect conversion to Class A shares after approximately eight years.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets.
Institutional Class shares were first made available Dec. 31, 2008, and are available without sales or asset-based distribution charges only to certain eligible institutional accounts.
The “Fund performance” table and the “Performance of a $10,000 investment” graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
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. High yielding, noninvestment grade bonds (junk bonds) involve higher risk than investment grade bonds.
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 that applies to certain investors. Capital gains, if any, are taxable.
15
Performance summaries
Delaware National High-Yield Municipal Bond Fund
The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table. Delaware Investments has agreed to reimburse certain expenses and/or waive certain fees from Jan. 1, 2009, through Dec. 31, 2009. Please see the most recent prospectus for additional information on these fee waivers and/or reimbursements.
| Fund expense ratios | Class A | | Class B | | Class C | | Institutional Class |
| Total annual operating expenses | 1.04% | | 1.79% | | 1.79% | | 0.79% |
| (without fee waivers) | | | | | | | |
| Net expenses | 0.90% | | 1.65% | | 1.65% | | 0.65% |
| (including fee waivers, if any) | | | | | | | |
| Type of waiver | Contractual | | Contractual | | Contractual | | Contractual |
Performance of a $10,000 investment
Average annual total returns from Aug. 31, 1999, through Aug. 31, 2009
| For period beginning Aug. 31, 1999, through Aug. 31, 2009 | Starting value | Ending value |
| | Barclays Capital Municipal Bond Index | $10,000 | $16,924 |
| | Delaware National High-Yield
Municipal Bond Fund — Class A Shares | $9,550 | $13,864 |
The chart assumes $10,000 invested in the Fund on Aug. 31, 1999, and includes the effect of a 4.50% front-end sales charge and the reinvestment of all distributions. Please note additional details on these fees in the “Performance summary” section of this report, which includes pages 14 through 17.
The chart also assumes $10,000 invested in the Barclays Capital Municipal Bond Fund as of Aug. 31, 1999. The Barclays Capital Municipal Bond Index, formerly the Lehman Brothers Municipal Bond Index, measures the total return performance of the long-term, investment grade tax-exempt bond market.
An index is unmanaged and does not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. You cannot invest directly in an index.
16
Performance of other Fund classes will vary due to different charges and expenses.
The “Fund performance” chart and the “Performance of a $10,000 investment” graph do not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares.
Past performance does not guarantee future results.
| Stock symbols and CUSIP numbers |
| | | Nasdaq symbols | | CUSIPs | |
| Class A | | | CXHYX | | | 928928241 | |
| Class B | | | DVNYX | | | 928928233 | |
| Class C | | | DVHCX | | | 928928225 | |
| Institutional Class | | | DVHIX | | | 24610H302 | |
17
Disclosure of Fund expenses
For the period March 1, 2009 to August 31, 2009
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. These following examples are intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period March 1, 2009 to August 31, 2009.
Actual expenses
The first section of the tables shown, “Actual Fund Return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the tables shown, “Hypothetical 5% Return,” provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of each table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund’s expenses shown in the tables reflect fee waivers in effect. The expenses shown in each table assume reinvestment of all dividends and distributions.
18
Delaware Tax-Free USA Fund
Expense analysis of an investment of $1,000
| | Beginning | | Ending | | | | Expenses |
| | Account Value | | Account Value | | Annualized | | Paid During Period |
| | 3/1/09 | | 8/31/09 | | Expense Ratio | | 3/1/09 to 8/31/09* |
| Actual Fund return | | | | | | | | | | | | |
| Class A | | $1,000.00 | | | $1,075.70 | | | 0.84% | | | $4.39 | |
| Class B | | 1,000.00 | | | 1,070.60 | | | 1.60% | | | 8.35 | |
| Class C | | 1,000.00 | | | 1,070.60 | | | 1.60% | | | 8.35 | |
| Institutional Class | | 1,000.00 | | | 1,076.50 | | | 0.60% | | | 3.14 | |
| Hypothetical 5% return (5% return before expenses) | | | | | | | |
| Class A | | $1,000.00 | | | $1,020.97 | | | 0.84% | | | $4.28 | |
| Class B | | 1,000.00 | | | 1,017.14 | | | 1.60% | | | 8.13 | |
| Class C | | 1,000.00 | | | 1,017.14 | | | 1.60% | | | 8.13 | |
| Institutional Class | | 1,000.00 | | | 1,022.18 | | | 0.60% | | | 3.06 | |
Delaware Tax-Free USA Intermediate Fund
Expense analysis of an investment of $1,000
| | Beginning | | Ending | | | | Expenses |
| | Account Value | | Account Value | | Annualized | | Paid During Period |
| | 3/1/09 | | 8/31/09 | | Expense Ratio | | 3/1/09 to 8/31/09* |
| Actual Fund return | | | | | | | | | | | | |
| Class A | | $1,000.00 | | | $1,052.90 | | | 0.75% | | | $3.88 | |
| Class B | | 1,000.00 | | | 1,048.50 | | | 1.60% | | | 8.26 | |
| Class C | | 1,000.00 | | | 1,047.40 | | | 1.60% | | | 8.26 | |
| Institutional Class | | 1,000.00 | | | 1,053.30 | | | 0.60% | | | 3.11 | |
| Hypothetical 5% return (5% return before expenses) | | | | | | | |
| Class A | | $1,000.00 | | | $1,021.42 | | | 0.75% | | | $3.82 | |
| Class B | | 1,000.00 | | | 1,017.14 | | | 1.60% | | | 8.13 | |
| Class C | | 1,000.00 | | | 1,017.14 | | | 1.60% | | | 8.13 | |
| Institutional Class | | 1,000.00 | | | 1,022.18 | | | 0.60% | | | 3.06 | |
19
Disclosure of Fund expenses
Delaware National High-Yield Municipal Bond Fund
Expense analysis of an investment of $1,000
| | Beginning | | Ending | | | | Expenses |
| | Account Value | | Account Value | | Annualized | | Paid During Period |
| | 3/1/09 | | 8/31/09 | | Expense Ratio | | 3/1/09 to 8/31/09* |
| Actual Fund return | | | | | | | | | | | | |
| Class A | | $1,000.00 | | | $1,145.10 | | | 0.90% | | | $4.87 | |
| Class B | | 1,000.00 | | | 1,142.00 | | | 1.65% | | | 8.91 | |
| Class C | | 1,000.00 | | | 1,141.70 | | | 1.65% | | | 8.91 | |
| Institutional Class | | 1,000.00 | | | 1,146.10 | | | 0.65% | | | 3.52 | |
| Hypothetical 5% return (5% return before expenses) | | | | | | | |
| Class A | | $1,000.00 | | | $1,020.67 | | | 0.90% | | | $4.58 | |
| Class B | | 1,000.00 | | | 1,016.89 | | | 1.65% | | | 8.39 | |
| Class C | | 1,000.00 | | | 1,016.89 | | | 1.65% | | | 8.39 | |
| Institutional Class | | 1,000.00 | | | 1,021.93 | | | 0.65% | | | 3.31 | |
*“Expenses Paid During Period” are equal to a Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
20
| Sector allocations and credit quality breakdowns | |
| Delaware Tax-Free USA Fund | As of August 31, 2009 |
Sector designations may be different than the sector designations presented in other Fund materials.
| Sector | Percentage of net assets |
| Municipal Bonds | 98.16 | % |
| Corporate Revenue Bonds | 15.83 | % |
| Education Revenue Bonds | 6.89 | % |
| Electric Revenue Bonds | 2.13 | % |
| Escrowed to Maturity Bonds | 7.09 | % |
| Health Care Revenue Bonds | 13.12 | % |
| Housing Revenue Bonds | 1.24 | % |
| Lease Revenue Bonds | 2.44 | % |
| Local General Obligation Bonds | 5.67 | % |
| Pre-Refunded Bonds | 14.44 | % |
| Special Tax Bonds | 8.73 | % |
| State General Obligation Bonds | 5.38 | % |
| Transportation Revenue Bonds | 11.74 | % |
| Water & Sewer Revenue Bonds | 3.46 | % |
| Total Value of Securities | 98.16 | % |
| Receivables and Other Assets Net of Liabilities | 1.84 | % |
| Total Net Assets | 100.00 | % |
| | | |
| Credit quality breakdown (as a % of fixed income investments)* | | |
| AAA | 26.09 | % |
| AA | 11.86 | % |
| A | 27.31 | % |
| BBB | 23.61 | % |
| BB | 1.64 | % |
| B | 1.35 | % |
| CCC | 0.68 | % |
| Not Rated | 7.46 | % |
| Total | 100.00 | % |
*Bond ratings are determined by independent, nationally recognized statistical rating organizations.
21
| Sector allocations and credit quality breakdowns |
| Delaware Tax-Free USA Intermediate Fund | As of August 31, 2009 |
Sector designations may be different than the sector designations presented in other Fund materials.
| Sector | Percentage of net assets |
| Municipal Bonds | 98.82 | % |
| Corporate Revenue Bonds | 10.09 | % |
| Education Revenue Bonds | 4.02 | % |
| Electric Revenue Bonds | 3.16 | % |
| Escrowed to Maturity Bonds | 0.04 | % |
| Health Care Revenue Bonds | 11.30 | % |
| Housing Revenue Bonds | 1.43 | % |
| Lease Revenue Bonds | 2.54 | % |
| Local General Obligation Bonds | 8.77 | % |
| Pre-Refunded Bonds | 7.06 | % |
| Resource Recovery Bonds | 0.24 | % |
| Special Tax Bonds | 11.74 | % |
| State General Obligation Bonds | 20.40 | % |
| Transportation Revenue Bonds | 11.05 | % |
| Water & Sewer Revenue Bonds | 6.98 | % |
| Short-Term Investments | 1.24 | % |
| Total Value of Securities | 100.06 | % |
| Liabilities Net of Receivables and Other Assets | (0.06 | %) |
| Total Net Assets | 100.00 | % |
| | | |
| Credit quality breakdown (as a % of fixed income investments)* | | |
| AAA | 21.23 | % |
| AA | 31.80 | % |
| A | 26.95 | % |
| BBB | 14.61 | % |
| BB | 0.95 | % |
| B | 0.42 | % |
| CCC | 0.25 | % |
| Not Rated | 3.79 | % |
| Total | 100.00 | % |
*Bond ratings are determined by independent, nationally recognized statistical rating organizations.
22
| Delaware National High-Yield Municipal Bond Fund | As of August 31, 2009 |
Sector designations may be different than the sector designations presented in other Fund materials.
| Sector | Percentage of net assets |
| Municipal Bonds | 99.99 | % |
| Corporate Revenue Bonds | 24.03 | % |
| Education Revenue Bonds | 20.34 | % |
| Health Care Revenue Bonds | 26.39 | % |
| Housing Revenue Bonds | 1.29 | % |
| Lease Revenue Bonds | 2.13 | % |
| Pre-Refunded Bonds | 3.67 | % |
| Special Tax Bonds | 13.19 | % |
| State General Obligation Bonds | 2.03 | % |
| Transportation Revenue Bonds | 6.92 | % |
| Short-Term Investment | 0.38 | % |
| Total Value of Securities | 100.37 | % |
| Liabilities Net of Receivables and Other Assets | (0.37 | %) |
| Total Net Assets | 100.00 | % |
| | | |
| Credit quality breakdown (as a % of fixed income investments)* | | |
| AAA | 3.60 | % |
| AA | 1.28 | % |
| A | 17.77 | % |
| BBB | 40.22 | % |
| BB | 7.93 | % |
| B | 4.82 | % |
| CCC | 0.57 | % |
| Not Rated | 23.81 | % |
| Total | 100.00 | % |
*Bond ratings are determined by independent, nationally recognized statistical rating organizations.
23
| Statements of net assets |
| Delaware Tax-Free USA Fund | August 31, 2009 |
| | Principal amount | | Value |
| Municipal Bonds – 98.16% | | | | | | | |
| Corporate Revenue Bonds – 15.83% | | | | | | | |
| | Alliance Airport Authority, Texas Special Facilities | | | | | | | |
| Revenue (American Airlines Project) Series B | | | | | | | |
| 5.25% 12/1/29 (AMT) | | $ | 2,250,000 | | | $ | 942,413 |
| · | Brazos, Texas Harbor Industrial Development | | | | | | | |
| Environmental Facilities Revenue | | | | | | | |
| (Dow Chemical Co. Project) 5.90% 5/1/38 (AMT) | | | 1,940,000 | | | | 1,805,480 |
| Brazos, Texas River Authority Pollution Control Revenue | | | | | | | |
| | (Texas Utilities) 5.40% 5/1/29 (AMT) | | | 3,000,000 | | | | 1,271,310 |
| (TXU Energy Co. Project) Series B 6.30% 7/1/32 (AMT) | | | 3,500,000 | | | | 1,551,760 |
| Buckeye, Ohio Tobacco Settlement Financing Authority | | | | | | | |
| Asset-Backed Series A-2 | | | | | | | |
| 5.875% 6/1/47 | | | 8,040,000 | | | | 5,930,384 |
| 6.50% 6/1/47 | | | 3,670,000 | | | | 2,959,268 |
| Cloquet, Minnesota Pollution Control Revenue | | | | | | | |
| (Potlatch Corp. Project) 5.90% 10/1/26 | | | 1,695,000 | | | | 1,225,790 |
| Golden State, California Tobacco Securitization | | | | | | | |
| Corporation Settlement Revenue Refunding | | | | | | | |
| Asset-Backed Senior Series A-1 | | | 1,530,000 | | | | 1,073,984 |
| 5.125% 6/1/47 | | | | | | | |
| 5.75% 6/1/47 | | | 2,150,000 | | | | 1,677,022 |
| Hawaii State Department Budget & Finance Special | | | | | | | |
| Purpose Revenue (Hawaiian Electric Co. Subsidiary) | | | | | | | |
| 6.50% 7/1/39 | | | 5,350,000 | | | | 5,610,759 |
| Indianapolis, Indiana Airport Authority Revenue Special | | | | | | | |
| Facilities (Federal Express Corp. Project) | | | | | | | |
| 5.10% 1/15/17 (AMT) | | | 2,750,000 | | | | 2,533,905 |
| Series 1998 5.50% 5/1/29 (AMT) | | | 2,000,000 | | | | 1,536,840 |
| Iowa Finance Authority Pollution Control Facility Revenue | | | | | | | |
| (Interstate Power) 5.00% 7/1/14 (FGIC) | | | 3,640,000 | | | | 3,819,561 |
| Mason County, West Virginia Pollution Control Revenue | | | | | | | |
| (Appalachian Power Co. Project) Series K | | | | | | | |
| 6.05% 12/1/24 (AMBAC) | | | 3,000,000 | | | | 3,012,090 |
| Michigan Tobacco Settlement Finance Authority | | | | | | | |
| Asset-Backed Series A 6.00% 6/1/48 | | | 4,445,000 | | | | 3,424,161 |
| Mississippi Business Finance Corporation Pollution Control | | | | | | | |
| Revenue (System Energy Resources, Inc. Project) | | | | | | | |
| 5.90% 5/1/22 | | | 3,000,000 | | | | 2,817,600 |
24
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | |
| Corporate Revenue Bonds (continued) | | | |
| · | Mobile, Alabama Industrial Development Board | | | |
| Pollution Control Revenue (Alabama Power Co.) | | | | | | |
| Series B 4.875% 6/1/34 | | $ | 4,750,000 | | | $ | 5,011,013 |
| | M-S-R Energy Authority, California Gas Revenue Series A | | | | | | | |
| 6.125% 11/1/29 | | | 1,915,000 | | | | 1,909,312 |
| 6.50% 11/1/39 | | | 3,915,000 | | | | 3,946,398 |
| Nassau County, New York Tobacco Settlement | | | | | | | |
| Asset-Backed Series A-3 5.125% 6/1/46 | | | 2,215,000 | | | | 1,626,032 |
| New Jersey Economic Development Authority Special | | | | | | | |
| Facility Revenue (Continental Airlines Inc. Project) | | | | | | | |
| 6.25% 9/15/29 (AMT) | | | 2,000,000 | | | | 1,611,840 |
| Ohio State Air Quality Development Authority Revenue | | | | | | | |
| Environmental Improvement (First Energy Generation) | | | | | | | |
| Series A 5.70% 8/1/20 | | | 4,750,000 | | | | 4,909,695 |
| Pennsylvania Economic Development Financing Authority | | | | | | | |
| Exempt Facilities Revenue (Allegheny Energy Supply Co.) | | | | | | | |
| 7.00% 7/15/39 | | | 6,340,000 | | | | 6,562,978 |
| Petersburg, Indiana Pollution Control Revenue | | | | | | | |
| (Indianapolis Power & Light Co. Project) | | | | | | | |
| 6.375% 11/1/29 (AMT) | | | 5,000,000 | | | | 4,705,500 |
| Phenix City, Alabama Industrial Development Board | | | | | | | |
| Environmental Improvement Revenue | | | | | | | |
| (Mead Westvaco Corp. Project) | | | | | | | |
| Series A 6.35% 5/15/35 (AMT) | | | 3,000,000 | | | | 2,396,430 |
| Richmond County, Georgia Development Authority | | | | | | | |
| Environmental Improvement Revenue (International | | | | | | | |
| Paper Co.) Series B 5.95% 11/15/25 (AMT) | | | 5,000,000 | | | | 4,497,550 |
| Salt Verde Financial Corporation, Arizona Senior Gas | | | | | | | |
| Revenue 5.00% 12/1/37 | | | 5,500,000 | | | | 4,611,860 |
| South Carolina Jobs Economic Development Authority | | | | | | | |
| Industrial Revenue (South Carolina Electric & Gas Co. | | | | | | | |
| Project) Series B 5.45% 11/1/32 (AMBAC) (AMT) | | | 500,000 | | | | 471,735 |
| Sugar Creek, Missouri Industrial Development Revenue | | | | | | | |
| (Lafarge North America Project) Series A | | | | | | | |
| 5.65% 6/1/37 (AMT) | | | 500,000 | | | | 382,160 |
| Sweetwater County, Wyoming Solid Waste Disposal | | | | | | | |
| Revenue (FMC Corp. Project) 5.60% 12/1/35 (AMT) | | | 3,250,000 | | | | 2,855,905 |
25
Statements of net assets
Delaware Tax-Free USA Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Corporate Revenue Bonds (continued) | | | | | | | |
| Tobacco Settlement Financing Corporation, Virginia Senior | | | | | | | |
| WConvertible Series B-2 5.20% 6/1/46 | | $ | 2,500,000 | | | $ | 1,350,050 |
| Series B-1 5.00% 6/1/47 | | | 2,020,000 | | | | 1,414,364 |
| | | | | | | | 89,455,149 |
| Education Revenue Bonds – 6.89% | | | | | | | |
| Amherst, New York Industrial Development Agency Civic | | | | | | | |
| Facilities Revenue (UBF Faculty Student Housing) | | | | | | | |
| Series A 5.75% 8/1/30 (AMBAC) | | | 1,300,000 | | | | 1,325,740 |
| Broward County, Florida Educational Facilities Authority | | | | | | | |
| Revenue (Nova Southeastern Project) | | | | | | | |
| 5.25% 4/1/27 (RADIAN) | | | 1,000,000 | | | | 903,050 |
| California Statewide Communities Development Authority | | | | | | | |
| Student Housing Revenue (East Campus Apartments, LLC) | | | | | | | |
| Series A 5.625% 8/1/34 (ACA) | | | 3,400,000 | | | | 3,027,428 |
| Gainesville, Georgia Redevelopment Authority Educational | | | | | | | |
| Facilities Revenue (Riverside Military Academy Project) | | | | | | | |
| 5.125% 3/1/37 | | | 3,735,000 | | | | 2,238,498 |
| Marietta, Georgia Development Authority Revenue | | | | | | | |
| (Life University Income Project) 7.00% 6/15/39 | | | 4,200,000 | | | | 3,506,538 |
| Massachusetts State Health & Educational Facilities | | | | | | | |
| Authority Revenue | | | | | | | |
| (Harvard University) Series A 5.50% 11/15/36 | | | 4,515,000 | | | | 4,980,767 |
| (Nichols College Project) Series C 6.125% 10/1/29 | | | 4,350,000 | | | | 3,780,455 |
| Missouri State Health & Educational Facilities Authority | | | | | | | |
| Educational Facilities Revenue (Washington University) | | | | | | | |
| Series A 5.375% 3/15/39 | | | 5,000,000 | | | | 5,388,049 |
| New Hampshire Higher Educational & Health Facilities | | | | | | | |
| Authority Revenue (New Hampton School Issue) | | | | | | | |
| 5.375% 10/1/28 | | | 3,070,000 | | | | 2,370,900 |
| New Jersey State Educational Facilities Authority Revenue | | | | | | | |
| (University of Medical & Dentistry) Series B | | | | | | | |
| 7.50% 12/1/32 | | | 1,435,000 | | | | 1,586,378 |
| ^ | Oregon Health & Science University Revenue (Capital | | | | | | | |
| Appreciation Insured) Series A 5.50% 7/1/21 (NATL-RE) | | | 2,000,000 | | | | 1,034,420 |
| Provo, Utah Charter School Revenue (Freedom Academy | | | | | | | |
| Foundation Project) 5.50% 6/15/37 | | | 1,750,000 | | | | 1,220,310 |
26
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Education Revenue Bonds (continued) | | | | | | | |
| Saint Louis, Missouri Industrial Development Authority | | | | | | | |
| Revenue (Confluence Academy Project) Series A | | | | | | | |
| | 5.25% 6/15/25 | | $ | 1,150,000 | | | $ | 844,687 |
| 5.35% 6/15/32 | | | 2,300,000 | | | | 1,570,900 |
| Texas A & M University Revenue Financing System | | | | | | | |
| 5.00% 5/15/17 | | | 4,060,000 | | | | 4,698,800 |
| University of the Virgin Islands Series A 5.375% 6/1/34 | | | 500,000 | | | | 442,350 |
| | | | | | | | 38,919,270 |
| Electric Revenue Bonds – 2.13% | | | | | | | |
| Chelan County, Washington Public Utilities District #001 | | | | | | | |
| Consolidated Revenue (Chelan Hydro System) | | | | | | | |
| Series A 5.45% 7/1/37 (AMBAC) (AMT) | | | 5,000,000 | | | | 4,655,150 |
| Missouri State Environmental Improvement & Energy | | | | | | | |
| Resource Authority Pollution Control Revenue Refunding | | | | | | | |
| (St. Joseph Light & Power Company Project) | | | | | | | |
| 5.85% 2/1/13 (AMBAC) | | | 2,200,000 | | | | 2,202,926 |
| Puerto Rico Electric Power Authority Power Revenue | | | | | | | |
| Series PP 5.00% 7/1/25 (NATL-RE) (FGIC) | | | 1,000,000 | | | | 1,000,780 |
| Series TT 5.00% 7/1/37 | | | 1,105,000 | | | | 1,034,103 |
| Series WW 5.50% 7/1/38 | | | 2,100,000 | | | | 2,104,200 |
| Sikeston, Missouri Electric Revenue Refunding | | | | | | | |
| 6.00% 6/1/13 (NATL-RE) | | | 1,000,000 | | | | 1,062,170 |
| | | | | | | | 12,059,329 |
| Escrowed to Maturity Bonds – 7.09% | | | | | | | |
| Cape Girardeau County, Missouri Industrial Development | | | | | | | |
| Authority Health Care Facilities Revenue (Southeast | | | | | | | |
| Missouri Hospital) 5.25% 6/1/16 (NATL-RE) | | | 440,000 | | | | 495,713 |
| ^ | Greene County, Missouri Single Family Mortgage Revenue | | | | | | | |
| Municipal Multiplier (Private Mortgage Insurance) | | | | | | | |
| 6.10% 3/1/16 | | | 1,225,000 | | | | 1,013,259 |
| Louisiana Public Facilities Authority Hospital Revenue | | | | | | | |
| (Southern Baptist Hospital, Inc. Project) | | | | | | | |
| 8.00% 5/15/12 | | | 2,715,000 | | | | 3,010,338 |
| New Jersey State Highway Authority Garden State Parkway | | | | | | | |
| General Revenue (Senior Parkway) | | | | | | | |
| 5.50% 1/1/14 (FGIC) | | | 5,000,000 | | | | 5,773,400 |
| 5.50% 1/1/15 (FGIC) | | | 7,310,000 | | | | 8,595,975 |
| 5.50% 1/1/16 (FGIC) | | | 1,000,000 | | | | 1,193,090 |
27
Statements of net assets
Delaware Tax-Free USA Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Escrowed to Maturity Bonds (continued) | | | | | | | |
| Oklahoma State Turnpike Authority Revenue | | | | | | | |
| (First Senior) 6.00% 1/1/22 | | $ | 13,535,000 | | | $ | 17,220,078 |
| Virgin Islands Public Finance Authority Revenue | | | | | | | |
| Series A 7.30% 10/1/18 | | | 2,200,000 | | | | 2,762,804 |
| | | | | | | | 40,064,657 |
| Health Care Revenue Bonds – 13.12% | | | | | | | |
| Allegheny County, Pennsylvania Hospital Development | | | | | | | |
| Authority Revenue (University of Pittsburgh Medical | | | | | | | |
| Center) Series A 5.00% 9/1/14 | | | 5,575,000 | | | | 6,154,521 |
| Arizona Health Facilities Authority Revenue (Banner Health) | | | | | | | |
| Series D 5.375% 1/1/32 | | | 2,500,000 | | | | 2,502,300 |
| Brevard County, Florida Health Facilities Authority Health | | | | | | | |
| Care Facilities Revenue (Heath First Inc. Project) | | | | | | | |
| Series B 7.00% 4/1/39 | | | 1,610,000 | | | | 1,679,455 |
| Butler County, Pennsylvania Hospital Authority Revenue | | | | | | | |
| (Butler Health System Project) 7.125% 7/1/29 | | | 2,250,000 | | | | 2,432,250 |
| Cape Girardeau County, Missouri Industrial Development | | | | | | | |
| Authority Health Care Facilities Revenue Unrefunded | | | | | | | |
| Balance (St. Francis Medical Center) Series A | | | | | | | |
| 5.50% 6/1/32 | | | 1,000,000 | | | | 1,003,260 |
| Chatham County, Georgia Hospital Authority Revenue | | | | | | | |
| | (Memorial Health Medical Center) Series A | | | | | | | |
| 6.125% 1/1/24 | | | 1,805,000 | | | | 1,664,084 |
| @ | Cleveland-Cuyahoga County, Ohio Port Authority Revenue | | | | | | | |
| Senior Housing (St. Clarence - Geac) Series A | | | | | | | |
| 6.25% 5/1/38 | | | 1,500,000 | | | | 1,007,235 |
| Colorado Health Facilities Authority Revenue | | | | | | | |
| (Evangelical Lutheran) Series A 5.25% 6/1/34 | | | 4,275,000 | | | | 3,899,783 |
| Cuyahoga County, Ohio Revenue (Cleveland Clinic Health | | | | | | | |
| Systems) Series A 5.50% 1/1/29 | | | 4,000,000 | | | | 4,142,000 |
| Escambia County, Florida Health Facilities Authority Health | | | | | | | |
| Care Facilities Loan (VHA Program) | | | | | | | |
| 5.95% 7/1/20 (AMBAC) | | | 465,000 | | | | 477,741 |
| Fairfax County, Virginia Industrial Development | | | | | | | |
| Authority Revenue (Inova Health System) Series A | | | | | | | |
| 5.50% 5/15/35 | | | 2,500,000 | | | | 2,602,800 |
28
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Health Care Revenue Bonds (continued) | | | | | | | |
| Gainesville & Hall County, Georgia Development Authority | | | | | | | |
| Revenue Senior Living Facilities (Lanier Village Estates | | | | | | | |
| Project) Series C 7.25% 11/15/29 | | $ | 1,000,000 | | | $ | 1,012,390 |
| Illinois Finance Authority Revenue (Silver Cross & Medical | | | | | | | |
| Centers) 7.00% 8/15/44 | | | 5,500,000 | | | | 5,578,375 |
| Illinois Health Facilities Authority Revenue (Elmhurst | | | | | | | |
| | Memorial Healthcare Project) 5.625% 1/1/28 | | | 2,000,000 | | | | 1,819,880 |
| Indian River County, Florida Hospital District Revenue | | | | | | | |
| Refunding 6.10% 10/1/18 (FSA) | | | 3,000,000 | | | | 3,003,450 |
| Lucas County, Ohio Health Care Facility Revenue | | | | | | | |
| (Sunset Retirement Communities) | | | | | | | |
| Series A 6.625% 8/15/30 | | | 2,000,000 | | | | 2,001,180 |
| Maricopa County, Arizona Industrial Development | | | | | | | |
| Authority Health Facilities Revenue | | | | | | | |
| (Catholic Healthcare West) Series A 6.00% 7/1/39 | | | 3,690,000 | | | | 3,714,133 |
| Michigan State Hospital Finance Authority Revenue | | | | | | | |
| (Ascension Health Credit Group) Series B | | | | | | | |
| 5.25% 11/15/26 | | | 3,500,000 | | | | 3,596,635 |
| (Trinity Health Credit) Series C 5.375% 12/1/30 | | | 6,000,000 | | | | 6,007,440 |
| Montgomery County, Pennsylvania Industrial Development | | | | | | | |
| Authority Retirement Community Revenue (Acts | | | | | | | |
| Retirement Communities) Series A 4.50% 11/15/36 | | | 2,000,000 | | | | 1,506,820 |
| New York State Dormitory Authority Revenue Non State | | | | | | | |
| Supported Debt | | | | | | | |
| (North Shore LI Jewish Health System) Series A 5.50% 5/1/37 | | | 3,500,000 | | | | 3,465,350 |
| (Orange Regional Medical Center) 6.50% 12/1/21 | | | 2,745,000 | | | | 2,540,552 |
| North Carolina Medical Care Commission Health Care | | | | | | | |
| Facilities Revenue (First Mortgage - Presbyterian Homes) | | | | | | | |
| 5.40% 10/1/27 | | | 3,260,000 | | | | 2,766,371 |
| Ohio State Higher Educational Facility Community Revenue | | | | | | | |
| (Cleveland Clinic Health System Obligation Group) | | | | | | | |
| Series A 5.25% 1/1/33 | | | 2,000,000 | | | | 2,045,900 |
| Oregon Health Sciences University Revenue | | | | | | | |
| Series A 5.75% 7/1/39 | | | 3,700,000 | | | | 3,823,173 |
| Puerto Rico Industrial, Tourist, Educational, Medical & | | | | | | | |
| Environmental Control Facilities Revenue (Hospital Auxilio | | | | | | | |
| Mutuo Obligated Group) Series A 6.25% 7/1/24 (NATL-RE) | | | 1,200,000 | | | | 1,200,516 |
29
Statements of net assets
Delaware Tax-Free USA Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Health Care Revenue Bonds (continued) | | | | | | | |
| Tallahassee, Florida Health Facilities Revenue | | | | | | | |
| (Tallahassee Memorial Regional Medical Center) | | | | | | | |
| Series B 6.00% 12/1/15 (NATL-RE) | | $ | 2,500,000 | | | $ | 2,502,725 |
| | | | | | | | 74,150,319 |
| Housing Revenue Bonds – 1.24% | | | | | | | |
| Florida Housing Finance Agency | | | | | | | |
| (Landings at Sea Forest Apartments) Series T | | | | | | | |
| 5.85% 12/1/18 (AMBAC) (FHA) (AMT) | | | 310,000 | | | | 310,155 |
| 6.05% 12/1/36 (AMBAC) (FHA) (AMT) | | | 700,000 | | | | 699,937 |
| (Spinnaker Cove Apartments) Series G 6.50% 7/1/36 | | | | | | | |
| (AMBAC) (FHA) (AMT) | | | 500,000 | | | | 500,135 |
| Milwaukee, Wisconsin Redevelopment Authority | | | | | | | |
| Multifamily Revenue (City Hall Square) | | | | | | | |
| 6.30% 8/1/38 (FHA) (AMT) | | | 1,455,000 | | | | 1,459,453 |
| Missouri State Housing Development Commission | | | | | | | |
| Mortgage Revenue Single Family Homeowner | | | | | | | |
| Loan A 5.20% 9/1/33 (GNMA) (FNMA) (AMT) | | | 210,000 | | | | 206,327 |
| Missouri State Housing Development Commission | | | | | | | |
| Multifamily Housing Revenue | | | | | | | |
| (Hyder) Series 3 5.60% 7/1/34 (FHA) (AMT) | | | 1,435,000 | | | | 1,442,232 |
| (San Remo) Series 5 5.45% 1/1/36 (FHA) (AMT) | | | 500,000 | | | | 497,190 |
| New Mexico Mortgage Finance Authority Revenue | | | | | | | |
| Series B Class III 6.75% 7/1/25 (GNMA) (FNMA) | | | 105,000 | | | | 108,527 |
| Series E 6.95% 1/1/26 (GNMA) (AMT) | | | 120,000 | | | | 122,876 |
| Orange County, Florida Housing Finance Authority | | | | | | | |
| Homeowner Revenue Series B 5.25% 3/1/33 | | | | | | | |
| (GNMA) (FNMA) (AMT) | | | 135,000 | | | | 133,562 |
| Oregon Health, Housing, Educational, & Cultural Facilities | | | | | | | |
| Authority Revenue (Pier Park Project) | | | | | | | |
| Series A 6.05% 4/1/18 (GNMA) (AMT) | | | 890,000 | | | | 891,050 |
| Santa Fe, New Mexico Single Family Mortgage Revenue | | | | | | | |
| Series B -1 6.20% 11/1/16 (GNMA) (FNMA) (AMT) | | | 135,000 | | | | 135,153 |
| Volusia County, Florida Multifamily Housing Finance | | | | | | | |
| Authority (San Marco Apartments) Series A | | | | | | | |
| 5.60% 1/1/44 (FSA) (AMT) | | | 500,000 | | | | 500,085 |
| | | | | | | | 7,006,682 |
30
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Lease Revenue Bonds – 2.44% | | | | | | | |
| Atlanta, Georgia Development Authority Educational | | | | | | | |
| Facilities Revenue (Panther Place - Georgia State | | | | | | | |
| Campus) Series A 4.75% 7/1/32 (ASSURED GTY) | | $ | 1,520,000 | | | $ | 1,523,466 |
| Golden State Tobacco Securitization Corporation | | | | | | | |
| Settlement Revenue Enhanced Asset-Backed | | | | | | | |
| Series A 5.00% 6/1/45 | | | 3,450,000 | | | | 2,975,590 |
| Loudoun County, Virginia Industrial Development Authority | | | | | | | |
| | Public Safety Facility Lease Revenue Series A | | | | | | | |
| 5.25% 12/15/23 (FSA) | | | 700,000 | | | | 755,146 |
| Missouri State Development Finance Board | | | | | | | |
| Infrastructure Facilities Revenue | | | | | | | |
| (Branson Landing Project) Series A | | | | | | | |
| 5.25% 12/1/19 | | | 1,435,000 | | | | 1,413,662 |
| 5.625% 12/1/28 | | | 2,430,000 | | | | 2,307,940 |
| (Sewer System Improvement Project) Series C | | | | | | | |
| 5.00% 3/1/25 | | | 605,000 | | | | 600,493 |
| (Triumph Foods Project) Series A 5.25% 3/1/25 | | | 500,000 | | | | 502,090 |
| Puerto Rico Commonwealth Industrial Development | | | | | | | |
| Company General Purpose Revenue Series B | | | | | | | |
| 5.375% 7/1/16 | | | 1,000,000 | | | | 1,000,270 |
| Puerto Rico Public Buildings Authority Revenue | | | | | | | |
| (Guaranteed Government Facilities) | | | | | | | |
| Series F 5.25% 7/1/25 | | | 930,000 | | | | 857,479 |
| St. Charles County, Missouri Public Water Supply | | | | | | | |
| District #2 Certificates of Participation (Missouri Project) | | | | | | | |
| Series B 5.10% 12/1/25 (NATL-RE) | | | 500,000 | | | | 490,220 |
| ^ | St. Louis, Missouri Industrial Development Authority | | | | | | | |
| Leasehold Revenue (Convention Center Hotel) | | | | | | | |
| 5.80% 7/15/20 (AMBAC) | | | 3,035,000 | | | | 1,376,676 |
| | | | | | | | 13,803,032 |
| Local General Obligation Bonds – 5.67% | | | | | | | |
| Boerne, Texas Independent School District Building | | | | | | | |
| 5.25% 2/1/27 (PSF) | | | 4,000,000 | | | | 4,169,720 |
| Desert, California Community College District Election 2004 | | | | | | | |
| Series C 5.00% 8/1/37 (FSA) | | | 4,785,000 | | | | 4,812,753 |
| Los Angeles, California Unified School District Election of 2005 | | | | | | | |
| Series F 5.00% 1/1/34 | | | 6,180,000 | | | | 6,236,979 |
31
Statements of net assets
Delaware Tax-Free USA Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Local General Obligation Bonds (continued) | | | | | | | |
| Melrose Park, Illinois Tax Increment Series B | | | | | | | |
| 6.00% 12/15/19 (FSA) | | $ | 1,250,000 | | | $ | 1,311,038 |
| New York City, New York | | | | | | | |
| Series I 5.125% 3/1/23 | | | 5,875,000 | | | | 6,067,582 |
| Series I-1 5.375% 4/1/36 | | | 5,000,000 | | | | 5,273,600 |
| Series J 5.25% 6/1/28 | | | 2,055,000 | | | | 2,111,780 |
| Powell, Ohio 5.50% 12/1/32 (NATL-RE) | | | 2,000,000 | | | | 2,068,380 |
| | | | | | | | 32,051,832 |
| §Pre-Refunded Bonds – 14.44% | | | | | | | |
| Alexandria, Virginia Industrial Development Authority | | | | | | | |
| Revenue (Institute for Defense Analyses) | | | | | | | |
| Series A 5.90% 10/1/30-10 (AMBAC) | | | 6,000,000 | | | | 6,413,700 |
| Deschutes County, Oregon Hospital Facilities Authority | | | | | | | |
| Hospital Revenue (Cascade Health Services) | | | | | | | |
| 5.60% 1/1/32-12 | | | 1,250,000 | | | | 1,378,750 |
| Duluth, Minnesota Economic Development Authority | | | | | | | |
| Health Care Facilities Revenue (Benedictine Health | | | | | | | |
| System - St. Mary’s Hospital) 5.25% 2/15/33-14 | | | 4,000,000 | | | | 4,561,200 |
| Florida State Board of Education (Lottery Revenue) | | | | | | | |
| Series A 6.00% 7/1/14-10 (FGIC) | | | 1,000,000 | | | | 1,057,330 |
| Golden State, California Tobacco Securitization | | | | | | | |
| Corporation Settlement Revenue Series B | | | | | | | |
| 5.625% 6/1/38-13 | | | 7,500,000 | | | | 8,504,025 |
| Henrico County, Virginia Economic Development | | | | | | | |
| Authority Revenue (Bon Secours Health System) | | | | | | | |
| Series A 5.60% 11/15/30-11 | | | 130,000 | | | | 147,844 |
| Highlands County, Florida Health Facilities Authority | | | | | | | |
| (Adventist Health System/Sunbelt) Series A | | | | | | | |
| 6.00% 11/15/31-11 | | | 1,500,000 | | | | 1,673,805 |
| Illinois Educational Facilities Authority Student Housing | | | | | | | |
| Revenue (Educational Advancement Fund - University | | | | | | | |
| Center Project) 6.25% 5/1/30-12 | | | 5,000,000 | | | | 5,728,350 |
| Jackson, Ohio Local School District (Stark & Summit | | | | | | | |
| Counties) School Facilities Construction & Improvement | | | | | | | |
| 5.625% 12/1/25-10 (FSA) | | | 1,000,000 | | | | 1,063,490 |
| Jackson, Oregon School District #6 Central Point | | | | | | | |
| 5.25% 6/15/20-10 (FGIC) | | | 1,175,000 | | | | 1,220,449 |
32
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| §Pre-Refunded Bonds (continued) | | | | | | | |
| Lee County, Florida Airport Revenue Series B | | | | | | | |
| 5.75% 10/1/33-10 (FSA) | | $ | 3,000,000 | | | $ | 3,202,680 |
| | Linn County, Oregon Community School District #9 Lebanon | | | | | | | |
| 5.60% 6/15/30-13 (FGIC) | | | 2,000,000 | | | | 2,307,280 |
| Maryland State Economic Development Corporation, | | | | | | | |
| Student Housing Revenue (University of Maryland College | | | | | | | |
| Park Project) 5.625% 6/1/35-13 | | | 1,125,000 | | | | 1,297,800 |
| Miami-Dade County, Florida Educational Facilities | | | | | | | |
| Authority (University of Miami) Series A | | | | | | | |
| 5.75% 4/1/29-10 (AMBAC) | | | 2,000,000 | | | | 2,083,020 |
| Milledgeville-Baldwin County, Georgia Development | | | | | | | |
| Authority Revenue (Georgia College & State University | | | | | | | |
| Foundation Student Housing Project) 6.00% 9/1/33-14 | | | 1,000,000 | | | | 1,207,940 |
| New Jersey State Educational Facilities Authority Revenue | | | | | | | |
| (Stevens Institute of Technology) Series B | | | | | | | |
| 5.25% 7/1/24-14 | | | 2,085,000 | | | | 2,409,697 |
| New York City, New York Series J 5.25% 6/1/28-13 | | | 2,895,000 | | | | 3,303,571 |
| North Carolina Medical Care Commission Hospital Revenue | | | | | | | |
| (Northeast Medical Center Project) | | | | | | | |
| 5.125% 11/1/34-14 | | | 1,250,000 | | | | 1,448,863 |
| Osceola County, Florida School Board Certificates of | | | | | | | |
| Participation Series A 5.25% 6/1/27-12 (AMBAC) | | | 4,000,000 | | | | 4,446,920 |
| Payne County, Oklahoma Economic Development | | | | | | | |
| Authority Student Housing Revenue (Collegiate | | | | | | | |
| Housing Foundation - Oklahoma State University) | | | | | | | |
| Series A 6.375% 6/1/30-11 | | | 4,000,000 | | | | 4,383,840 |
| Puerto Rico Commonwealth Highway & Transportation | | | | | | | |
| Authority Revenue Series G 5.00% 7/1/42-13 | | | 525,000 | | | | 596,447 |
| Puerto Rico Electric Power Authority Revenue | | | | | | | |
| Series II 5.25% 7/1/31-12 | | | 6,000,000 | | | | 6,766,140 |
| Series NN 5.125% 7/1/29-13 | | | 1,105,000 | | | | 1,260,529 |
| Puerto Rico Public Buildings Authority Revenue | | | | | | | |
| (Guaranteed Government Facilities) Series I | | | | | | | |
| 5.25% 7/1/33-14 | | | 175,000 | | | | 199,213 |
| Richmond, Virginia Public Utilities Revenue | | | | | | | |
| 5.00% 1/15/27-12 (FSA) | | | 10,000,000 | | | | 10,935,299 |
33
Statements of net assets
Delaware Tax-Free USA Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| §Pre-Refunded Bonds (continued) | | | | | | | |
| St. Louis, Missouri Airport Revenue (Capital Improvement | | | | | | | |
| Project) Series A 5.375% 7/1/21-12 (NATL-RE) | | $ | 1,635,000 | | | $ | 1,821,897 |
| Vancouver, Washington Limited Tax | | | | | | | |
| 5.50% 12/1/25-10 (AMBAC) | | | 1,250,000 | | | | 1,327,413 |
| Wisconsin Housing & Economic Developing Authority | | | | | | | |
| Revenue 6.10% 6/1/21-17 (FHA) | | | 690,000 | | | | 832,209 |
| | | | | | | | 81,579,701 |
| Special Tax Bonds – 8.73% | | | | | | | |
| @ | Belleville, Illinois Tax Increment Revenue | | | | | | | |
| | (Frank Scott Parkway) Series A 5.70% 5/1/36 | | | 1,350,000 | | | | 874,895 |
| Florida Enterprise Community Development District Special | | | | | | | |
| Assessment 6.10% 5/1/16 (NATL-RE) | | | 695,000 | | | | 697,453 |
| Henderson, Nevada Local Improvement Districts #T-18 | | | | | | | |
| 5.30% 9/1/35 | | | 2,315,000 | | | | 837,336 |
| Hollywood, Florida Community Redevelopment Agency | | | | | | | |
| Revenue (Beach CRA) 5.625% 3/1/24 | | | 1,200,000 | | | | 1,091,868 |
| Jacksonville, Florida Excise Taxes Revenue Series B | | | | | | | |
| 5.00% 10/1/26 (AMBAC) | | | 1,000,000 | | | | 1,009,050 |
| Lammersville, California School District Community | | | | | | | |
| Facilities District #2002 (Mountain House) | | | | | | | |
| 5.125% 9/1/35 | | | 4,125,000 | | | | 2,774,434 |
| Middlesex County, New Jersey Improvement Authority | | | | | | | |
| Senior Revenue (Heldrich Center Hotel/Conference | | | | | | | |
| Project) Series A | | | | | | | |
| 5.00% 1/1/32 | | | 1,500,000 | | | | 762,195 |
| 5.125% 1/1/37 | | | 1,500,000 | | | | 762,285 |
| Missouri State Development Finance Board Infrastructure | | | | | | | |
| Facilities Revenue (Crackerneck Creek Project) | | | | | | | |
| Series C 5.00% 3/1/26 | | | 500,000 | | | | 496,670 |
| New Jersey Economic Development Authority (Cigarette Tax) | | | | | | | |
| 5.50% 6/15/31 | | | 1,000,000 | | | | 894,910 |
| 5.75% 6/15/34 | | | 1,935,000 | | | | 1,772,770 |
| New York City, New York Transitional Finance Authority | | | | | | | |
| Series D 5.00% 2/1/31 | | | 5,000,000 | | | | 5,087,650 |
| New York Sales Tax Asset Receivables | | | | | | | |
| Series A 5.25% 10/15/27 (AMBAC) | | | 1,000,000 | | | | 1,087,190 |
34
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Special Tax Bonds (continued) | | | | | | | |
| New York State Dormitory Authority State | | | | | | | |
| Personal Income Tax Revenue | | | | | | | |
| Series A 5.00% 3/15/38 | | $ | 4,545,000 | | | $ | 4,652,262 |
| Series B 5.25% 3/15/38 | | | 6,000,000 | | | | 6,265,319 |
| Puerto Rico Sales Tax Financing Corporation | | | | | | | |
| Sales Tax Revenue | | | | | | | |
| W(Capital Appreciation) Series A 6.75% 8/1/32 | | | 10,780,000 | | | | 7,545,999 |
| ·Series A 5.00% 8/1/39 | | | 5,500,000 | | | | 5,629,910 |
| Series A 5.75% 8/1/37 | | | 5,905,000 | | | | 6,070,931 |
| Tampa, Florida Sports Authority Revenue | | | | | | | |
| Sales Tax (Tampa Bay Arena Project) 5.75% 10/1/20 | | | | | | | |
| (NATL-RE) | | | 1,000,000 | | | | 1,036,030 |
| | | | | | | | 49,349,157 |
| State General Obligation Bonds – 5.38% | | | | | | | |
| California State | | | | | | | |
| 6.00% 4/1/38 | | | 4,060,000 | | | | 4,296,211 |
| 6.50% 4/1/33 | | | 2,570,000 | | | | 2,850,233 |
| Guam Government Series A 7.00% 11/15/39 | | | 4,295,000 | | | | 4,330,176 |
| Maryland State & Local Facilities Land Capital | | | | | | | |
| Improvement Second Series 5.00% 8/1/16 | | | 4,000,000 | | | | 4,686,320 |
| New York State Series A 5.00% 2/15/39 | | | 1,450,000 | | | | 1,495,153 |
| Puerto Rico Commonwealth Public Improvement Series A | | | | | | | |
| 5.125% 7/1/31 | | | 7,880,000 | | | | 7,153,070 |
| | 5.25% 7/1/23 | | | 500,000 | | | | 490,335 |
| 5.50% 7/1/19 (NATL-RE) | | | 5,000,000 | | | | 5,090,800 |
| | | | | | | | 30,392,298 |
| Transportation Revenue Bonds – 11.74% | | | | | | | |
| Bay Area, California Toll Authority Bridge Authority | | | | | | | |
| Revenue (San Francisco Bay Area) Series F-1 | | | | | | | |
| 5.625% 4/1/44 | | | 4,265,000 | | | | 4,536,595 |
| Branson, Missouri Regional Airport Transportation | | | | | | | |
| Development District Revenue (Branson Airport Project) | | | | | | | |
| Series B 6.00% 7/1/37 (AMT) | | | 1,500,000 | | | | 980,970 |
| Capital Trust Agency Florida Revenue | | | | | | | |
| (Fort Lauderdale/Cargo Acquisition Project) | | | | | | | |
| 5.75% 1/1/32 (AMT) | | | 3,750,000 | | | | 2,599,800 |
| (Orlando/Cargo Acquisition Project) | | | | | | | |
| 6.75% 1/1/32 (AMT) | | | 2,395,000 | | | | 1,845,491 |
35
Statements of net assets
Delaware Tax-Free USA Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Transportation Revenue Bonds (continued) | | | | | | | |
| Dallas-Fort Worth, Texas International Airport Revenue | | | | | | | |
| Series A 5.50% 11/1/31 (NATL-RE) (FGIC) (AMT) | | $ | 1,500,000 | | | $ | 1,499,880 |
| Grapevine, Texas Industrial Development Corporate | | | | | | | |
| Revenue (Air Cargo) 6.50% 1/1/24 (AMT) | | | 910,000 | | | | 747,965 |
| Houston, Texas Industrial Development Corporate | | | | | | | |
| Revenue (Air Cargo) 6.375% 1/1/23 (AMT) | | | 1,995,000 | | | | 1,633,526 |
| Metropolitan Washington DC Airports Authority Dulles Toll | | | | | | | |
| | Road Revenue First Senior Lien Series A | | | | | | | |
| 5.00% 10/1/39 | | | 2,500,000 | | | | 2,510,700 |
| 5.25% 10/1/44 | | | 6,110,000 | | | | 6,142,505 |
| Missouri State Highways & Transportation Commission | | | | | | | |
| State Road Revenue Series B 5.00% 5/1/24 | | | 9,000,000 | | | | 9,725,491 |
| New York State Thruway Authority General Revenue | | | | | | | |
| Series H 5.00% 1/1/19 (NATL-RE) | | | 6,240,000 | | | | 6,906,432 |
| North Texas Tollway Authority Revenue (First Tier) | | | | | | | |
| Series A 6.00% 1/1/24 | | | 3,345,000 | | | | 3,540,047 |
| ·Series E-3 5.75% 1/1/38 | | | 4,320,000 | | | | 4,536,734 |
| Pennsylvania State Turnpike Commission Turnpike Revenue | | | | | | | |
| Subordinate Series B 5.25% 6/1/39 | | | 6,000,000 | | | | 6,105,840 |
| Puerto Rico Commonwealth Highway & Transportation | | | | | | | |
| Authority Revenue Series G 5.00% 7/1/42 | | | 275,000 | | | | 237,474 |
| Sacramento County, California Airport System Revenue | | | | | | | |
| (PFC/Grant) Series C 6.00% 7/1/41 | | | 6,500,000 | | | | 6,585,150 |
| Saint Louis, Missouri Airport Revenue (Lambert-St. Louis | | | | | | | |
| International) Series A-1 6.625% 7/1/34 | | | 5,995,000 | | | | 6,179,826 |
| | | | | | | | 66,314,426 |
| Water & Sewer Revenue Bonds – 3.46% | | | | | | | |
| Atlanta, Georgia Water & Wastewater Revenue | | | | | | | |
| Series A 6.25% 11/1/39 | | | 5,500,000 | | | | 5,732,595 |
| Missouri State Environmental Improvement & Energy | | | | | | | |
| Resource Authority Water Pollution Control Revenue | | | | | | | |
| Unrefunded Balance (State Revolving Fund Project) | | | | | | | |
| Series A 6.05% 7/1/16 (FSA) | | | 1,060,000 | | | | 1,064,113 |
| New York City, New York Municipal Water Finance | | | | | | | |
| Authority Water & Sewer System Revenue | | | | | | | |
| Fiscal 2009 Series A 5.75% 6/15/40 | | | 4,000,000 | | | | 4,373,000 |
| Series A 5.25% 6/15/34 | | | 3,705,000 | | | | 3,770,986 |
36
| | | Principal amount | | Value | |
| Municipal Bonds (continued) | | | | | | | | |
| Water & Sewer Revenue Bonds (continued) | | | | | | | | |
| Tampa, Florida Water and Sewer Revenue | | | | | | | | |
| 6.00% 10/1/16 (FSA) | | $ | 1,000,000 | | | $ | 1,188,380 | |
| Virgin Islands Water & Power Authority Water System | | | | | | | | |
| Revenue 5.50% 7/1/17 | | | 510,000 | | | | 511,749 | |
| West Virginia State Water Development Authority | | | | | | | | |
| | Revenue (Loan Program III) Series A | | | | | | | | |
| 6.375% 7/1/39 (AMBAC) (AMT) | | | 2,890,000 | | | | 2,924,680 | |
| | | | | | | | 19,565,503 | |
| Total Municipal Bonds (cost $545,193,345) | | | | | | | 554,711,355 | |
| Total Value of Securities – 98.16% | | | | | | | | |
| (cost $545,193,345) | | | | | | | 554,711,355 | |
| Receivables and Other Assets | | | | | | | | |
| Net of Liabilities – 1.84% | | | | | | | 10,419,922 | |
| Net Assets Applicable to 51,896,068 | | | | | | | | |
| Shares Outstanding – 100.00% | | | | | | $ | 565,131,277 | |
| Net Asset Value – Delaware Tax-Free USA Fund | | | | | | | | |
| Class A ($536,420,077 / 49,259,602 Shares) | | | | | | | $10.89 | |
| Net Asset Value – Delaware Tax-Free USA Fund | | | | | | | | |
| Class B ($8,167,905 / 750,457 Shares) | | | | | | | $10.88 | |
| Net Asset Value – Delaware Tax-Free USA Fund | | | | | | | | |
| Class C ($20,542,151 / 1,885,904 Shares) | | | | | | | $10.89 | |
| Net Asset Value – Delaware Tax-Free USA Fund | | | | | | | | |
| Institutional Class ($1,144 / 105.01 Shares) | | | | | | | $10.89 | |
| Components of Net Assets at August 31, 2009: | | | | | | | | |
| Shares of beneficial interest (unlimited authorization – no par) | | | | | | $ | 568,373,809 | |
| Undistributed net investment income | | | | | | | 66,893 | |
| Accumulated net realized loss on investments | | | | | | | (12,827,435 | ) |
| Net unrealized appreciation of investments | | | | | | | 9,518,010 | |
| Total net assets | | | | | | $ | 565,131,277 | |
37
Statements of net assets
Delaware Tax-Free USA Fund
| | |
| § | Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 8 in “Notes to financial statements.” |
| · | Variable rate security. The rate shown is the rate as of August 31, 2009. |
| ^ | Zero coupon security. The rate shown is the yield at the time of purchase. |
| @ | Illiquid security. At August 31, 2009, the aggregate amount of illiquid securities was $1,882,130, which represented 0.33% of the Fund’s net assets. See Note 8 in “Notes to financial statements.” |
| W | Step coupon bond. Indicates security that has a zero coupon that remains in effect until a predetermined date at which time the stated interest rate becomes effective. |
Summary of abbreviations:
ACA — Insured by American Capital Access
AMBAC — Insured by the AMBAC Assurance Corporation
AMT — Subject to Alternative Minimum Tax
ASSURED GTY — Insured by the Assured Guaranty Corporation
FGIC — Insured by the Financial Guaranty Insurance Company
FHA — Insured by the Federal Housing Administration
FNMA — Insured by Federal National Mortgage Association collateral
FSA — Insured by Financial Security Assurance
GNMA — Government National Mortgage Association collateral
NATL-RE — Insured by the National Public Finance Guarantee Corporation
PSF — Insured by the Permanent School Fund
RADIAN — Insured by Radian Asset Assurance
VHA — Veterans Health Administration
| Net Asset Value and Offering Price Per Share – | | |
| Delaware Tax-Free USA Fund | | |
| Net asset value Class A (A) | $ | 10.89 |
| Sales charge (4.50% of offering price) (B) | | 0.51 |
| Offering price | $ | 11.40 |
| (A) | Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. |
| (B) | See the current prospectus for purchases of $100,000 or more. |
See accompanying notes
38
| Delaware Tax-Free USA Intermediate Fund | August 31, 2009 |
| | | Principal amount | | Value |
| Municipal Bonds – 98.82% | | | | | | | |
| Corporate Revenue Bonds – 10.09% | | | | | | | |
| Alliance Airport Authority, Texas Special Facilities Revenue | | | | | | | |
| (Federal Express Corp. Project) 4.85% 4/1/21 (AMT) | | $ | 2,000,000 | | | $ | 1,737,300 |
| · | Brazos, Texas Harbor Industrial Development | | | | | | | |
| Environmental Facilities Revenue (Dow Chemical Co. | | | | | | | |
| Project) 5.90% 5/1/38 (AMT) | | | 1,010,000 | | | | 939,967 |
| Brazos, Texas River Authority Pollution Control Revenue | | | | | | | |
| (Texas Utilities) 5.40% 5/1/29 (AMT) | | | 1,000,000 | | | | 423,770 |
| Buckeye, Ohio Tobacco Settlement Financing Authority | | | | | | | |
| Asset-Backed Series A-2 5.875% 6/1/47 | | | 9,405,000 | | | | 6,937,221 |
| · | Chesapeake, Virginia Economic Development Authority | | | | | | | |
| Pollution Control Revenue (Electric & Power Co. | | | | | | | |
| | Project) Series A 3.60% 2/1/32 | | | 1,150,000 | | | | 1,166,468 |
| Chesterfield County, Virginia Economic Development | | | | | | | |
| Authority Pollution Control Revenue (Virginia Electric & | | | | | | | |
| Power) Series A 5.00% 5/1/23 | | | 1,460,000 | | | | 1,509,684 |
| Golden State, California Tobacco Securitization | | | | | | | |
| Corporation Settlement Revenue Asset-Backed Senior | | | | | | | |
| Series A-1 5.75% 6/1/47 | | | 3,860,000 | | | | 3,010,839 |
| Indianapolis, Indiana Airport Authority Revenue | | | | | | | |
| Special Facilities (Federal Express Corp. Project) | | | | | | | |
| 5.10% 1/15/17 (AMT) | | | 750,000 | | | | 691,065 |
| Iowa Finance Authority Pollution Control Facilities | | | | | | | |
| Revenue (Interstate Power) 5.00% 7/1/14 (FGIC) | | | 2,000,000 | | | | 2,098,660 |
| Maryland Economic Development Corporation | | | | | | | |
| Pollution Control Revenue (Potomac Electric Project) | | | | | | | |
| 6.20% 9/1/22 | | | 1,780,000 | | | | 1,965,476 |
| Memphis-Shelby County, Tennessee Airport Authority | | | | | | | |
| Special Facilities Revenue (Federal Express Corp. | | | | | | | |
| Project) 5.05% 9/1/12 | | | 1,000,000 | | | | 1,036,850 |
| Michigan State Strategic Fund Limited Obligation | | | | | | | |
| Revenue (Dow Chemical Project) Series B-2 | | | | | | | |
| 6.25% 6/1/14 | | | 4,500,000 | | | | 4,632,704 |
| · | Mobile, Alabama Industrial Development Board | | | | | | | |
| Pollution Control Revenue (Alabama Power Co.) | | | | | | | |
| Series B 4.875% 6/1/34 | | | 2,840,000 | | | | 2,996,058 |
| M-S-R Energy Authority, California Gas Revenue | | | | | | | |
| Series A 6.125% 11/1/29 | | | 3,640,000 | | | | 3,629,189 |
39
Statements of net assets
Delaware Tax-Free USA Intermediate Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Corporate Revenue Bonds (continued) | | | | | | | |
| Ohio State Air Quality Development Authority Revenue | | | | | | | |
| Environmental Improvement (First Energy) | | | | | | | |
| Series A 5.70% 2/1/14 | | $ | 2,225,000 | | | $ | 2,358,367 |
| Series A 5.70% 8/1/20 | | | 4,320,000 | | | | 4,465,238 |
| Series C 5.625% 6/1/18 | | | 2,370,000 | | | | 2,457,406 |
| | (USX Project) 5.00% 11/1/15 | | | 1,000,000 | | | | 1,020,760 |
| · | Pennsylvania Economic Development Financing Authority | | | | | | | |
| Exempt Facilities Revenue (Exelon Generation Co. | | | | | | | |
| Project) Series A 5.00% 12/1/42 | | | 1,355,000 | | | | 1,387,032 |
| Prattville, Alabama Industrial Development Board | | | | | | | |
| Environmental Improvement Revenue (International | | | | | | | |
| Paper Co. Project) Series A 6.70% 3/1/24 (AMT) | | | 1,000,000 | | | | 977,300 |
| · | Sabine, Texas River Authority Pollution Control Revenue | | | | | | | |
| (TXU Electric Co. Project) Series A 5.50% 5/1/22 | | | 1,000,000 | | | | 812,650 |
| Salt Verde Financial Corporation, Arizona Senior Gas | | | | | | | |
| Revenue 5.00% 12/1/37 | | | 4,500,000 | | | | 3,773,340 |
| Sugar Creek, Missouri Industrial Development Revenue | | | | | | | |
| (Lafarge North America Project) Series A | | | | | | | |
| 5.65% 6/1/37 (AMT) | | | 500,000 | | | | 382,160 |
| Toledo, Lucas County, Ohio Port Authority Development | | | | | | | |
| Revenue (Northwest Ohio Bond Fund - Alex Products Inc.) | | | | | | | |
| Series B 6.125% 11/15/09 (AMT) | | | 150,000 | | | | 150,260 |
| | | | | | | | 50,559,764 |
| Education Revenue Bonds – 4.02% | | | | | | | |
| California Municipal Finance Authority Educational Revenue | | | | | | | |
| (American Heritage Education Foundation Project) | | | | | | | |
| Series A 5.25% 6/1/26 | | | 1,000,000 | | | | 816,500 |
| California Statewide Communities Development Authority | | | | | | | |
| Student Housing Revenue (Irvine, LLC - UCI East Campus) | | | | | | | |
| 6.00% 5/15/23 | | | 3,150,000 | | | | 3,183,674 |
| Chattanooga, Tennessee Health Educational & Housing | | | | | | | |
| Facilities Board Revenue (CDFI Phase I, LLC Project) | | | | | | | |
| Series B 5.50% 10/1/20 | | | 1,095,000 | | | | 912,814 |
| Fulton County, Georgia Development Authority Revenue | | | | | | | |
| (Molecular Science Building Project) | | | | | | | |
| 5.25% 5/1/21 (NATL-RE) | | | 1,000,000 | | | | 1,092,520 |
| Grand Traverse, Michigan Public School Academy Revenue | | | | | | | |
| 5.00% 11/1/36 | | | 1,000,000 | | | | 607,950 |
40
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Education Revenue Bonds (continued) | | | | | | | |
| Marietta, Georgia Development Authority Revenue | | | | | | | |
| (Life University Income Project) 6.25% 6/15/20 | | $ | 1,180,000 | | | $ | 1,035,922 |
| Massachusetts State Health & Educational | | | | | | | |
| | Facilities Authority Revenue | | | | | | | |
| (Nichols College Project) Series C 6.125% 10/1/29 | | | 1,000,000 | | | | 869,070 |
| ·(Northeastern University) 4.125% 10/1/37 | | | 2,360,000 | | | | 2,414,846 |
| Michigan Higher Education Facilities Authority Revenue | | | | | | | |
| (Kalamazoo College Project) 5.50% 12/1/19 | | | 500,000 | | | | 517,340 |
| New York State Dormitory Authority Revenue | | | | | | | |
| (Brooklyn Law School) Series A 5.50% 7/1/18 (RADIAN) | | | 1,000,000 | | | | 1,031,590 |
| (Non State Supported Debt - Rockefeller University) | | | | | | | |
| Series A 5.00% 7/1/27 | | | 1,055,000 | | | | 1,162,568 |
| Ohio State Higher Educational Facility Revenue | | | | | | | |
| (John Carroll University) 5.50% 11/15/18 | | | 335,000 | | | | 352,135 |
| ·(Kenyon College Project) 4.70% 7/1/37 | | | 1,000,000 | | | | 1,051,090 |
| Ohio State University General Receipts Revenue | | | | | | | |
| Series B 5.25% 6/1/21 | | | 1,000,000 | | | | 1,069,290 |
| University of California Revenue Series A | | | | | | | |
| 5.125% 5/15/20 (AMBAC) | | | 250,000 | | | | 266,255 |
| University of Oklahoma Research Facilities Revenue | | | | | | | |
| 5.00% 3/1/23 (AMBAC) | | | 1,065,000 | | | | 1,092,988 |
| University of Virginia General Revenue Series B | | | | | | | |
| 5.00% 6/1/20 | | | 1,250,000 | | | | 1,339,500 |
| 5.00% 6/1/21 | | | 1,250,000 | | | | 1,333,000 |
| | | | | | | | 20,149,052 |
| Electric Revenue Bonds – 3.16% | | | | | | | |
| · | Burke County, Georgia Development Authority | | | | | | | |
| Pollution Control Revenue (Oglethorpe Power) | | | | | | | |
| Series C-2 4.625% 1/1/37 (AMBAC) | | | 3,320,000 | | | | 3,391,878 |
| Metropolitan Government Nashville & Davidson County, | | | | | | | |
| Tennessee Electric Revenue Series B 5.50% 5/15/14 | | | 1,000,000 | | | | 1,149,420 |
| Orlando, Florida Utilities Commission Water & Electric | | | | | | | |
| Revenue 5.25% 10/1/20 | | | 555,000 | | | | 590,820 |
| Platte River Power Authority, Colorado Power Revenue | | | | | | | |
| Series HH 5.00% 6/1/26 | | | 2,000,000 | | | | 2,161,720 |
| Rochester, Minnesota Electric Utilities Revenue | | | | | | | |
| Series C 5.00% 12/1/18 (NATL-RE) | | | 2,000,000 | | | | 2,243,440 |
41
Statements of net assets
Delaware Tax-Free USA Intermediate Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Electric Revenue Bonds (continued) | | | | | | | |
| South Carolina State Public Service Authority Revenue | | | | | | | |
| Refunding Series A 5.125% 1/1/21 (FSA) | | $ | 1,000,000 | | | $ | 1,053,480 |
| Texas Municipal Power Agency Revenue | | | | | | | |
| 4.00% 9/1/11 (AMBAC) | | | 750,000 | | | | 751,515 |
| Vernon, California Electric System Revenue Series A | | | | | | | |
| 5.125% 8/1/21 | | | 4,500,000 | | | | 4,501,170 |
| | | | | | | | 15,843,443 |
| Escrowed to Maturity Bonds – 0.04% | | | | | | | |
| Southcentral, Pennsylvania General Authority Revenue | | | | | | | |
| (Wellspan Health Obligated Project) 5.625% 5/15/26 | | | 180,000 | | | | 194,017 |
| | | | | | | | 194,017 |
| Health Care Revenue Bonds – 11.30% | | | | | | | |
| Allegheny County, Pennsylvania Municipal Development | | | | | | | |
| Authority Revenue (University of Pittsburgh Medical Center) | | | | | | | |
| Series A 5.00% 9/1/14 | | | 4,000,000 | | | | 4,415,800 |
| Berks County, Pennsylvania Hospital Authority Revenue | | | | | | | |
| (Reading Hospital & Medical Center Project) | | | | | | | |
| Series A-3 5.25% 11/1/24 | | | 4,405,000 | | | | 4,464,600 |
| Butler County, Pennsylvania Hospital Authority Revenue | | | | | | | |
| | (Butler Health System Project) 7.125% 7/1/29 | | | 2,250,000 | | | | 2,432,250 |
| California Statewide Communities Development Authority | | | | | | | |
| Revenue (Kaiser Permanente) Series A 5.00% 4/1/19 | | | 6,070,000 | | | | 6,335,138 |
| Cape Girardeau County, Missouri Industrial Development | | | | | | | |
| Authority Health Care Facilities Revenue (St. Francis | | | | | | | |
| Medical Center) Series A 5.50% 6/1/34 | | | 640,000 | | | | 641,792 |
| Chatham County, Georgia Hospital Authority Revenue | | | | | | | |
| (Memorial Health Medical Center) Series A | | | | | | | |
| 6.125% 1/1/24 | | | 905,000 | | | | 834,347 |
| @ | Cleveland-Cuyahoga County, Ohio Port Authority | | | | | | | |
| Revenue (Saint Clarence - Geac) Series A | | | | | | | |
| 6.125% 5/1/26 | | | 715,000 | | | | 541,913 |
| Cuyahoga County, Ohio Revenue (Cleveland Clinic Health | | | | | | | |
| System) Series A 6.00% 1/1/21 | | | 1,000,000 | | | | 1,081,440 |
| Dauphin County, Pennsylvania General Authority Health | | | | | | | |
| System Revenue (Pinnacle Health System Project) | | | | | | | |
| Series A 6.00% 6/1/29 | | | 4,500,000 | | | | 4,602,825 |
42
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Health Care Revenue Bonds (continued) | | | | | | | |
| Georgia Medical Center Hospital Authority Revenue | | | | | | | |
| (Spring Harbor Green Island Project) 5.25% 7/1/37 | | $ | 2,300,000 | | | $ | 1,662,371 |
| · | Highlands County, Florida Health Facilities Authority | | | | | | | |
| | Revenue (Adventist Health System) Series I | | | | | | | |
| 5.00% 11/15/29 | | | 2,000,000 | | | | 2,015,860 |
| Maryland State Health & Higher Education Facilities | | | | | | | |
| Authority Revenue | | | | | | | |
| ·(John Hopkins Health Systems) 5.00% 5/15/46 | | | 790,000 | | | | 855,696 |
| (Union Hospital of Cecil County) 5.625% 7/1/32 | | | 500,000 | | | | 500,410 |
| Massachusetts State Health & Educational Facilities | | | | | | | |
| Authority Revenue (Caregroup) Series E-2 | | | | | | | |
| 5.375% 7/1/21 | | | 1,970,000 | | | | 2,012,217 |
| Michigan State Hospital Finance Authority Revenue | | | | | | | |
| (Oakwood Obligation Group) 5.50% 11/1/14 | | | 2,230,000 | | | | 2,261,755 |
| Minneapolis, Minnesota Health Care System Revenue | | | | | | | |
| (Fairview Health) Series A 6.375% 11/15/23 | | | 3,710,000 | | | | 4,076,622 |
| New Hampshire Health & Education Facilities Authority | | | | | | | |
| Revenue (Elliot Hospital) Series B 5.60% 10/1/22 | | | 610,000 | | | | 614,606 |
| New York State Dormitory Authority Revenue Non State | | | | | | | |
| Supported Debt | | | | | | | |
| (North Shore LI Jewish Health System) Series A 5.50% 5/1/30 | | | 1,700,000 | | | | 1,709,996 |
| (Orange Regional Medical Center) 6.50% 12/1/21 | | | 2,000,000 | | | | 1,851,040 |
| North Carolina Medical Care Commission Health Care | | | | | | | |
| Facilities Revenue (First Mortgage - Presbyterian Homes) | | | | | | | |
| 5.40% 10/1/27 | | | 780,000 | | | | 661,892 |
| Ohio State Higher Educational Facilities Commission | | | | | | | |
| Revenue (Cleveland Clinic Health System | | | | | | | |
| Obligation Group) Series A | | | | | | | |
| 5.00% 1/1/17 | | | 2,000,000 | | | | 2,180,300 |
| 5.00% 1/1/18 | | | 1,000,000 | | | | 1,085,720 |
| Scottsdale, Arizona Industrial Development Authority | | | | | | | |
| Hospital Revenue (Scottsdale Healthcare) Series A | | | | | | | |
| 5.00% 9/1/19 | | | 3,065,000 | | | | 3,109,381 |
| St. Louis Park, Minnesota Health Care Facilities Revenue | | | | | | | |
| Refunding (Nicollet Health Services) Series C | | | | | | | |
| 5.50% 7/1/18 | | | 4,240,000 | | | | 4,533,196 |
| St. Mary Hospital Authority, Pennsylvania Health System | | | | | | | |
| Revenue (Catholic Health East) Series A | | | | | | | |
| 5.25% 11/15/16 | | | 1,200,000 | | | | 1,243,248 |
43
Statements of net assets
Delaware Tax-Free USA Intermediate Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Health Care Revenue Bonds (continued) | | | | | | | |
| St. Paul, Minnesota Housing & Redevelopment Authority | | | | | | | |
| Hospital Revenue (Health East Project) | | | | | | | |
| 6.00% 11/15/25 | | $ | 1,000,000 | | | $ | 894,520 |
| | | | | | | | 56,618,935 |
| Housing Revenue Bonds – 1.43% | | | | | | | |
| California Housing Finance Agency Revenue | | | | | | | |
| (Home Mortgage) Series M 5.95% 8/1/25 (AMT) | | | 2,700,000 | | | | 2,603,097 |
| Puerto Rico Housing Finance Authority Subordinate | | | | | | | |
| | (Capital Fund Modernization) 5.50% 12/1/16 | | | 4,120,000 | | | | 4,555,278 |
| | | | | | | | 7,158,375 |
| Lease Revenue Bonds – 2.54% | | | | | | | |
| Golden State, California Tobacco Securitization Corporation | | | | | | | |
| Settlement Revenue Refunding Asset-Backed Series A | | | | | | | |
| 5.00% 6/1/18 | | | 1,170,000 | | | | 1,169,906 |
| 5.00% 6/1/21 (AMBAC) | | | 1,000,000 | | | | 970,530 |
| Michigan State Building Authority Revenue Series I | | | | | | | |
| 5.00% 10/15/09 (FSA) | | | 1,000,000 | | | | 1,004,970 |
| 5.00% 10/15/24 | | | 3,000,000 | | | | 3,022,020 |
| 5.50% 10/15/18 | | | 2,175,000 | | | | 2,238,989 |
| New York State Municipal Bond Bank Agency Special | | | | | | | |
| School Purpose Revenue Series C 5.25% 6/1/22 | | | 1,000,000 | | | | 1,043,070 |
| · | Puerto Rico Public Buildings Authority Revenue | | | | | | | |
| (Guaranteed Government Facilities) Series J | | | | | | | |
| 5.00% 7/1/28 | | | 1,000,000 | | | | 1,015,230 |
| Tobacco Settlement Financing New York Revenue | | | | | | | |
| (Asset-Backed) Series B 5.00% 6/1/12 | | | 2,060,000 | | | | 2,231,351 |
| | | | | | | | 12,696,066 |
| Local General Obligation Bonds – 8.77% | | | | | | | |
| Chicago, Illinois Board of Education Refunding Dedicated | | | | | | | |
| Revenue Series B 5.00% 12/1/23 (AMBAC) | | | 3,500,000 | | | | 3,621,695 |
| Chicago, Illinois Modern Schools Across Chicago | | | | | | | |
| Series J 5.00% 12/1/23 (AMBAC) | | | 2,865,000 | | | | 2,996,217 |
| Chicago, Illinois Project & Refunding Series C | | | | | | | |
| 5.50% 1/1/40 (NATL-RE) (FGIC) | | | 2,940,000 | | | | 2,967,283 |
| Dallas, Texas 5.125% 2/15/15 | | | 3,000,000 | | | | 3,457,770 |
44
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Local General Obligation Bonds (continued) | | | | | | | |
| Fairfax County, Virginia Refunding & Public Improvement | | | | | | | |
| 5.25% 4/1/14 | | $ | 3,500,000 | | | $ | 4,040,575 |
| Gwinnett County, Georgia School District 5.00% 2/1/11 | | | 3,000,000 | | | | 3,182,970 |
| Lansing, Michigan Community College (College Building | | | | | | | |
| and Site) 5.00% 5/1/21 (NATL-RE) | | | 1,325,000 | | | | 1,418,267 |
| Licking County, Ohio Joint Vocational School District | | | | | | | |
| | School Facilities Construction and Improvement | | | | | | | |
| 5.00% 12/1/19 (NATL-RE) | | | 1,000,000 | | | | 1,055,980 |
| Los Angeles, California Unified School District | | | | | | | |
| (Election 1997) Series F 5.00% 7/1/21 (FGIC) | | | 2,880,000 | | | | 2,993,184 |
| (Election 2004) Series G | | | | | | | |
| 5.00% 7/1/13 (AMBAC) | | | 2,000,000 | | | | 2,201,620 |
| 5.00% 7/1/31 (AMBAC) | | | 3,955,000 | | | | 4,009,579 |
| Middlesex County, New Jersey Improvement Authority | | | | | | | |
| Revenue (County Guaranteed Open Space Trust) | | | | | | | |
| 5.25% 9/15/20 | | | 1,000,000 | | | | 1,106,630 |
| New York City, New York | | | | | | | |
| Series A-1 5.00% 8/1/19 | | | 3,500,000 | | | | 3,830,050 |
| Series G 5.25% 8/1/15 | | | 1,000,000 | | | | 1,102,630 |
| Series I 5.00% 8/1/21 | | | 1,000,000 | | | | 1,049,340 |
| Series I-1 5.25% 4/1/28 | | | 4,500,000 | | | | 4,781,835 |
| Series J 5.50% 6/1/23 | | | 100,000 | | | | 104,778 |
| | | | | | | | 43,920,403 |
| §Pre-Refunded Bonds – 7.06% | | | | | | | |
| Benton & Linn Counties, Oregon School District #509J | | | | | | | |
| 5.00% 6/1/21-13 (FSA) | | | 1,000,000 | | | | 1,130,070 |
| Cook County, Illinois Series A 5.375% 11/15/21-11 (FGIC) | | | 2,160,000 | | | | 2,324,398 |
| Duluth, Minnesota Economic Development | | | | | | | |
| Authority Health Care Facilities Revenue | | | | | | | |
| (Benedictine Health System - St. Mary’s Hospital) | | | | | | | |
| 5.25% 2/15/28-14 | | | 1,000,000 | | | | 1,140,300 |
| 5.50% 2/15/23-14 | | | 1,000,000 | | | | 1,150,920 |
| Forest Grove, Oregon Revenue Campus (Pacific University) | | | | | | | |
| 6.30% 5/1/25-10 (RADIAN) | | | 1,000,000 | | | | 1,039,680 |
| Illinois Educational Facilities Authority Student Housing | | | | | | | |
| Revenue (Educational Advancement - | | | | | | | |
| University Center Project) 6.00% 5/1/22-12 | | | 750,000 | | | | 854,333 |
45
Statements of net assets
Delaware Tax-Free USA Intermediate Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | | |
| §Pre-Refunded Bonds (continued) | | | | | | | | |
| | Lancaster County, Pennsylvania Hospital Authority | | | | | | | | |
| Revenue (Lancaster General Hospital Project) | | | | | | | | |
| 5.75% 3/15/21-13 | | | $ | 1,000,000 | | | $ | 1,159,210 |
| Lunenburg County, Virginia Series B | | | | | | | | |
| 5.25% 2/1/29-13 (NATL-RE) | | | | 715,000 | | | | 814,907 |
| Miami-Dade County, Florida Educational Facilities | | | | | | | | |
| Authority Revenue (University of Miami) | | | | | | | | |
| Series A 5.00% 4/1/34-14 (AMBAC) | | | | 3,500,000 | | | | 3,977,329 |
| | Minneapolis, Minnesota Health Care System Revenue | | | | | | | | |
| (Allina Health Systems) Series A 5.75% 11/15/32-12 | | | | 500,000 | | | | 570,640 |
| New Jersey State Educational Facilities Authority | | | | | | | | |
| Revenue (Georgian Court College Project) Series C | | | | | | | | |
| 6.50% 7/1/33-13 | | | | 500,000 | | | | 592,675 |
| New York City, New York Series J 5.50% 6/1/23-13 | | | | 900,000 | | | | 1,035,216 |
| North Texas Health Facilities Development Corporation | | | | | | | | |
| Hospital Revenue (United Regional Health Care | | | | | | | | |
| System, Inc. Project) 6.00% 9/1/23-13 | | | | 1,000,000 | | | | 1,158,380 |
| Ohio State Higher Education Capital Facilities | | | | | | | | |
| Series B 5.625% 5/1/14-10 | | | | 5,780,000 | | | | 5,980,623 |
| Pennsylvania State First Series 5.125% 1/15/19-11 | | | | 3,515,000 | | | | 3,760,066 |
| Pennsylvania State Higher Educational Facilities Authority | | | | | | | | |
| College & University Revenue (Geneva College Project) | | | | | | | | |
| 6.125% 4/1/22-12 | | | | 1,000,000 | | | | 1,125,310 |
| Puerto Rico Commonwealth Highway & Transportation | | | | | | | | |
| Authority Revenue Series J 5.50% 7/1/21-14 | | | | 1,000,000 | | | | 1,152,230 |
| Puerto Rico Public Buildings Authority Revenue | | | | | | | | |
| (Guaranteed Government Facilities) Series I | | | | | | | | |
| 5.50% 7/1/23-14 | | | | 2,000,000 | | | | 2,299,500 |
| Southcentral, Pennsylvania General Authority Revenue | | | | | | | | |
| (Welllspan Health Obligated Project) | | | | | | | | |
| 5.625% 5/15/26-11 | | | | 820,000 | | | | 893,948 |
| University of North Carolina Revenue (Chapel Hill) | | | | | | | | |
| Series A 5.375% 12/1/14-11 | | | | 2,000,000 | | | | 2,160,520 |
| Virginia State Resource Authority Clean Water Revenue | | | | | | | | |
| (State Revolving Fund) 6.00% 10/1/16-10 | | | | 1,000,000 | | | | 1,060,080 |
| | | | | | | | | 35,380,335 |
46
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | | |
| Resource Recovery Bonds – 0.24% | | | | | | | | |
| | Pennsylvania Economic Development Financing Authority | | | | | | | | |
| Resource Recovery Revenue (Subordinate Colver | | | | | | | | |
| Project) Series G 5.125% 12/1/15 (AMT) | | | $ | 1,400,000 | | | $ | 1,210,440 |
| | | | | | | | | 1,210,440 |
| Special Tax Bonds – 11.74% | | | | | | | | |
| Baltimore, Maryland Convention Center Hotel Revenue | | | | | | | | |
| Subordinated Series B 5.00% 9/1/16 | | | | 1,200,000 | | | | 1,002,192 |
| California State Economic Recovery Series A 5.25% 7/1/14 | | | | 1,000,000 | | | | 1,115,740 |
| Casa Grande, Arizona Excise Tax Revenue | | | | | | | | |
| 5.00% 4/1/22 (AMBAC) | | | | 1,600,000 | | | | 1,613,616 |
| Columbia County, Georgia Sales Tax 5.00% 4/1/16 | | | | 1,265,000 | | | | 1,460,822 |
| Dallas, Texas Convention Center Hotel Development | | | | | | | | |
| Revenue Series A | | | | | | | | |
| 5.00% 1/1/24 | | | | 3,420,000 | | | | 3,388,707 |
| 5.25% 1/1/23 | | | | 5,375,000 | | | | 5,449,819 |
| | Guam Government Limited Obligation Revenue | | | | | | | | |
| (Section 30) Series A | | | | | | | | |
| 5.375% 12/1/24 | | | | 1,750,000 | | | | 1,757,368 |
| 5.625% 12/1/29 | | | | 1,185,000 | | | | 1,186,256 |
| Hampton, Virginia Convention Center Revenue | | | | | | | | |
| 5.25% 1/15/23 (AMBAC) | | | | 1,000,000 | | | | 1,010,700 |
| Louisiana State Citizens Property Insurance Corporation | | | | | | | | |
| Assessment Revenue Series C-2 6.75% 6/1/26 | | | | | | | | |
| (ASSURED GTY) | | | | 3,600,000 | | | | 4,145,904 |
| Metropolitan Pier & Exposition Authority, Illinois Dedicate | | | | | | | | |
| State Tax Revenue (McCormick Place Expansion Project) | | | | | | | | |
| Series A 5.50% 12/15/24 (NATL-RE) (FGIC) | | | | 2,000,000 | | | | 2,035,360 |
| Middlesex County, New Jersey Improvement Authority | | | | | | | | |
| Senior Revenue (Heldrich Center Hotel/Conference | | | | | | | | |
| Project) Series A 5.00% 1/1/32 | | | | 1,000,000 | | | | 508,130 |
| @ | Modesto, California Special Tax Community Facilities | | | | | | | | |
| District #04-1 (Village 2) 5.15% 9/1/36 | | | | 1,500,000 | | | | 996,975 |
| New Jersey Economic Development Authority Revenue | | | | | | | | |
| (Cigarette Tax) | | | | | | | | |
| 5.00% 6/15/11 (FGIC) | | | | 2,750,000 | | | | 2,785,943 |
| 5.50% 6/15/31 | | | | 1,000,000 | | | | 894,910 |
| 5.625% 6/15/18 | | | | 1,000,000 | | | | 987,310 |
47
Statements of net assets
Delaware Tax-Free USA Intermediate Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | | |
| Special Tax Bonds (continued) | | | | | | | | |
| · | New York City, New York Transitional Finance Authority | | | | | | | | |
| | Revenue Refunding - Future Tax Secured | | | | | | | | |
| Series A 5.50% 11/1/26 | | | $ | 1,000,000 | | | $ | 1,085,070 |
| New York State Urban Development Corporation | | | | | | | | |
| Revenue (State Personal Income Tax) | | | | | | | | |
| Series A-1 5.00% 12/15/28 | | | | 4,000,000 | | | | 4,218,600 |
| Oregon Department of Administrative Services Lottery | | | | | | | | |
| | Revenue Series A 5.25% 4/1/26 | | | | 2,000,000 | | | | 2,200,660 |
| Puerto Rico Sales Tax Financing Corporation Sales Tax Revenue | | | | | | | | |
| W(Capital Appreciation) Series A 6.75% 8/1/32 | | | | 5,585,000 | | | | 3,909,500 |
| Series A 5.00% 8/1/39 | | | | 4,500,000 | | | | 4,606,290 |
| Series A 6.125% 8/1/29 | | | | 2,500,000 | | | | 2,605,075 |
| Richmond Heights, Missouri Tax Increment & Transaction | | | | | | | | |
| Sales Tax Revenue Refunding & Improvement (Francis | | | | | | | | |
| Place Redevelopment Project) 5.625% 11/1/25 | | | | 1,000,000 | | | | 775,590 |
| @ | St. Joseph, Missouri Industrial Development Authority Tax | | | | | | | | |
| Increment Revenue (Shoppes at North Village Project) | | | | | | | | |
| Series A 5.10% 11/1/19 | | | | 250,000 | | | | 216,473 |
| Series B 5.375% 11/1/23 | | | | 1,000,000 | | | | 816,770 |
| Washington State Motor Vehicle Fuel Tax | | | | | | | | |
| Series B 5.00% 7/1/16 | | | | 4,250,000 | | | | 4,893,279 |
| Wyandotte County, Kansas City, Kansas Unified | | | | | | | | |
| Government Special Obligation Revenue Refunding- | | | | | | | | |
| Sales Tax-2nd Lien-Area B 5.00% 12/1/20 | | | | 1,500,000 | | | | 1,496,055 |
| Wyoming State Loan & Investment Board Facilities | | | | | | | | |
| Revenue 5.00% 10/1/24 | | | | 1,550,000 | | | | 1,627,516 |
| | | | | | | | | 58,790,630 |
| State General Obligation Bonds – 20.40% | | | | | | | | |
| California State 5.25% 11/1/17 | | | | 1,000,000 | | | | 1,058,940 |
| California State Various Purpose 6.50% 4/1/33 | | | | 4,500,000 | | | | 4,990,680 |
| Connecticut State Series C 5.00% 11/1/24 | | | | 2,000,000 | | | | 2,214,080 |
| Florida State Board Education Capital Outlay Public | | | | | | | | |
| Education Series D 5.75% 6/1/22 | | | | 2,000,000 | | | | 2,068,000 |
| Georgia State | | | | | | | | |
| 5.00% 8/1/12 | | | | 3,125,000 | | | | 3,476,813 |
| 5.00% 7/1/17 | | | | 4,810,000 | | | | 5,651,125 |
| Series D 5.00% 7/1/11 | | | | 6,865,000 | | | | 7,396,488 |
| Guam Government Series A 7.00% 11/15/39 | | | | 1,560,000 | | | | 1,572,776 |
48
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | | |
| State General Obligation Bonds (continued) | | | | | | | | |
| Illinois State Refunding Series B 5.00% 1/1/13 | | | $ | 3,475,000 | | | $ | 3,802,380 |
| Maryland State 5.00% 8/1/17 | | | | 1,500,000 | | | | 1,733,100 |
| Maryland State & Local Facilities Land Capital | | | | | | | | |
| | Improvement 5.00% 3/15/19 | | | | 3,675,000 | | | | 4,204,898 |
| Massachusetts State Consolidated Loan | | | | | | | | |
| Series A 5.25% 8/1/13 | | | | 5,000,000 | | | | 5,695,400 |
| Series C 5.00% 9/1/10 | | | | 7,750,000 | | | | 8,097,438 |
| Minnesota State 5.00% 6/1/14 | | | | 900,000 | | | | 1,030,086 |
| Mississippi State Series A 5.00% 10/1/17 | | | | 4,860,000 | | | | 5,600,081 |
| North Carolina State Public Improvement Series A | | | | | | | | |
| 5.00% 3/1/12 | | | | 4,000,000 | | | | 4,393,040 |
| 5.00% 3/1/15 | | | | 1,200,000 | | | | 1,387,296 |
| North Carolina State Refunding Series B 5.00% 4/1/15 | | | | 4,000,000 | | | | 4,630,880 |
| Ohio State | | | | | | | | |
| Series A 5.00% 6/15/13 | | | | 3,750,000 | | | | 4,226,400 |
| Series D 5.00% 9/15/14 | | | | 3,500,000 | | | | 4,006,485 |
| Pennsylvania State | | | | | | | | |
| 5.50% 2/1/13 | | | | 3,200,000 | | | | 3,620,160 |
| | Second Series A 5.00% 8/1/13 | | | | 4,000,000 | | | | 4,518,000 |
| Puerto Rico Commonwealth Public Improvement Series A | | | | | | | | |
| 5.00% 7/1/16 (ASSURED GTY) | | | | 2,110,000 | | | | 2,268,904 |
| 5.25% 7/1/22 | | | | 3,470,000 | | | | 3,437,798 |
| 5.25% 7/1/23 | | | | 1,125,000 | | | | 1,103,254 |
| 5.50% 7/1/17 | | | | 4,415,000 | | | | 4,551,953 |
| · | Puerto Rico Commonwealth Series A 5.00% 7/1/30 | | | | 1,000,000 | | | | 1,018,430 |
| · | Puerto Rico Public Finance Corporation Commonwealth | | | | | | | | |
| Appropriation (LOC Puerto Rico Government Bank) | | | | | | | | |
| Series A 5.75% 8/1/27 | | | | 1,000,000 | | | | 1,027,360 |
| Virginia State 5.00% 6/1/23 | | | | 2,000,000 | | | | 2,244,040 |
| Washington State Variable Purpose Series A 5.00% 7/1/16 | | | | 1,000,000 | | | | 1,151,360 |
| | | | | | | | | 102,177,645 |
| Transportation Revenue Bonds – 11.05% | | | | | | | | |
| Bay Area Toll Authority, California Toll Bridge Revenue | | | | | | | | |
| (San Francisco Bay Area) Series F-1 5.25% 4/1/29 | | | | 4,400,000 | | | | 4,657,928 |
| Broward County, Florida Airport System Revenue | | | | | | | | |
| Series O 5.375% 10/1/29 | | | | 3,895,000 | | | | 3,941,662 |
| Capital Trust Agency Florida Revenue (Fort Lauderdale/ | | | | | | | | |
| Cargo Acquisition Project) 5.75% 1/1/32 (AMT) | | | | 1,750,000 | | | | 1,213,240 |
49
Statements of net assets
Delaware Tax-Free USA Intermediate Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | | |
| Transportation Revenue Bonds (continued) | | | | | | | | |
| | Chicago, Illinois O’ Hare International Airport | | | | | | | | |
| Revenue General-Airport-Third Lien | | | | | | | | |
| | Series A-2 5.75% 1/1/20 (FSA) (AMT) | | | $ | 1,000,000 | | | $ | 1,028,820 |
| Dallas-Fort Worth, Texas International Airport Revenue | | | | | | | | |
| Series A 5.00% 11/1/15 (XLCA) (AMT) | | | | 2,000,000 | | | | 2,002,080 |
| Georgia Federal Highway Road and Tollway Authority | | | | | | | | |
| Revenue Bonds 5.00% 6/1/10 (NATL-RE) | | | | 2,000,000 | | | | 2,068,900 |
| Idaho Housing & Finance Association Grant Revenue | | | | | | | | |
| (Antic Federal Highway Transportation) | | | | | | | | |
| Series A 5.25% 7/15/21 (ASSURED GTY) | | | | 2,760,000 | | | | 3,086,011 |
| Metropolitan, New York Transportation Authority Revenue | | | | | | | | |
| | Series A 5.00% 11/15/18 | | | | 2,500,000 | | | | 2,675,675 |
| Series C 6.50% 11/15/28 | | | | 2,860,000 | | | | 3,234,031 |
| Metropolitan, Washington D.C. Airport Authority Systems | | | | | | | | |
| Revenue Series A 5.50% 10/1/19 (NATL-RE) (FGIC) (AMT) | | | | 1,000,000 | | | | 1,031,990 |
| New York State Thruway Authority Revenue | | | | | | | | |
| (General Highway and Bridge Trust Fund) | | | | | | | | |
| Series B 5.25% 4/1/13 (AMBAC) | | | | 3,300,000 | | | | 3,699,432 |
| North Texas Tollway Authority Revenue System (First Tier) | | | | | | | | |
| Series A 6.00% 1/1/20 | | | | 4,000,000 | | | | 4,278,000 |
| ·Series E-3 5.75% 1/1/38 | | | | 2,470,000 | | | | 2,593,920 |
| Pennsylvania State Turnpike Commission Revenue | | | | | | | | |
| Series A 5.25% 12/1/20 (AMBAC) | | | | 1,230,000 | | | | 1,364,144 |
| Sacramento County, California Airport System | | | | | | | | |
| Revenue (PFC/Grant) Series D | | | | | | | | |
| 5.50% 7/1/28 | | | | 2,020,000 | | | | 2,017,475 |
| 5.625% 7/1/29 | | | | 1,685,000 | | | | 1,692,414 |
| Saint Louis, Missouri Airport Revenue (Lambert-St. Louis | | | | | | | | |
| International) Series A-1 6.125% 7/1/24 | | | | 3,780,000 | | | | 3,881,833 |
| Texas State Transportation Commission Highway Fund | | | | | | | | |
| Revenue (First Tier) 5.00% 4/1/18 | | | | 1,700,000 | | | | 1,935,212 |
| Triborough, New York Bridge & Tunnel Authority Revenue | | | | | | | | |
| Series A 5.00% 11/15/17 | | | | 1,720,000 | | | | 1,967,818 |
| ·Series B-1 5.00% 11/15/25 | | | | 4,000,000 | | | | 4,437,200 |
| ·Series B-3 5.00% 11/15/38 | | | | 1,800,000 | | | | 2,001,618 |
| Virginia Port Authority Commonwealth Port Fund | | | | | | | | |
| Revenue Resolution 5.00% 7/1/12 (AMT) | | | | 500,000 | | | | 535,105 |
| | | | | | | | | 55,344,508 |
50
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | | |
| Water & Sewer Revenue Bonds – 6.98% | | | | | | | | |
| | Alabama Water Pollution Control Authority Revenue | | | | | | | | |
| 5.50% 8/15/23 (AMBAC) | | | $ | 1,000,000 | | | $ | 1,014,030 |
| Arizona Water Infrastructure Finance Authority Revenue | | | | | | | | |
| (Water Quality) Series A 5.00% 10/1/21 | | | | 2,430,000 | | | | 2,734,601 |
| Atlanta, Georgia Water & Wastewater Revenue | | | | | | | | |
| | Series A 6.00% 11/1/25 | | | | 2,925,000 | | | | 3,065,342 |
| Dallas, Texas Waterworks & Sewer System Revenue | | | | | | | | |
| 5.00% 10/1/24 (FSA) | | | | 6,500,000 | | | | 6,511,569 |
| Florida Water Pollution Control Financing Corporation | | | | | | | | |
| Revenue (Water Pollution Control) Series A | | | | | | | | |
| 5.00% 1/15/25 | | | | 5,000,000 | | | | 5,287,150 |
| King County, Washington Sewer Revenue Refunding | | | | | | | | |
| Series B 5.00% 1/1/14 (NATL-RE) | | | | 3,500,000 | | | | 3,942,960 |
| Massachusetts State Water Pollution Abatement Trust | | | | | | | | |
| 5.00% 8/1/16 | | | | 2,170,000 | | | | 2,530,263 |
| New York State Environmental Facilities Corporation | | | | | | | | |
| Revenue (State Clean Water & Drinking Water | | | | | | | | |
| Revolving Foundation) | | | | | | | | |
| Series A 5.00% 6/15/22 | | | | 1,405,000 | | | | 1,562,852 |
| Series D 5.00% 9/15/23 | | | | 3,360,000 | | | | 3,680,611 |
| Portland, Oregon Sewer System Revenue (First Lien) | | | | | | | | |
| Series A 5.00% 6/15/18 | | | | 4,000,000 | | | | 4,605,840 |
| | | | | | | | | 34,935,218 |
| Total Municipal Bonds (cost $480,361,761) | | | | | | | | 494,978,831 |
| | | | | | | | | |
| Short-Term Investments – 1.24% | | | | | | | | |
| ·Variable Rate Demand Notes – 1.24% | | | | | | | | |
| Colorado Educational & Cultural Facilities Authority | | | | | | | | |
| Revenue (National Jewish Federation) | | | | | | | | |
| Series A-4 0.18% 2/1/34 | | | | 1,300,000 | | | | 1,300,000 |
| Series A-8 0.18% 9/1/35 | | | | 1,500,000 | | | | 1,500,000 |
| Minneapolis, Minnesota Health Care System Revenue | | | | | | | | |
| (Fairview Health Services) Series E 0.20% 11/15/47 | | | | 900,000 | | | | 900,000 |
| Philadelphia, Pennsylvania Gas Works Revenue | | | | | | | | |
| Series E 0.25% 8/1/31 | | | | 500,000 | | | | 500,000 |
| University of Minnesota Series C 0.20% 12/1/36 | | | | 2,000,000 | | | | 2,000,000 |
| Total Short-Term Investments (cost $6,200,000) | | | | | | | | 6,200,000 |
51
Statements of net assets
Delaware Tax-Free USA Intermediate Fund
| | | | |
| Total Value of Securities – 100.06% | | | | |
| (cost $486,561,761) | | $ | 501,178,831 | |
| Liabilities Net of Receivables and | | | | |
| Other Assets – (0.06%) | | | (303,261 | ) |
| Net Assets Applicable to 43,716,346 | | | | |
| Shares Outstanding – 100.00% | | $ | 500,875,570 | |
| | | | | |
| Net Asset Value – Delaware Tax-Free USA Intermediate Fund | | | | |
| Class A ($459,781,407 / 40,127,755 Shares) | | | $11.46 | |
| Net Asset Value – Delaware Tax-Free USA Intermediate Fund | | | | |
| Class B ($860,724 / 75,197 Shares) | | | $11.45 | |
| Net Asset Value – Delaware Tax-Free USA Intermediate Fund | | | | |
| Class C ($40,232,330 / 3,513,297 Shares) | | | $11.45 | |
| Net Asset Value – Delaware Tax-Free USA Intermediate Fund | | | | |
| Institutional Class ($1,109 / 96.8 Shares) | | | $11.46 | |
| | | | | |
| Components of Net Assets at August 31, 2009: | | | | |
| Shares of beneficial interest (unlimited authorization – no par) | | $ | 495,042,867 | |
| Undistributed net investment income | | | 16,225 | |
| Accumulated net realized loss on investments | | | (8,800,592 | ) |
| Net unrealized appreciation of investments | | | 14,617,070 | |
| Total net assets | | $ | 500,875,570 | |
| § | Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 8 in “Notes to financial statements.” |
| · | Variable rate security. The rate shown is the rate as of August 31, 2009. |
| @ | Illiquid security. At August 31, 2009, the aggregate amount of illiquid securities was $2,572,131, which represented 0.51% of the Fund’s net assets. See Note 8 in “Notes to financial statements.” |
WStep coupon bond. Indicates security that has a zero coupon that remains in effect until a predetermined date at which time the stated interest rate becomes effective.
52
| |
Summary of abbreviations:
AMBAC – Insured by the AMBAC Assurance Corporation
AMT – Subject to Alternative Minimum Tax
ASSURED GTY – Insured by the Assured Guaranty Corporation
CDFI – Community Development Financial Institutions
FGIC – Insured by the Financial Guaranty Insurance Company
FSA – Insured by Financial Security Assurance
LOC – Letter of Credit
NATL-RE – Insured by the National Public Finance Guarantee Corporation
RADIAN – Insured by Radian Asset Assurance
XLCA – Insured by XL Capital Assurance |
| Net Asset Value and Offering Price Per Share – | | |
| Delaware Tax-Free USA Intermediate Fund | | |
| Net asset value Class A (A) | $ | 11.46 |
| Sales charge (2.75% of offering price) (B) | | 0.32 |
| Offering price | $ | 11.78 |
| (A) | Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. |
| (B) | See the current prospectus for purchases of $100,000 or more. |
See accompanying notes
53
| Statements of net assets | |
| Delaware National High-Yield Municipal Bond Fund | August 31, 2009 |
| | | Principal amount | | Value |
| Municipal Bonds – 99.99% | | | | | | | | |
| Corporate Revenue Bonds – 24.03% | | | | | | | | |
| · | Beaver County, Pennsylvania Industrial Development | | | | | | | | |
| | Authority Pollution Control Revenue (Firstenergy | | | | | | | | |
| General Corp. Project) Series C 7.125% 6/1/28 (AMT) | | | $ | 1,000,000 | | | $ | 1,038,820 |
| · | Brazos, Texas Harbor Industrial Development | | | | | | | | |
| Environmental Facilities Revenue (Dow Chemical Co. | | | | | | | | |
| Project) 5.90% 5/1/38 (AMT) | | | | 190,000 | | | | 176,825 |
| · | Brazos, Texas River Authority Pollution Control Revenue | | | | | | | | |
| (TXU Energy Co. Project) Series B 6.30% 7/1/32 (AMT) | | | | 1,000,000 | | | | 443,360 |
| Buckeye, Ohio Tobacco Settlement Financing Authority | | | | | | | | |
| Asset-Backed Series A-2 | | | | | | | | |
| | 5.875% 6/1/47 | | | | 590,000 | | | | 435,190 |
| 6.50% 6/1/47 | | | | 1,000,000 | | | | 806,340 |
| Cloquet, Minnesota Pollution Control Revenue | | | | | | | | |
| (Potlatch Corp. Project) 5.90% 10/1/26 | | | | 750,000 | | | | 542,385 |
| De Soto Parish, Louisiana Environmental Improvement | | | | | | | | |
| Revenue (International Paper Co. Project) | | | | | | | | |
| Series A 6.35% 2/1/25 (AMT) | | | | 1,650,000 | | | | 1,604,929 |
| Golden State, California Tobacco Securitization Settlement | | | | | | | | |
| Revenue Refunding Asset-Backed Senior Series A-1 | | | | | | | | |
| 5.75% 6/1/47 | | | | 235,000 | | | | 183,302 |
| Gulf Coast, Texas Waste Disposal Authority Revenue | | | | | | | | |
| (Valero Energy Corp. Project) 6.65% 4/1/32 (AMT) | | | | 1,000,000 | | | | 979,910 |
| Hawaii State Department Budget & Finance Special Purpose | | | | | | | | |
| Revenue (Hawaiian Electric Co. Subsidiary) 6.50% 7/1/39 | | | | 970,000 | | | | 1,017,278 |
| Michigan Tobacco Settlement Finance Authority | | | | | | | | |
| Revenue Asset-Backed Series A 6.00% 6/1/48 | | | | 555,000 | | | | 427,539 |
| Mississippi Business Finance Corporation Pollution | | | | | | | | |
| Control Revenue (System Energy Resources, Inc. | | | | | | | | |
| Project) 5.90% 5/1/22 | | | | 900,000 | | | | 845,280 |
| M-S-R Energy Authority, California Gas Revenue | | | | | | | | |
| Series C 6.50% 11/1/39 | | | | 1,000,000 | | | | 1,008,020 |
| Nassau County, New York Tobacco Settlement | | | | | | | | |
| Asset-Backed Series A-3 5.125% 6/1/46 | | | | 525,000 | | | | 385,403 |
| New Jersey Economic Development Authority Special | | | | | | | | |
| Facility Revenue (Continental Airlines Inc. Project) | | | | | | | | |
| 6.40% 9/15/23 (AMT) | | | | 1,000,000 | | | | 848,160 |
| New York City, New York Industrial Development Agency | | | | | | | | |
| Special Facilities Revenue (JetBlue Airways Corp. Project) | | | | | | | | |
| 5.125% 5/15/30 (AMT) | | | | 1,000,000 | | | | 646,090 |
54
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | | |
| Corporate Revenue Bonds (continued) | | | | | | | | |
| | Pennsylvania Economic Development Financing Authority | | | | | | | | |
| Exempt Facilities Revenue (Allegheny Energy Supply Co.) | | | | | | | | |
| 7.00% 7/15/39 | | | $ | 1,000,000 | | | $ | 1,035,170 |
| Petersburg, Indiana Pollution Control Revenue (Indianapolis | | | | | | | | |
| Power & Light Co. Project) 6.375% 11/1/29 (AMT) | | | | 1,000,000 | | | | 941,100 |
| Phenix City, Alabama Industrial Development Board | | | | | | | | |
| Environmental Improvement Revenue (Mead Westvaco | | | | | | | | |
| Corp. Project) Series A 6.35% 5/15/35 (AMT) | | | | 500,000 | | | | 399,405 |
| Salt Verde Financial Corporation, Arizona Senior Gas Revenue | | | | | | | | |
| 5.00% 12/1/37 | | | | 1,000,000 | | | | 838,520 |
| | Sugar Creek, Missouri Industrial Development Revenue | | | | | | | | |
| (Lafarge North America Project) Series A | | | | | | | | |
| 5.65% 6/1/37 (AMT) | | | | 500,000 | | | | 382,160 |
| Sweetwater County, Wyoming Solid Waste Disposal | | | | | | | | |
| Revenue (FMC Corp. Project) 5.60% 12/1/35 (AMT) | | | | 1,000,000 | | | | 878,740 |
| Tobacco Settlement Financing Corporation, New Jersey | | | | | | | | |
| Refunding Senior Series 1A 5.00% 6/1/41 | | | | 2,000,000 | | | | 1,369,100 |
| Tobacco Settlement Financing Corporation, Virginia | | | | | | | | |
| Senior Series B-1 5.00% 6/1/47 | | | | 1,000,000 | | | | 700,180 |
| Toledo, Lucas County, Ohio Port Authority Development | | | | | | | | |
| Revenue (Toledo Express Airport Project) Series C | | | | | | | | |
| 6.375% 11/15/32 (AMT) | | | | 1,000,000 | | | | 817,060 |
| | | | | | | | | 18,750,266 |
| Education Revenue Bonds – 20.34% | | | | | | | | |
| California Statewide Communities Development | | | | | | | | |
| Authority Revenue (California Baptist University | | | | | | | | |
| Project) Series A 5.50% 11/1/38 | | | | 1,000,000 | | | | 669,180 |
| California Statewide Communities Development | | | | | | | | |
| Authority Student Housing Revenue (East Campus | | | | | | | | |
| Apartments, LLC) Series A 5.625% 8/1/34 (ACA) | | | | 1,000,000 | | | | 890,420 |
| Chattanooga, Tennessee Health Educational & Housing | | | | | | | | |
| Facilities Board Revenue (CDFI Phase I, LLC Project) | | | | | | | | |
| Subordinate Series B 6.00% 10/1/35 | | | | 1,000,000 | | | | 754,760 |
| Idaho Housing & Finance Association Nonprofit | | | | | | | | |
| Facilities Revenue (North Star Charter School Project) | | | | | | | | |
| Series A 9.50% 7/1/39 | | | | 1,000,000 | | | | 1,046,890 |
| Indiana State Finance Authority Revenue Educational | | | | | | | | |
| Facilities (Irvington Community) Series A 9.00% 7/1/39 | | | | 1,000,000 | | | | 1,096,650 |
55
Statements of net assets
Delaware National High-Yield Municipal Bond Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | | |
| Education Revenue Bonds (continued) | | | | | | | | |
| Marietta, Georgia Development Authority Revenue | | | | | | | | |
| | (Life University Income Project) 7.00% 6/15/39 | | | $ | 1,000,000 | | | $ | 834,890 |
| Maryland State Economic Development Corporation | | | | | | | | |
| | Student Housing Revenue (University of Maryland | | | | | | | | |
| College Park Projects) 5.75% 6/1/33 | | | | 930,000 | | | | 907,559 |
| @ | Maryland State Health & Higher Educational Facilities | | | | | | | | |
| Authority Revenue (Washington Christian | | | | | | | | |
| Academy Project) 5.50% 7/1/38 | | | | 1,170,000 | | | | 592,043 |
| Massachusetts State Health & Educational Facilities | | | | | | | | |
| Authority Revenue (Nichols College Project) | | | | | | | | |
| Series C 6.125% 10/1/29 | | | | 1,000,000 | | | | 869,070 |
| Minnesota State Higher Education Facilities Authority | | | | | | | | |
| Revenue (Bethel University) Series 6-R 5.50% 5/1/37 | | | | 1,000,000 | | | | 879,790 |
| New Jersey State Educational Facilities Authority Revenue | | | | | | | | |
| (Fairleigh Dickinson Project) Series C 5.50% 7/1/23 | | | | 750,000 | | | | 720,120 |
| (University of Medical & Dentistry) Series B 7.50% 12/1/32 | | | | 1,000,000 | | | | 1,105,489 |
| New Mexico Educational Assistance Foundation Student | | | | | | | | |
| Loan Revenue 1st Subordinate Series A-2 | | | | | | | | |
| 6.65% 11/1/25 (AMT) | | | | 985,000 | | | | 987,236 |
| Ohio State Higher Educational Facility Revenue | | | | | | | | |
| (Otterbein College Project) Series A 5.50% 12/1/28 | | | | 950,000 | | | | 991,914 |
| Oregon State Facilities Authority Revenue | | | | | | | | |
| (College Housing Northwest Project) Series A | | | | | | | | |
| 5.45% 10/1/32 | | | | 1,000,000 | | | | 739,560 |
| Pennsylvania State Higher Educational Facilities | | | | | | | | |
| Authority Revenue | | | | | | | | |
| (Edinboro University Foundation Student Housing) | | | | | | | | |
| 6.00% 7/1/42 | | | | 1,000,000 | | | | 884,100 |
| (Widener University) 5.375% 7/15/29 | | | | 650,000 | | | | 633,315 |
| Philadelphia, Pennsylvania Authority for Industrial | | | | | | | | |
| Development Revenue (First Philadelphia Charter | | | | | | | | |
| Project) Series A 5.75% 8/15/32 | | | | 745,000 | | | | 571,639 |
| Provo, Utah Charter School Revenue (Freedom Academy | | | | | | | | |
| Foundation Project) 5.50% 6/15/37 | | | | 1,000,000 | | | | 697,320 |
| | | | | | | | | 15,871,945 |
56
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | | |
| Health Care Revenue Bonds – 26.39% | | | | | | | | |
| | Apple Valley, Minnesota Economic Development | | | | | | | | |
| Authority Health Care Revenue (Augustana Home | | | | | | | | |
| St. Paul Project) Series A 6.00% 1/1/40 | | | $ | 1,000,000 | | | $ | 751,930 |
| Brevard County, Florida Health Facilities Authority | | | | | | | | |
| Health Care Facilities Revenue (Heath First Inc. Project) | | | | | | | | |
| Series B 7.00% 4/1/39 | | | | 1,000,000 | | | | 1,043,140 |
| Butler County, Pennsylvania Hospital Authority Revenue | | | | | | | | |
| (Butler Health System Project) 7.125% 7/1/29 | | | | 900,000 | | | | 972,900 |
| California Statewide Communities Development | | | | | | | | |
| Authority Revenue (Senior Living - Southern California) | | | | | | | | |
| 7.25% 11/15/41 | | | | 500,000 | | | | 510,760 |
| Chatham County, Georgia Hospital Authority Revenue | | | | | | | | |
| (Memorial Health Medical Center) Series A | | | | | | | | |
| | 6.125% 1/1/24 | | | | 750,000 | | | | 691,448 |
| @ | Cleveland-Cuyahoga County, Ohio Port Authority | | | | | | | | |
| Revenue Senior Housing (St. Clarence - Geac) | | | | | | | | |
| Series A 6.25% 5/1/38 | | | | 1,000,000 | | | | 671,490 |
| Colorado Health Facilities Authority Revenue | | | | | | | | |
| (Christian Living Community Project) Series A | | | | | | | | |
| 5.75% 1/1/37 | | | | 500,000 | | | | 371,215 |
| East Rochester, New York Housing Authority Revenue | | | | | | | | |
| Refunding (Senior Living - Woodland Village Project) | | | | | | | | |
| 5.50% 8/1/33 | | | | 500,000 | | | | 379,455 |
| Gainesville & Hall County, Georgia Development | | | | | | | | |
| Authority Revenue Senior Living Facilities | | | | | | | | |
| (Lanier Village Estates Project) Series C 7.25% 11/15/29 | | | | 1,000,000 | | | | 1,012,390 |
| Illinois Finance Authority Revenue | | | | | | | | |
| (Provena Health) Series A 7.75% 8/15/34 | | | | 1,000,000 | | | | 1,035,690 |
| (Silver Cross & Medical Centers) 7.00% 8/15/44 | | | | 1,000,000 | | | | 1,014,250 |
| Illinois Health Facilities Authority Revenue | | | | | | | | |
| (Elmhurst Memorial Healthcare Project) 5.625% 1/1/28 | | | | 1,000,000 | | | | 909,940 |
| Lancaster County, Pennsylvania Hospital Authority Revenue | | | | | | | | |
| (Brethren Village Project) Series A 6.375% 7/1/30 | | | | 725,000 | | | | 665,608 |
| Lebanon County, Pennsylvania Health Facilities Authority | | | | | | | | |
| Center Revenue (Pleasant View Retirement) | | | | | | | | |
| Series A 5.30% 12/15/26 | | | | 1,000,000 | | | | 824,410 |
| New Jersey Health Care Facilities Financing Authority | | | | | | | | |
| Revenue (St. Josephs Healthcare System) 6.625% 7/1/38 | | | | 860,000 | | | | 786,117 |
57
Statements of net assets
Delaware National High-Yield Municipal Bond Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Health Care Revenue Bonds (continued) | | | | | | | |
| New York State Dormitory Authority Revenue Non State | | | | | | | |
| Supported Debt (Orange Regional Medical Center) | | | | | | | |
| 6.25% 12/1/37 | | $ | 1,000,000 | | | $ | 811,630 |
| North Carolina Medical Care Commission Health Care | | | | | | | |
| Facilities Revenue (First Mortgage - Presbyterian Homes) | | | | | | | |
| 5.60% 10/1/36 | | | 1,000,000 | | | | 770,280 |
| Orange County, Florida Health Facilities Authority | | | | | | | |
| Revenue (Orlando Regional Healthcare) Series C | | | | | | | |
| 5.25% 10/1/35 | | | 1,000,000 | | | | 895,650 |
| Pennsylvania Economic Development Financing Authority | | | | | | | |
| Health System Revenue (Evalbert Einstein Healthcare) | | | | | | | |
| Series A 6.25% 10/15/23 | | | 1,000,000 | | | | 1,020,960 |
| Richland County, Ohio Hospital Facilities Revenue | | | | | | | |
| (Medcentral Health System Project) Series B | | | | | | | |
| 6.375% 11/15/30 | | | 500,000 | | | | 506,645 |
| St. Joseph County, Indiana Industrial Economic | | | | | | | |
| Development Revenue (Madison Center Project) | | | | | | | |
| 5.50% 2/15/21 | | | 1,150,000 | | | | 1,105,576 |
| St. Paul, Minnesota Housing & Redevelopment | | | | | | | |
| Authority Hospital Revenue (Healtheast Project) | | | | | | | |
| 6.00% 11/15/30 | | | 1,000,000 | | | | 834,910 |
| Washington State Health Care Facilities Authority | | | | | | | |
| Revenue (Multicare Health System) Series B | | | | | | | |
| 6.00% 8/15/39 (ASSURED GTY) | | | 1,250,000 | | | | 1,312,438 |
| Winchester, Virginia Industrial Development Authority | | | | | | | |
| Residential Care Facility Revenue (Westminster- | | | | | | | |
| Canterbury Project) Series A 5.30% 1/1/35 | | | 1,000,000 | | | | 731,730 |
| Yavapai County, Arizona Industrial Development Authority | | | | | | | |
| Hospital Revenue (Yavapai Medical Center Project) | | | | | | | |
| Series A 6.00% 8/1/33 | | | 1,000,000 | | | | 960,730 |
| | | | | | | | 20,591,292 |
| Housing Revenue Bonds – 1.29% | | | | | | | |
| North Carolina Housing Finance Agency Homeownership | | | | | | | |
| Revenue Series 27-A 5.55% 7/1/38 (AMT) | | | 1,000,000 | | | | 1,004,070 |
| | | | | | | | 1,004,070 |
58
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Lease Revenue Bonds – 2.13% | | | | | | | |
| Dauphin County, Pennsylvania General Authority Revenue | | | | | | | |
| (Riverfront Office & Parking Project) 5.75% 1/1/10 | | $ | 970,000 | | | $ | 963,035 |
| Missouri State Development Finance Board Infrastructure | | | | | | | |
| Facilities Revenue (Branson Landing Project) | | | | | | | |
| Series A 5.50% 12/1/24 | | | 720,000 | | | | 696,845 |
| | | | | | | | 1,659,880 |
| §Pre-Refunded Bonds – 3.67% | | | | | | | |
| Bexar County, Texas Health Facilities Development | | | | | | | |
| Corporation Revenue (Army Retirement Residence | | | | | | | |
| Project) 6.30% 7/1/32-12 | | | 1,000,000 | | | | 1,139,670 |
| Milledgeville-Baldwin County, Georgia Development | | | | | | | |
| Authority Revenue (Georgia College & State University | | | | | | | |
| Foundation Student Housing Project) 6.00% 9/1/33-14 | | | 1,000,000 | | | | 1,207,940 |
| Minnesota State Higher Education Facilities Authority | | | | | | | |
| Revenue (College of Art & Design Project) | | | | | | | |
| Series 5-D 6.75% 5/1/26-10 | | | 500,000 | | | | 520,440 |
| | | | | | | | 2,868,050 |
| Special Tax Bonds – 13.19% | | | | | | | |
| Baltimore, Maryland Convention Center Hotel Revenue | | | | | | | |
| Suborinated Series B 5.875% 9/1/39 | | | 1,000,000 | | | | 761,890 |
| Chicago, Illinois Tax Increment Allocation | | | | | | | |
| (Chatham Ridge Redevelopment Project) | | | | | | | |
| 5.95% 12/15/12 | | | 750,000 | | | | 741,248 |
| Farms New Kent, Virginia Community Development | | | | | | | |
| Authority Special Assessment Series C 5.80% 3/1/36 | | | 1,000,000 | | | | 605,830 |
| Henderson, Nevada Local Improvement Districts #T-18 | | | | | | | |
| 5.30% 9/1/35 | | | 665,000 | | | | 240,531 |
| Lancaster, California Redevelopment Agency Tax Allocation | | | | | | | |
| (Combined Redevelopment Project Areas) 6.875% 8/1/39 | | | 500,000 | | | | 503,100 |
| Middlesex County, New Jersey Improvement Authority | | | | | | | |
| Senior Revenue (Heldrich Center Hotel/Conference | | | | | | | |
| Project) Series A | | | | | | | |
| 5.00% 1/1/32 | | | 500,000 | | | | 254,065 |
| 5.125% 1/1/37 | | | 870,000 | | | | 442,125 |
| New Jersey Economic Development Authority | | | | | | | |
| (Cigarette Tax) 5.75% 6/15/34 | | | 965,000 | | | | 884,094 |
59
Statements of net assets
Delaware National High-Yield Municipal Bond Fund
| | | Principal amount | | Value |
| Municipal Bonds (continued) | | | | | | | |
| Special Tax Bonds (continued) | | | | | | | |
| Prescott Valley, Arizona Improvement District Special | | | | | | | |
| Assessment (Sewer Collection System Roadway Repair | | | | | | | |
| Project) 7.90% 1/1/12 | | $ | 168,000 | | | $ | 174,576 |
| Puerto Rico Sales Tax Financing Corporation Sales Tax Revenue | | | | | | | |
| W(Capital Appreciation) Series A 6.75% 8/1/32 | | | 2,030,000 | | | | 1,420,999 |
| Series A 5.75% 8/1/37 | | | 940,000 | | | | 966,414 |
| Richmond Heights, Missouri Tax Increment & Transaction | | | | | | | |
| Sales Tax Revenue Refunding & Improvement | | | | | | | |
| (Francis Place Redevelopment Project) 5.625% 11/1/25 | | | 1,200,000 | | | | 930,708 |
| @ | Southwestern Illinois Development Authority Revenue | | | | | | | |
| (Local Government Program - Collinsville Limited Project) | | | | | | | |
| 5.35% 3/1/31 | | | 500,000 | | | | 346,585 |
| @ | St. Joseph, Missouri Industrial Development Authority Tax | | | | | | | |
| Increment Revenue (Shoppes at North Village Project) Series A | | | | | | | |
| 5.375% 11/1/24 | | | 1,000,000 | | | | 810,480 |
| 5.50% 11/1/27 | | | 500,000 | | | | 395,555 |
| Winter Garden Village at Fowler Groves Community | | | | | | | |
| Development District, Florida Special Assessment Revenue | | | | | | | |
| 5.65% 5/1/37 | | | 975,000 | | | | 815,402 |
| | | | | | | | 10,293,602 |
| State General Obligation Bonds – 2.03% | | | | | | | |
| Guam Government Series A 6.75% 11/15/29 | | | 1,565,000 | | | | 1,581,213 |
| | | | | | | | 1,581,213 |
| Transportation Revenue Bonds – 6.92% | | | | | | | |
| Branson, Missouri Regional Airport Transportation Development | | | | | | | |
| District (Airport Project) Series A 6.00% 7/1/37 | | | 500,000 | | | | 346,400 |
| Metropolitan Washington DC Airports Authority Dulles Toll | | | | | | | |
| Road Revenue First Senior Lien Series A 5.25% 10/1/44 | | | 900,000 | | | | 904,788 |
| New York City, New York Industrial Development Agency | | | | | | | |
| Special Airport Facilities (Airis JFK I LLC Project) | | | | | | | |
| �� Series A 5.50% 7/1/28 (AMT) | | | 905,000 | | | | 632,857 |
| Oklahoma City, Oklahoma Industrial & Cultural Facilities | | | | | | | |
| Subordinated (Air Cargo Obligated Group Project) | | | | | | | |
| 6.75% 1/1/23 (AMT) | | | 1,160,000 | | | | 963,798 |
| Onondaga County, New York Industrial Development | | | | | | | |
| Authority Revenue Subordinated (Air Cargo Project) | | | | | | | |
| 7.25% 1/1/32 (AMT) | | | 500,000 | | | | 417,545 |
60
| | | Principal amount | | Value | |
| Municipal Bonds (continued) | | | | | | | | |
| Transportation Revenue Bonds (continued) | | | | | | | | |
| Sacramento County, California Airport Services Revenue | | | | | | | | |
| (PFC/Grant) Series C 6.00% 7/1/41 | | $ | 1,000,000 | | | $ | 1,013,100 | |
| Saint Louis, Missouri Airport Revenue (Lambert-St. Louis | | | | | | | | |
| International) Series A-1 6.625% 7/1/34 | | | 1,090,000 | | | | 1,123,605 | |
| | | | | | | | 5,402,093 | |
| Total Municipal Bonds (cost $84,459,936) | | | | | | | 78,022,411 | |
| | | | | | | | | |
| Short-Term Investment – 0.38% | | | | | | | | |
| ·Variable Rate Demand Note – 0.38% | | | | | | | | |
| Philadelphia, Pennsylvania Gas Works Revenue 8th | | | | | | | | |
| Series E 0.25% 8/1/31 | | | 300,000 | | | | 300,000 | |
| Total Short-Term Investment (cost $300,000) | | | | | | | 300,000 | |
| |
| Total Value of Securities – 100.37% | | | | | | | | |
| (cost $84,759,936) | | | | | | | 78,322,411 | |
| Liabilities Net of Receivables | | | | | | | | |
| and Other Assets – (0.37%) | | | | | | | (291,298 | ) |
| Net Assets Applicable to 8,739,745 | | | | | | | | |
| Shares Outstanding – 100.00% | | | | | | $ | 78,031,113 | |
| | |
| Net Asset Value – Delaware National High-Yield Municipal | | | | | | | | |
| Bond Fund Class A ($68,812,016 / 7,710,832 Shares) | | | | | | | | $8.92 | |
| Net Asset Value – Delaware National High-Yield Municipal | | | | | | | | |
| Bond Fund Class B ($1,448,068 / 161,945 Shares) | | | | | | | | $8.94 | |
| Net Asset Value – Delaware National High-Yield Municipal | | | | | | | | |
| Bond Fund Class C ($7,769,786 / 866,829 Shares) | | | | | | | | $8.96 | |
| Net Asset Value – Delaware National High-Yield Municipal | | | | | | | | |
| Bond Fund Institutional Class ($1,243 / 139.2 Shares) | | | | | | | | $8.93 | |
61
Statements of net assets
Delaware National High-Yield Municipal Bond Fund
| |
| Components of Net Assets at August 31, 2009: | | | | |
| Shares of beneficial interest (unlimited authorization – no par) | | $ | 87,784,016 | |
| Undistributed net investment income | | | 13,405 | |
| Accumulated net realized loss on investments | | | (3,328,783 | ) |
| Net unrealized depreciation of investments | | | (6,437,525 | ) |
| Total net assets | | $ | 78,031,113 | |
| § | Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 8 in “Notes to financial statements.” |
| · | Variable rate security. The rate shown is the rate as of August 31, 2009. |
| @ | Illiquid security. At August 31, 2009, the aggregate amount of illiquid securities was $2,816,153, which represented 3.61% of the Fund’s net assets. See Note 8 in “Notes to financial statements.” |
| W | Step coupon bond. Indicates security that has a zero coupon that remains in effect until a predetermined date at which time the stated interest rate becomes effective. |
Summary of abbreviations:
ACA — Insured by American Capital Access
AMT — Subject to Alternative Minimum Tax
ASSURED GTY — Insured by the Assured Guaranty Corporation
CDFI — Community Development Financial Institutions
| Net Asset Value and Offering Price Per Share – | | | |
| Delaware National High-Yield Municipal Bond Fund | | | |
| Net asset value Class A (A) | | $ | 8.92 |
| Sales charge (4.50% of offering price) (B) | | | 0.42 |
| Offering price | | $ | 9.34 |
| (A) | Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. |
| (B) | See the current prospectus for purchases of $100,000 or more. |
See accompanying notes
62
| Statements of operations | |
| Year Ended August 31, 2009 |
| | Delaware | | Delaware | | Delaware |
| | Tax-Free | | Tax-Free USA | | National High-Yield |
| | USA Fund | | Intermediate Fund | | Municipal Bond Fund |
| Investment Income: | | | | | | | | | | | | | | |
| Interest | | $ | 29,239,930 | | | | $ | 18,728,141 | | | | $ | 4,824,027 | |
| |
| Expenses: | | | | | | | | | | | | | | |
| Management fees | | | 2,937,212 | | | | | 2,194,831 | | | | | 381,113 | |
| Distribution expenses – Class A | | | 1,232,597 | | | | | 1,219,093 | | | | | 152,059 | |
| Distribution expenses – Class B | | | 92,299 | | | | | 9,560 | | | | | 20,950 | |
| Distribution expenses – Class C | | | 178,247 | | | | | 307,441 | | | | | 63,888 | |
| Dividend disbursing and transfer | | | | | | | | | | | | | | |
| agent fees and expenses | | | 388,618 | | | | | 492,179 | | | | | 54,699 | |
| Accounting and administration expenses | | | 214,995 | | | | | 175,586 | | | | | 27,717 | |
| Registration fees | | | 98,265 | | | | | 98,134 | | | | | 56,974 | |
| Legal fees | | | 83,688 | | | | | 71,578 | | | | | 12,668 | |
| Reports and statements to shareholders | | | 64,145 | | | | | 59,372 | | | | | 10,393 | |
| Audit and tax | | | 45,162 | | | | | 40,074 | | | | | 15,330 | |
| Trustees’ fees | | | 38,960 | | | | | 31,697 | | | | | 5,015 | |
| Insurance fees | | | 18,193 | | | | | 14,326 | | | | | 2,112 | |
| Pricing fees | | | 17,182 | | | | | 19,833 | | | | | 9,818 | |
| Custodian fees | | | 9,895 | | | | | 8,144 | | | | | 1,489 | |
| Consulting fees | | | 7,340 | | | | | 5,929 | | | | | 942 | |
| Due and services | | | 3,445 | | | | | 2,329 | | | | | 322 | |
| Trustees’ expenses | | | 3,040 | | | | | 2,429 | | | | | 406 | |
| | | | 5,433,283 | | | | | 4,752,535 | | | | | 815,895 | |
| Less expenses absorbed or waived | | | (696,758 | ) | | | | (575,527 | ) | | | | (127,504 | ) |
| Less waived distribution expenses – Class A | | | — | | | | | (609,546 | ) | | | | — | |
| Less expense paid indirectly | | | (1,825 | ) | | | | (1,433 | ) | | | | (247 | ) |
| Total operating expenses | | | 4,734,700 | | | | | 3,566,029 | | | | | 688,144 | |
| Net Investment Income | | | 24,505,230 | | | | | 15,162,112 | | | | | 4,135,883 | |
64
| | Delaware | | Delaware | | Delaware |
| | Tax-Free | | Tax-Free USA | | National High-Yield |
| | USA Fund | | Intermediate Fund | | Municipal Bond Fund |
| Net Realized and Unrealized Gain | | | | | | | | | | | | | | |
| (Loss) on Investments: | | | | | | | | | | | | | | |
| Net realized loss on investments | | $ | (2,838,744 | ) | | | $ | (2,348,573 | ) | | | $ | (898,271 | ) |
| Net change in unrealized appreciation/ | | | | | | | | | | | | | | |
| depreciation of investments | | | 1,152,242 | | | | | 11,254,947 | | | | | (3,755,920 | ) |
| Net Realized and Unrealized Gain | | | | | | | | | | | | | | |
| (Loss) on Investments | | | (1,686,502 | ) | | | | 8,906,374 | | | | | (4,654,191 | ) |
| |
| Net Increase (Decrease) in Net Assets | | | | | | | | | | | | | | |
| Resulting from Operations | | $ | 22,818,728 | | | | $ | 24,068,486 | | | | $ | (518,308 | ) |
See accompanying notes
65
Statements of changes in net assets
Delaware Tax-Free USA Fund
| | Year Ended |
| | 8/31/09 | | 8/31/08 |
| Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
| Net investment income | | $ | 24,505,230 | | | $ | 27,617,892 | |
| Net realized loss on investments | | | (2,838,744 | ) | | | (9,007,332 | ) |
| Net change in unrealized | | | | | | | | |
| appreciation/depreciation of investments | | | 1,152,242 | | | | (6,388,968 | ) |
| Net increase in net assets resulting from operations | | | 22,818,728 | | | | 12,221,592 | |
| |
| Dividends and Distributions to Shareholders from: | | | | | | | | |
| Net investment income: | | | | | | | | |
| Class A | | | (23,405,639 | ) | | | (26,581,925 | ) |
| Class B | | | (352,615 | ) | | | (470,633 | ) |
| Class C | | | (681,841 | ) | | | (565,334 | ) |
| Institutional Class | | | (32 | ) | | | — | |
| | | (24,440,127 | ) | | | (27,617,892 | ) |
| |
| Capital Share Transactions: | | | | | | | | |
| Proceeds from shares sold: | | | | | | | | |
| Class A | | | 118,535,984 | | | | 37,572,215 | |
| Class B | | | 70,203 | | | | 293,560 | |
| Class C | | | 6,869,985 | | | | 4,557,451 | |
| Institutional Class | | | 1,022 | | | | — | |
| |
| Net asset value of shares issued upon reinvestment | | | | | | | | |
| of dividends and distributions: | | | | | | | | |
| Class A | | | 12,514,345 | | | | 13,138,217 | |
| Class B | | | 172,056 | | | | 251,193 | |
| Class C | | | 484,088 | | | | 410,918 | |
| Institutional Class | | | 32 | | | | — | |
| | | 138,647,715 | | | | 56,223,554 | |
66
| | Year Ended |
| | 8/31/09 | | 8/31/08 |
| Capital Share Transactions (continued): | | | | | | | | |
| Cost of shares repurchased: | | | | | | | | |
| Class A | | $ | (104,004,049 | ) | | $ | (260,772,109 | ) |
| Class B | | | (3,624,046 | ) | | | (5,722,909 | ) |
| Class C | | | (3,541,888 | ) | | | (4,798,596 | ) |
| | | | (111,169,983 | ) | | | (271,293,614 | ) |
| Increase (decrease) in net assets derived from | | | | | | | | |
| capital share transactions | | | 27,477,732 | | | | (215,070,060 | ) |
| Net Increase (Decrease) in Net Assets | | | 25,856,333 | | | | (230,466,360 | ) |
| |
| Net Assets: | | | | | | | | |
| Beginning of year | | | 539,274,944 | | | | 769,741,304 | |
| End of year | | $ | 565,131,277 | | | $ | 539,274,944 | |
| |
| Undistributed net investment income | | $ | 66,893 | | | $ | 1,790 | |
See accompanying notes
67
Statements of changes in net assets
Delaware Tax-Free USA Intermediate Fund
| | Year Ended |
| | 8/31/09 | | 8/31/08 |
| Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
| Net investment income | | $ | 15,162,112 | | | $ | 12,913,451 | |
| Net realized loss on investments | | | (2,348,573 | ) | | | (3,995,267 | ) |
| Net change in unrealized | | | | | | | | |
| appreciation/depreciation of investments | | | 11,254,947 | | | | 4,897,895 | |
| Net increase in net assets resulting from operations | | | 24,068,486 | | | | 13,816,079 | |
| |
| Dividends and Distributions to Shareholders from: | | | | | | | | |
| Net investment income: | | | | | | | | |
| Class A | | | (14,270,823 | ) | | | (12,238,496 | ) |
| Class B | | | (25,400 | ) | | | (39,714 | ) |
| Class C | | | (817,862 | ) | | | (667,017 | ) |
| Institutional Class | | | (26 | ) | | | — | |
| | | (15,114,111 | ) | | | (12,945,227 | ) |
| |
| Capital Share Transactions: | | | | | | | | |
| Proceeds from shares sold: | | | | | | | | |
| Class A | | | 235,187,166 | | | | 206,786,111 | |
| Class B | | | 184,940 | | | | 131,370 | |
| Class C | | | 19,373,068 | | | | 7,290,130 | |
| Institutional Class | | | 1,022 | | | | — | |
| |
| Net asset value of shares issued upon reinvestment | | | | | | | | |
| of dividends and distributions: | | | | | | | | |
| Class A | | | 9,817,928 | | | | 9,108,623 | |
| Class B | | | 18,329 | | | | 31,547 | |
| Class C | | | 581,579 | | | | 429,923 | |
| Institutional Class | | | 24 | | | | — | |
| | | 265,164,056 | | | | 223,777,704 | |
68
| | Year Ended |
| | 8/31/09 | | 8/31/08 |
| Capital Share Transactions (continued): | | | | | | | | |
| Cost of shares repurchased: | | | | | | | | |
| Class A | | $ | (201,015,285 | ) | | $ | (115,146,849 | ) |
| Class B | | | (616,595 | ) | | | (680,553 | ) |
| Class C | | | (5,491,621 | ) | | | (11,178,428 | ) |
| | | | (207,123,501 | ) | | | (127,005,830 | ) |
| Increase in net assets derived from | | | | | | | | |
| capital share transactions | | | 58,040,555 | | | | 96,771,874 | |
| Net Increase in Net Assets | | | 66,994,930 | | | | 97,642,726 | |
| |
| Net Assets: | | | | | | | | |
| Beginning of year | | | 433,880,640 | | | | 336,237,914 | |
| End of year | | $ | 500,875,570 | | | $ | 433,880,640 | |
| |
| Undistributed (distributions in excess of) | | | | | | | | |
| net investment income | | $ | 16,225 | | | $ | (31,776 | ) |
See accompanying notes
69
Statements of changes in net assets
Delaware National High-Yield Municipal Bond Fund
| | Year Ended |
| | 8/31/09 | | 8/31/08 |
| Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
| Net investment income | | $ | 4,135,883 | | | $ | 3,633,791 | |
| Net realized gain (loss) on investments | | | (898,271 | ) | | | 245,645 | |
| Net change in unrealized | | | | | | | | |
| appreciation/depreciation of investments | | | (3,755,920 | ) | | | (4,249,383 | ) |
| Net decrease in net assets resulting from operations | | | (518,308 | ) | | | (369,947 | ) |
| |
| Dividends and Distributions to Shareholders from: | | | | | | | | |
| Net investment income: | | | | | | | | |
| Class A | | | (3,657,847 | ) | | | (3,214,246 | ) |
| Class B | | | (110,366 | ) | | | (176,575 | ) |
| Class C | | | (335,892 | ) | | | (242,971 | ) |
| Institutional Class | | | (47 | ) | | | — | |
| | | (4,104,152 | ) | | | (3,633,792 | ) |
| |
| Capital Share Transactions: | | | | | | | | |
| Proceeds from shares sold: | | | | | | | | |
| Class A | | | 12,889,514 | | | | 17,354,089 | |
| Class B | | | 289,157 | | | | 54,983 | |
| Class C | | | 2,516,187 | | | | 3,638,033 | |
| Institutional Class | | | 1,016 | | | | — | |
| |
| Net asset value of shares issued upon reinvestment | | | | | | | | |
| of dividends and distributions: | | | | | | | | |
| Class A | | | 2,236,012 | | | | 1,920,956 | |
| Class B | | | 50,724 | | | | 62,814 | |
| Class C | | | 220,675 | | | | 164,618 | |
| Institutional Class | | | 45 | | | | — | |
| | | 18,203,330 | | | | 23,195,493 | |
70
| | Year Ended |
| | 8/31/09 | | 8/31/08 |
| Capital Share Transactions (continued): | | | | | | | | |
| Cost of shares repurchased: | | | | | | | | |
| Class A | | $ | (10,110,767 | ) | | $ | (13,185,106 | ) |
| Class B | | | (1,746,311 | ) | | | (2,736,136 | ) |
| Class C | | | (1,588,149 | ) | | | (1,338,113 | ) |
| | | | (13,445,227 | ) | | | (17,259,355 | ) |
| Increase in net assets derived from | | | | | | | | |
| capital share transactions | | | 4,758,103 | | | | 5,936,138 | |
| Net Increase in Net Assets | | | 135,643 | | | | 1,932,399 | |
| | | | | | | | | |
| Net Assets: | | | | | | | | |
| Beginning of year | | | 77,895,470 | | | | 75,963,071 | |
| End of year | | $ | 78,031,113 | | | $ | 77,895,470 | |
| Undistributed (distributions in excess of) | | | | | | | | |
| net investment income | | $ | 13,405 | | | $ | (4,103 | ) |
See accompanying notes
71
Financial highlights
Delaware Tax-Free USA Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
| Net asset value, beginning of period |
| |
| Income (loss) from investment operations: |
| Net investment income |
| Net realized and unrealized gain (loss) on investments |
| Total from investment operations |
| |
| Less dividends and distributions from: |
| Net investment income |
| Total dividends and distributions |
| |
| Net asset value, end of period |
| |
| Total return1 |
| |
| Ratios and supplemental data: |
| Net assets, end of period (000 omitted) |
| Ratio of expenses to average net assets |
| Ratio of expenses to average net assets |
| prior to fees waived and expense paid indirectly |
| Ratio of net investment income to average net assets |
| Ratio of net investment income to average net assets |
| prior to fees waived and expense paid indirectly |
| Portfolio turnover |
1 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers by the manager and distributor, as applicable. Performance would have been lower had the waivers not been in effect. |
See accompanying notes
72
| Year Ended | |
| 8/31/09 | | 8/31/08 | | 8/31/07 | | 8/31/06 | | 8/31/05 | |
| | $10.970 | | | $11.230 | | | $11.570 | | | $11.760 | | | $11.460 | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | 0.479 | | | 0.462 | | | 0.466 | | | 0.458 | | | 0.512 | | |
| | (0.081 | ) | | (0.260 | ) | | (0.337 | ) | | (0.186 | ) | | 0.300 | | |
| | 0.398 | | | 0.202 | | | 0.129 | | | 0.272 | | | 0.812 | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | (0.478 | ) | | (0.462 | ) | | (0.469 | ) | | (0.462 | ) | | (0.512 | ) | |
| | (0.478 | ) | | (0.462 | ) | | (0.469 | ) | | (0.462 | ) | | (0.512 | ) | |
| | | | | | | | | | | | | | | | |
| | $10.890 | | | $10.970 | | | $11.230 | | | $11.570 | | | $11.760 | | |
| | | | | | | | | | | | | | | | |
| | 3.91% | | | 1.82% | | | 1.08% | | | 2.42% | | | 7.23% | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | $536,420 | | | $510,822 | | | $735,584 | | | $656,813 | | | $453,982 | | |
| | 0.84% | | | 0.85% | | | 0.87% | | | 0.86% | | | 0.86% | | |
| | | | | | | | | | | | | | | | |
| | 0.97% | | | 0.94% | | | 0.95% | | | 1.00% | | | 0.98% | | |
| | 4.60% | | | 4.13% | | | 4.03% | | | 3.97% | | | 4.43% | | |
| | | | | | | | | | | | | | | | |
| | 4.47% | | | 4.04% | | | 3.95% | | | 3.83% | | | 4.31% | | |
| | 66% | | | 28% | | | 36% | | | 41% | | | 47% | | |
73
Financial highlights
Delaware Tax-Free USA Fund Class B
Selected data for each share of the Fund outstanding throughout each period were as follows:
| Net asset value, beginning of period |
| |
| Income (loss) from investment operations: |
| Net investment income |
| Net realized and unrealized gain (loss) on investments |
| Total from investment operations |
| |
| Less dividends and distributions from: |
| Net investment income |
| Total dividends and distributions |
| |
| Net asset value, end of period |
| |
| Total return1 |
| |
| Ratios and supplemental data: |
| Net assets, end of period (000 omitted) |
| Ratio of expenses to average net assets |
| Ratio of expenses to average net assets |
| prior to fees waived and expense paid indirectly |
| Ratio of net investment income to average net assets |
| Ratio of net investment income to average net assets |
| prior to fees waived and expense paid indirectly |
| Portfolio turnover |
1 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
74
| Year Ended | |
| 8/31/09 | | 8/31/08 | | 8/31/07 | | 8/31/06 | | 8/31/05 | |
| $10.960 | | | $11.230 | | | $11.570 | | | $11.760 | | | $11.460 | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| 0.399 | | | 0.378 | | | 0.378 | | | 0.370 | | | 0.423 | | |
| (0.080 | ) | | (0.270 | ) | | (0.337 | ) | | (0.186 | ) | | 0.300 | | |
| 0.319 | | | 0.108 | | | 0.041 | | | 0.184 | | | 0.723 | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| (0.399 | ) | | (0.378 | ) | | (0.381 | ) | | (0.374 | ) | | (0.423 | ) | |
| (0.399 | ) | | (0.378 | ) | | (0.381 | ) | | (0.374 | ) | | (0.423 | ) | |
| | | | | | | | | | | | | | | | |
| $10.880 | | | $10.960 | | | $11.230 | | | $11.570 | | | $11.760 | | |
| | | | | | | | | | | | | | | | |
| 3.13% | | | 0.96% | | | 0.32% | | | 1.63% | | | 6.42% | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| $8,168 | | | $11,812 | | | $17,286 | | | $22,189 | | | $16,507 | | |
| 1.60% | | | 1.61% | | | 1.63% | | | 1.63% | | | 1.63% | | |
| | | | | | | | | | | | | | | | |
| 1.73% | | | 1.70% | | | 1.71% | | | 1.73% | | | 1.71% | | |
| 3.84% | | | 3.37% | | | 3.27% | | | 3.20% | | | 3.66% | | |
| | | | | | | | | | | | | | | | |
| 3.71% | | | 3.28% | | | 3.19% | | | 3.10% | | | 3.58% | | |
| 66% | | | 28% | | | 36% | | | 41% | | | 47% | | |
75
Financial highlights
Delaware Tax-Free USA Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
| Net asset value, beginning of period |
| |
| Income (loss) from investment operations: |
| Net investment income |
| Net realized and unrealized gain (loss) on investments |
| Total from investment operations |
| |
| Less dividends and distributions from: |
| Net investment income |
| Total dividends and distributions |
| |
| Net asset value, end of period |
| |
| Total return1 |
| |
| Ratios and supplemental data: |
| Net assets, end of period (000 omitted) |
| Ratio of expenses to average net assets |
| Ratio of expenses to average net assets |
| prior to fees waived and expense paid indirectly |
| Ratio of net investment income to average net assets |
| Ratio of net investment income to average net assets |
| prior to fees waived and expense paid indirectly |
| Portfolio turnover |
1 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
76
| Year Ended | |
| 8/31/09 | | 8/31/08 | | 8/31/07 | | 8/31/06 | | 8/31/05 | |
| | $10.970 | | | $11.230 | | | $11.570 | | | $11.760 | | | $11.460 | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| 0.399 | | | 0.377 | | | 0.378 | | | 0.370 | | | 0.423 | | |
| (0.080 | ) | | (0.260 | ) | | (0.337 | ) | | (0.186 | ) | | 0.300 | | |
| | 0.319 | | | 0.117 | | | 0.041 | | | 0.184 | | | 0.723 | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| (0.399 | ) | | (0.377 | ) | | (0.381 | ) | | (0.374 | ) | | (0.423 | ) | |
| (0.399 | ) | | (0.377 | ) | | (0.381 | ) | | (0.374 | ) | | (0.423 | ) | |
| | | | | | | | | | | | | | | | |
| $10.890 | | | $10.970 | | | $11.230 | | | $11.570 | | | $11.760 | | |
| | | | | | | | | | | | | | | | |
| 3.13% | | | 0.96% | | | 0.41% | | | 1.63% | | | 6.42% | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| $20,542 | | | $16,641 | | | $16,871 | | | $15,110 | | | $5,963 | | |
| 1.60% | | | 1.61% | | | 1.63% | | | 1.63% | | | 1.63% | | |
| | | | | | | | | | | | | | | | |
| 1.73% | | | 1.70% | | | 1.71% | | | 1.73% | | | 1.71% | | |
| 3.84% | | | 3.37% | | | 3.27% | | | 3.20% | | | 3.66% | | |
| | | | | | | | | | | | | | | | |
| 3.71% | | | 3.28% | | | 3.19% | | | 3.10% | | | 3.58% | | |
| 66% | | | 28% | | | 36% | | | 41% | | | 47% | | |
77
Financial highlights
Delaware Tax-Free USA Fund Institutional Class
Selected data for each share of the Fund outstanding throughout the period were as follows:
| | 12/31/081 | |
| | to 8/31/09 | |
| Net asset value, beginning of period | | $10.020 | | |
| | | | | |
| Income from investment operations: | | | | |
| Net investment income | | 0.322 | | |
| Net realized and unrealized gain on investments | | 0.870 | | |
| Total from investment operations | | 1.192 | | |
| | | | | |
| Less dividends and distributions from: | | | | |
| Net investment income | | (0.322 | ) | |
| Total dividends and distributions | | (0.322 | ) | |
| | | | | |
| Net asset value, end of period | | $10.890 | | |
| | | | | |
| Total return2 | | 12.15% | | |
| | | | | |
| Ratios and supplemental data: | | | | |
| Net assets, end of period (000 omitted) | | $1 | | |
| Ratio of expenses to average net assets | | 0.60% | | |
| Ratio of expenses to average net assets | | | | |
| prior to fees waived and expense paid indirectly | | 0.73% | | |
| Ratio of net investment income to average net assets | | 4.84% | | |
| Ratio of net investment income to average net assets | | | | |
| prior to fees waived and expense paid indirectly | | 4.71% | | |
| Portfolio turnover | | 66% | 3 | |
1 Date of commencement of operations; ratios have been annualized and total return has not been annualized. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
3 Portfolio turnover is representative of the Fund for the year ended August 31, 2009. |
See accompanying notes
78
Financial highlights
Delaware Tax-Free USA Intermediate Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
| Net asset value, beginning of period |
| |
| Income (loss) from investment operations: |
| Net investment income |
| Net realized and unrealized gain (loss) on investments |
| Total from investment operations |
| |
| Less dividends and distributions from: |
| Net investment income |
| Total dividends and distributions |
| |
| Net asset value, end of period |
| |
| Total return1 |
| |
| Ratios and supplemental data: |
| Net assets, end of period (000 omitted) |
| Ratio of expenses to average net assets |
| Ratio of expenses to average net assets |
| prior to fees waived and expense paid indirectly |
| Ratio of net investment income to average net assets |
| Ratio of net investment income to average net assets |
| prior to fees waived and expense paid indirectly |
| Portfolio turnover |
1 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes
80
| Year Ended | |
| 8/31/09 | | 8/31/08 | | 8/31/07 | | 8/31/06 | | 8/31/05 | |
| $11.250 | | | $11.210 | | | $11.470 | | | $11.610 | | | $11.390 | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| 0.388 | | | 0.383 | | | 0.414 | | | 0.408 | | | 0.410 | | |
| 0.210 | | | 0.041 | | | (0.260 | ) | | (0.140 | ) | | 0.220 | | |
| | 0.598 | | | 0.424 | | | 0.154 | | | 0.268 | | | 0.630 | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| (0.388 | ) | | (0.384 | ) | | (0.414 | ) | | (0.408 | ) | | (0.410 | ) | |
| (0.388 | ) | | (0.384 | ) | | (0.414 | ) | | (0.408 | ) | | (0.410 | ) | |
| | | | | | | | | | | | | | | | |
| $11.460 | | | $11.250 | | | $11.210 | | | $11.470 | | | $11.610 | | |
| | | | | | | | | | | | | | | | |
| 5.49% | | | 3.83% | | | 1.34% | | | 2.38% | | | 5.63% | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| $459,782 | | | $407,729 | | | $306,215 | | | $204,525 | | | $120,273 | | |
| 0.75% | | | 0.75% | | | 0.76% | | | 0.75% | | | 0.79% | | |
| | | | | | | | | | | | | | | | |
| 1.03% | | | 1.03% | | | 1.03% | | | 1.07% | | | 1.11% | | |
| 3.51% | | | 3.38% | | | 3.60% | | | 3.56% | | | 3.55% | | |
| | | | | | | | | | | | | | | | |
| 3.23% | | | 3.10% | | | 3.33% | | | 3.24% | | | 3.23% | | |
| 47% | | | 28% | | | 40% | | | 37% | | | 18% | | |
81
Financial highlights
Delaware Tax-Free USA Intermediate Fund Class B
Selected data for each share of the Fund outstanding throughout each period were as follows:
| Net asset value, beginning of period |
| |
| Income (loss) from investment operations: |
| Net investment income |
| Net realized and unrealized gain (loss) on investments |
| Total from investment operations |
| |
| Less dividends and distributions from: |
| Net investment income |
| Total dividends and distributions |
| |
| Net asset value, end of period |
| |
| Total return1 |
| |
| Ratios and supplemental data: |
| Net assets, end of period (000 omitted) |
| Ratio of expenses to average net assets |
| Ratio of expenses to average net assets |
| prior to fees waived and expense paid indirectly |
| Ratio of net investment income to average net assets |
| Ratio of net investment income to average net assets |
| prior to fees waived and expense paid indirectly |
| Portfolio turnover |
1 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes
82
| Year Ended | |
| 8/31/09 | | 8/31/08 | | 8/31/07 | | 8/31/06 | | 8/31/05 | |
| $11.240 | | | $11.200 | | | $11.460 | | | $11.610 | | | $11.380 | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| 0.294 | | | 0.287 | | | 0.317 | | | 0.311 | | | 0.313 | | |
| 0.210 | | | 0.041 | | | (0.260 | ) | | (0.150 | ) | | 0.230 | | |
| 0.504 | | | 0.328 | | | 0.057 | | | 0.161 | | | 0.543 | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| (0.294 | ) | | (0.288 | ) | | (0.317 | ) | | (0.311 | ) | | (0.313 | ) | |
| (0.294 | ) | | (0.288 | ) | | (0.317 | ) | | (0.311 | ) | | (0.313 | ) | |
| | | | | | | | | | | | | | | | |
| $11.450 | | | $11.240 | | | $11.200 | | | $11.460 | | | $11.610 | | |
| | | | | | | | | | | | | | | | |
| 4.61% | | | 2.95% | | | 0.48% | | | 1.43% | | | 4.83% | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| $861 | | | $1,272 | | | $1,786 | | | $2,413 | | | $3,203 | | |
| 1.60% | | | 1.60% | | | 1.61% | | | 1.60% | | | 1.64% | | |
| | | | | | | | | | | | | | | | |
| 1.73% | | | 1.73% | | | 1.73% | | | 1.77% | | | 1.81% | | |
| 2.66% | | | 2.53% | | | 2.75% | | | 2.71% | | | 2.70% | | |
| | | | | | | | | | | | | | | |
| | 2.53% | | | 2.40% | | | 2.63% | | | 2.54% | | | 2.53% | | |
| 47% | | | 28% | | | 40% | | | 37% | | | 18% | | |
83
Financial highlights
Delaware Tax-Free USA Intermediate Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
| |
| Net asset value, beginning of period |
| |
| Income (loss) from investment operations: |
| Net investment income |
| Net realized and unrealized gain (loss) on investments |
| Total from investment operations |
| |
| Less dividends and distributions from: |
| Net investment income |
| Total dividends and distributions |
| |
| Net asset value, end of period |
| |
| Total return1 |
| |
| Ratios and supplemental data: |
| Net assets, end of period (000 omitted) |
| Ratio of expenses to average net assets |
| Ratio of expenses to average net assets |
| prior to fees waived and expense paid indirectly |
| Ratio of net investment income to average net assets |
| Ratio of net investment income to average net assets |
| prior to fees waived and expense paid indirectly |
| Portfolio turnover |
1 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect.
See accompanying notes
84
| Year Ended |
| | 8/31/09 | | | 8/31/08 | | | 8/31/07 | | | 8/31/06 | | | 8/31/05 | | |
| | $11.240 | | | $11.200 | | | $11.470 | | | $11.610 | | | $11.390 | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | 0.294 | | | 0.287 | | | 0.317 | | | 0.311 | | | 0.313 | | |
| | 0.210 | | | 0.041 | | | (0.270 | ) | | (0.140 | ) | | 0.220 | | |
| | 0.504 | | | 0.328 | | | 0.047 | | | 0.171 | | | 0.533 | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | (0.294 | ) | | (0.288 | ) | | (0.317 | ) | | (0.311 | ) | | (0.313 | ) | |
| | (0.294 | ) | | (0.288 | ) | | (0.317 | ) | | (0.311 | ) | | (0.313 | ) | |
| | | | | | | | | | | | | | | | | |
| | $11.450 | | | $11.240 | | | $11.200 | | | $11.470 | | | $11.610 | | |
| | | | | | | | | | | | | | | | | |
| | 4.60% | | | 2.95% | | | 0.39% | | | 1.52% | | | 4.74% | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | $40,232 | | | $24,880 | | | $28,237 | | | $28,004 | | | $25,125 | | |
| | 1.60% | | | 1.60% | | | 1.61% | | | 1.60% | | | 1.64% | | |
| | | | | | | | | | | | | | | | | |
| | 1.73% | | | 1.73% | | | 1.73% | | | 1.77% | | | 1.81% | | |
| | 2.66% | | | 2.53% | | | 2.75% | | | 2.71% | | | 2.70% | | |
| | | | | | | | | | | | | | | | | |
| | 2.53% | | | 2.40% | | | 2.63% | | | 2.54% | | | 2.53% | | |
| | 47% | | | 28% | | | 40% | | | 37% | | | 18% | | |
85
Financial highlights
Delaware Tax-Free USA Intermediate Fund Institutional Class
Selected data for each share of the Fund outstanding throughout the period were as follows:
| 12/31/081 | |
| to 8/31/09 | |
| Net asset value, beginning of period | | $10.800 | | |
| | | | | |
| Income from investment operations: | | | | |
| Net investment income | | 0.269 | | |
| Net realized and unrealized gain on investments | | 0.660 | | |
| Total from investment operations | | 0.929 | | |
| | | | | |
| Less dividends and distributions from: | | | | |
| Net investment income | | (0.269 | ) | |
| Total dividends and distributions | | (0.269 | ) | |
| | | | | |
| Net asset value, end of period | | $11.460 | | |
| | | | | |
| Total return1 | | 8.68% | | |
| | | | | |
| Ratios and supplemental data: | | | | |
| Net assets, end of period (000 omitted) | | $1 | | |
| Ratio of expenses to average net assets | | 0.60% | | |
| Ratio of expenses to average net assets | | | | |
| prior to fees waived and expense paid indirectly | | 0.73% | | |
| Ratio of net investment income to average net assets | | 3.65% | | |
| Ratio of net investment income to average net assets | | | | |
| prior to fees waived and expense paid indirectly | | 3.52% | | |
| Portfolio turnover | | 47% | 3 | |
1 Date of commencement of operations; ratios have been annualized and total return has not been annualized. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
3 Portfolio turnover is representative of the Fund for the year ended August 31, 2009. |
See accompanying notes
86
Financial highlights
Delaware National High-Yield Municipal Bond Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
| |
| Net asset value, beginning of period |
| |
| Income (loss) from investment operations: |
| Net investment income |
| Net realized and unrealized gain (loss) on investments |
| Total from investment operations |
| |
| Less dividends and distributions from: |
| Net investment income |
| Total dividends and distributions |
| |
| Net asset value, end of period |
| |
| Total return1 |
| |
| Ratios and supplemental data: |
| Net assets, end of period (000 omitted) |
| Ratio of expenses to average net assets |
| Ratio of expenses to average net assets |
| prior to fees waived and expense paid indirectly |
| Ratio of net investment income to average net assets |
| Ratio of net investment income to average net assets |
| prior to fees waived and expense paid indirectly |
| Portfolio turnover |
1 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect.
See accompanying notes
88
| Year Ended |
| | 8/31/09 | | | 8/31/08 | | | 8/31/07 | | | 8/31/06 | | | 8/31/05 | | |
| | $9.510 | | | $10.030 | | | $10.320 | | | $10.380 | | | $10.010 | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | 0.505 | | | 0.484 | | | 0.482 | | | 0.477 | | | 0.503 | | |
| | (0.595 | ) | | (0.520 | ) | | (0.290 | ) | | (0.060 | ) | | 0.371 | | |
| | (0.090 | ) | | (0.036 | ) | | 0.192 | | | 0.417 | | | 0.874 | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | (0.500 | ) | | (0.484 | ) | | (0.482 | ) | | (0.477 | ) | | (0.504 | ) | |
| | (0.500 | ) | | (0.484 | ) | | (0.482 | ) | | (0.477 | ) | | (0.504 | ) | |
| | | | | | | | | | | | | | | | | |
| | $8.920 | | | $9.510 | | | $10.030 | | | $10.320 | | | $10.380 | | |
| | | | | | | | | | | | | | | | | |
| | (0.38% | ) | | (0.37% | ) | | 1.82% | | | 4.15% | | | 8.93% | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | $68,812 | | | $67,762 | | | $65,143 | | | $68,663 | | | $66,451 | | |
| | 0.90% | | | 0.90% | | | 0.91% | | | 0.90% | | | 0.93% | | |
| | | | | | | | | | | | | | | | | |
| | 1.08% | | | 1.04% | | | 1.03% | | | 1.02% | | | 1.01% | | |
| | 6.06% | | | 4.94% | | | 4.66% | | | 4.66% | | | 4.92% | | |
| | | | | | | | | | | | | | | | | |
| | 5.88% | | | 4.80% | | | 4.54% | | | 4.54% | | | 4.84% | | |
| | 67% | | | 24% | | | 37% | | | 73% | | | 36% | | |
89
Financial highlights
Delaware National High-Yield Municipal Bond Fund Class B
Selected data for each share of the Fund outstanding throughout each period were as follows:
| |
| Net asset value, beginning of period |
| |
| Income (loss) from investment operations: |
| Net investment income |
| Net realized and unrealized gain (loss) on investments |
| Total from investment operations |
| |
| Less dividends and distributions from: |
| Net investment income |
| Total dividends and distributions |
| |
| Net asset value, end of period |
| |
| Total return1 |
| |
| Ratios and supplemental data: |
| Net assets, end of period (000 omitted) |
| Ratio of expenses to average net assets |
| Ratio of expenses to average net assets |
| prior to fees waived and expense paid indirectly |
| Ratio of net investment income to average net assets |
| Ratio of net investment income to average net assets |
| prior to fees waived and expense paid indirectly |
| Portfolio turnover |
1 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect.
See accompanying notes
90
| Year Ended |
| | 8/31/09 | | | 8/31/08 | | | 8/31/07 | | | 8/31/06 | | | 8/31/05 | | |
| | $9.530 | | | $10.050 | | | $10.350 | | | $10.400 | | | $10.030 | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | 0.440 | | | 0.410 | | | 0.404 | | | 0.400 | | | 0.426 | | |
| | (0.592 | ) | | (0.520 | ) | | (0.300 | ) | | (0.050 | ) | | 0.371 | | |
| | (0.152 | ) | | (0.110 | ) | | 0.104 | | | 0.350 | | | 0.797 | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | (0.438 | ) | | (0.410 | ) | | (0.404 | ) | | (0.400 | ) | | (0.427 | ) | |
| | (0.438 | ) | | (0.410 | ) | | (0.404 | ) | | (0.400 | ) | | (0.427 | ) | |
| | | | | | | | | | | | | | | | | |
| | $8.940 | | | $9.530 | | | $10.050 | | | $10.350 | | | $10.400 | | |
| | | | | | | | | | | | | | | | | |
| | (1.11% | ) | | (1.12% | ) | | 0.96% | | | 3.47% | | | 8.10% | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | $1,448 | | | $3,135 | | | $5,972 | | | $9,519 | | | $13,046 | | |
| | 1.65% | | | 1.65% | | | 1.66% | | | 1.65% | | | 1.68% | | |
| | | | | | | | | | | | | | | | | |
| | 1.83% | | | 1.79% | | | 1.78% | | | 1.77% | | | 1.76% | | |
| | 5.31% | | | 4.19% | | | 3.91% | | | 3.91% | | | 4.17% | | |
| | | | | | | | | | | | | | | | | |
| | 5.13% | | | 4.05% | | | 3.79% | | | 3.79% | | | 4.09% | | |
| | 67% | | | 24% | | | 37% | | | 73% | | | 36% | | |
91
Financial highlights
Delaware National High-Yield Municipal Bond Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
| |
| Net asset value, beginning of period |
| |
| Income (loss) from investment operations: |
| Net investment income |
| Net realized and unrealized gain (loss) on investments |
| Total from investment operations |
| |
| Less dividends and distributions from: |
| Net investment income |
| Total dividends and distributions |
| |
| Net asset value, end of period |
| |
| Total return1 |
| |
| Ratios and supplemental data: |
| Net assets, end of period (000 omitted) |
| Ratio of expenses to average net assets |
| Ratio of expenses to average net assets |
| prior to fees waived and expense paid indirectly |
| Ratio of net investment income to average net assets |
| Ratio of net investment income to average net assets |
| prior to fees waived and expense paid indirectly |
| Portfolio turnover |
1 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect.
See accompanying notes
92
| Year Ended |
| | 8/31/09 | | | 8/31/08 | | | 8/31/07 | | | 8/31/06 | | | 8/31/05 | | |
| | $9.550 | | | $10.070 | | | $10.360 | | | $10.420 | | | $10.040 | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | 0.441 | | | 0.410 | | | 0.404 | | | 0.400 | | | 0.426 | | |
| | (0.592 | ) | | (0.520 | ) | | (0.290 | ) | | (0.060 | ) | | 0.381 | | |
| | (0.151 | ) | | (0.110 | ) | | 0.114 | | | 0.340 | | | 0.807 | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | (0.439 | ) | | (0.410 | ) | | (0.404 | ) | | (0.400 | ) | | (0.427 | ) | |
| | (0.439 | ) | | (0.410 | ) | | (0.404 | ) | | (0.400 | ) | | (0.427 | ) | |
| | | | | | | | | | | | | | | | | |
| | $8.960 | | | $9.550 | | | $10.070 | | | $10.360 | | | $10.420 | | |
| | | | | | | | | | | | | | | | | |
| | (1.11% | ) | | (1.12% | ) | | 1.06% | | | 3.36% | | | 8.19% | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | $7,770 | | | $6,998 | | | $4,848 | | | $5,332 | | | $5,234 | | |
| | 1.65% | | | 1.65% | | | 1.66% | | | 1.65% | | | 1.68% | | |
| | | | | | | | | | | | | | | | | |
| | 1.83% | | | 1.79% | | | 1.78% | | | 1.77% | | | 1.76% | | |
| | 5.31% | | | 4.19% | | | 3.91% | | | 3.91% | | | 4.17% | | |
| | | | | | | | | | | | | | | | | |
| | 5.13% | | | 4.05% | | | 3.79% | | | 3.79% | | | 4.09% | | |
| | 67% | | | 24% | | | 37% | | | 73% | | | 36% | | |
93
Financial highlights
Delaware National High-Yield Municipal Bond Fund Institutional Class
Selected data for each share of the Fund outstanding throughout the period were as follows:
| 12/31/081 | |
| to 8/31/09 | |
| Net asset value, beginning of period | | $7.590 | | |
| | | | | |
| Income from investment operations: | | | | |
| Net investment income | | 0.342 | | |
| Net realized and unrealized gain on investments | | 1.338 | | |
| Total from investment operations | | 1.680 | | |
| | | | | |
| Less dividends and distributions from: | | | | |
| Net investment income | | (0.340 | ) | |
| Total dividends and distributions | | (0.340 | ) | |
| | | | | |
| Net asset value, end of period | | $8.930 | | |
| | | | | |
| Total return1 | | 22.55% | | |
| | | | | |
| Ratios and supplemental data: | | | | |
| Net assets, end of period (000 omitted) | | $1 | | |
| Ratio of expenses to average net assets | | 0.65% | | |
| Ratio of expenses to average net assets | | | | |
| prior to fees waived and expense paid indirectly | | 0.85% | | |
| Ratio of net investment income to average net assets | | 6.41% | | |
| Ratio of net investment income to average net assets | | | | |
| prior to fees waived and expense paid indirectly | | 6.21% | | |
| Portfolio turnover | | 67% | 3 | |
1 Date of commencement of operations; ratios have been annualized and total return has not been annualized. |
2 Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
3 Portfolio turnover is representative of the Fund for the year ended August 31, 2009. |
See accompanying notes
94
| Notes to financial statements | |
| Delaware National Tax-Free Funds | August 31, 2009 |
Delaware Group® Tax-Free Fund is organized as a Delaware statutory trust and offers two series: Delaware Tax-Free USA Fund and Delaware Tax-Free USA Intermediate Fund. Voyageur Mutual Funds is organized as a Delaware statutory trust and offers five series: Delaware Tax-Free California Fund, Delaware Tax-Free Idaho Fund, Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund and Delaware Tax-Free New York Fund. Delaware Group Tax-Free Fund and Voyageur Mutual Funds are individually referred to as a “Trust” and collectively as the “Trusts.” These financial statements and the related notes pertain to Delaware Tax-Free USA Fund, Delaware Tax-Free USA Intermediate Fund and Delaware National High-Yield Municipal Bond Fund (each referred to as a “Fund” or, collectively, as the “Funds”). The above Trusts are open-end investment companies. The Funds are considered diversified under the Investment Company Act of 1940, as amended. The Funds offer Class A, Class B, Class C and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of up to 4.50% for Delaware Tax-Free USA Fund and Delaware National High-Yield Municipal Bond Fund, and up to 2.75% for Delaware Tax-Free USA Intermediate Fund. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1% if redeemed during the first year and 0.50% during the second year for Delaware Tax-Free USA Fund and Delaware National High-Yield Municipal Bond Fund; and of 0.75% for Delaware Tax-Free USA Intermediate Fund if redeemed within the first year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class B shares may be purchased only through dividend reinvestment and certain permitted exchanges. Prior to June 1, 2007, Class B shares of the Delaware Tax-Free USA Fund and Delaware National High-Yield Municipal Bond Fund were sold with a CDSC that declined from 4% to zero depending upon the period of time the shares were held. Class B shares of the Delaware Tax-Free USA Fund and Delaware National High-Yield Municipal Bond Fund will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class B shares of Delaware Tax-Free USA Intermediate Fund were sold with a CDSC that declined from 2% to zero depending upon the period of time the shares were held. Class B shares of the Tax-Free USA Intermediate Fund will automatically convert to Class A shares on a quarterly basis approximately five years after purchase. Class C shares are sold with a CDSC of 1%, if redeemed during the first twelve months. Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors.
The investment objective of the Delaware Tax-Free USA Fund and Delaware Tax-Free USA Intermediate Fund is to seek 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 investment objective of Delaware National Municipal Bond Fund is to seek a high level of current income exempt from federal income tax primarily through investment in medium- and lower-grade municipal obligations.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Funds.
Security Valuation — Debt securities are valued by an independent pricing service or broker. To the extent current market prices are not available, the pricing service may take into account
95
Notes to financial statements
Delaware National Tax-Free Funds
1. Significant Accounting Policies (continued)
developments related to the specific security, as well as transactions in comparable securities. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of each Fund’s Boards of Trustees (each a Board and collectively the Boards). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security.
Federal Income Taxes — No provision for federal income taxes has been made as each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Funds evaluate tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Management has analyzed each Fund’s tax position taken on federal income tax returns for all open tax years (tax years ended August 31, 2006 – August 31, 2009), and has concluded that no provision for federal income tax is required for each Fund’s financial statements.
Class Accounting — Investment income and common expenses are allocated to the various classes of each Fund on the basis of “settled shares” of each class in relation to the net assets of each Fund. Realized and unrealized gain (loss) on investments are allocated to the various classes of each Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Use of Estimates — The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Other — Expenses directly attributable to a Fund are charged directly to that Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated amongst such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Discounts and premiums are amortized to interest income over the lives of the respective securities. Each Fund declares dividends daily from net investment income and pays such dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually.
96
The Funds receive earnings credits from their custodian when positive cash balances are maintained, which are used to offset custody fees. The expense paid under this arrangement is included in custodian fees on the statements of operations with the corresponding expense offset shown as “expense paid indirectly.”
2. Investment Management, Administration Agreements and Other Transactions with Affiliates
In accordance with the terms of its respective investment management agreement, each Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee based on each Fund’s average daily net assets as follows:
| | Delaware Tax-Free | | Delaware Tax-Free | | Delaware National High-Yield |
| | USA Fund | | USA Intermediate Fund | | Municipal Bond Fund |
| On the first $500 million | | 0.550% | | 0.500% | | 0.550% |
| On the next $500 million | | 0.500% | | 0.475% | | 0.500% |
| On the next $1.5 billion | | 0.450% | | 0.450% | | 0.450% |
| In excess of $2.5 billion | | 0.425% | | 0.425% | | 0.425% |
DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse each Fund to the extent necessary to ensure that total annual operating expenses, (excluding 12b-1 plan expenses, taxes, interest, inverse floater program expenses, brokerage fees, certain insurance costs and non-routine expenses or costs including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations (collectively, “non-routine expenses”)) do not exceed 0.60%, 0.60%, and 0.65% of average daily net assets of Delaware Tax-Free USA Fund, Delaware Tax-Free USA Intermediate Fund, and Delaware National High-Yield Municipal Bond Fund, respectively, through December 31, 2009. For purposes of these waivers and reimbursements, non-routine expenses may also include such additional costs and expenses, as may be agreed upon time to time by the Funds’ Boards and DMC. These expense waivers and reimbursements apply only to expenses paid directly by the Funds.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Funds. For these services, each Fund pays DSC fees based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DSC under the service agreement described above are allocated among all Funds in the Delaware Investments Family of Funds on a relative net asset value basis. For the year ended August 31, 2009, each Fund was charged for these services as follows:
| | Delaware Tax-Free | | Delaware Tax-Free | | Delaware National High-Yield |
| | USA Fund | | USA Intermediate Fund | | Municipal Bond Fund |
| | $26,874 | | $21,948 | | $3,465 |
97
Notes to financial statements
Delaware National Tax-Free Funds
2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued)
DSC also provides dividend disbursing and transfer agency services. Each Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services.
Pursuant to a distribution agreement and distribution plan, each Fund pays DDLP, the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.30% of the average daily net assets of the Class A shares for Delaware Tax-Fee USA Intermediate Fund, 0.25% of the average daily net assets of the Class A shares for the Delaware National High-Yield Municipal Bond Fund and 1.00% of the average daily net assets of the Class B and C shares for all the Funds. The Board for Delaware Tax-Free USA Fund has adopted a formula for calculating 12b-1 plan fees for the Fund’s Class A shares that went into effect on June 1, 1992. The total 12b-1 fees to be paid by Class A shareholders of the Fund will be the sum of 0.10% of the average daily net assets representing shares that were acquired prior to June 1, 1992 and 0.30% of the average daily net assets representing shares that were acquired on or after June 1, 1992. Effective April 21, 2006, the maximum amount of the Class A 12b-1 fees was reduced to 0.25% and the total 12b-1 fees to be paid to Class A shareholders of the Fund will be the sum of 0.10% of the average daily net assets representing shares that were acquired prior to June 1, 1992 and 0.25% of the average daily net assets representing shares that were acquired on or after June 1, 1992. All Class A shareholders will bear 12b-1 fees at the same rate, the blended rate based upon the allocation of the rates described above. Institutional Class shares pay no distribution and service expenses. DDLP has contracted to waive distribution and service fees through December 31, 2009 in order to prevent distribution and service fees of Class A shares from exceeding 0.15% of average daily net assets for the Delaware Tax-Free USA Intermediate Fund.
At August 31, 2009, each Fund had liabilities payable to affiliates as follows:
| | Delaware Tax-Free | | Delaware Tax-Free | | Delaware National High-Yield |
| | USA Fund | | USA Intermediate Fund | | Municipal Bond Fund |
| Investment management fees | | | | | | | | | | | | |
| payable to DMC | | | $198,282 | | | | $158,904 | | | | $30,353 | |
| Dividend disbursing, transfer | | | | | | | | | | | | |
| agent and fund accounting | | | | | | | | | | | | |
| oversight fees and other | | | | | | | | | | | | |
| expenses payable to DSC | | | 25,854 | | | | 32,380 | | | | 3,960 | |
| Distribution fees payable | | | | | | | | | | | | |
| to DDLP | | | 132,751 | | | | 91,520 | | | | 21,857 | |
| Other expenses payable to | | | | | | | | | | | | |
| DMC and affiliates* | | | 9,361 | | | | 8,303 | | | | 1,299 | |
*DMC, as part of its administrative services, pays operating expenses on behalf of each Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees’ fees.
98
As provided in the investment management agreement, each Fund bears the cost of certain legal and tax services, including internal legal and tax services provided to each Fund by DMC and/or its affiliates’ employees. For the year ended August 31, 2009, each Fund was charged for internal legal and tax services provided by DMC and/or its affiliates’ employees as follows:
| | Delaware Tax-Free | | Delaware Tax-Free | | Delaware National High-Yield |
| | USA Fund | | USA Intermediate Fund | | Municipal Bond Fund |
| | $45,324 | | $38,206 | | $5,945 |
For the year ended August 31, 2009, DDLP earned commissions on sales of Class A shares for each Fund as follows:
| | Delaware Tax-Free | | Delaware Tax-Free | | Delaware National High-Yield |
| | USA Fund | | USA Intermediate Fund | | Municipal Bond Fund |
| | $38,160 | | $29,214 | | $12,822 |
For the year ended August 31, 2009, DDLP received gross CDSC commissions on redemption of each Fund’s Class A, Class B and Class C shares, respectively. These commissions were entirely used to offset up-front commissions previously paid by DDLP to broker-dealer on sales of those shares. The amounts received were as follows:
| | Delaware Tax-Free | | Delaware Tax-Free | | Delaware National High-Yield |
| | USA Fund | | USA Intermediate Fund | | Municipal Bond Fund |
| Class A | | $ | — | | | $ | — | | | $ | — | |
| Class B | | | 5,596 | | | | — | | | | 3,789 | |
| Class C | | | 1,358 | | | | 5,117 | | | | 2,065 | |
Trustees’ fees include expenses accrued by the Funds for each Trustee’s retainer and meeting fees. Certain officers of DMC, DSC and DDLP are officers and/or Trustees of the Trusts. These officers and Trustees are paid no compensation by the Funds.
3. Investments
For the year ended August 31, 2009, the Funds made purchases and sales of investment securities other than short-term investments as follows:
| | Delaware Tax-Free | | Delaware Tax-Free | | Delaware National High-Yield |
| | USA Fund | | USA Intermediate Fund | | Municipal Bond Fund |
| Purchases | | $375,585,268 | | $263,860,488 | | | $51,773,218 | |
| Sales | | 350,779,928 | | 202,577,691 | | | 45,700,444 | |
99
Notes to financial statements
Delaware National Tax-Free Funds
3. Investments (continued)
At August 31, 2009, the cost of investments and unrealized appreciation (depreciation) for federal income tax purposes for each Fund were as follows:
| | Delaware Tax-Free | | Delaware Tax-Free | | Delaware National High-Yield |
| | USA Fund | | USA Intermediate Fund | | Municipal Bond Fund |
| Cost of investments | | | $ | 545,193,345 | | | | $ | 486,561,761 | | | | $ | 84,744,459 | |
| Aggregate unrealized | | | | | | | | | | | | | | | |
| appreciation | | | | 34,414,817 | | | | | 21,655,219 | | | | | 2,763,959 | |
| Aggregate unrealized | | | | | | | | | | | | | | | |
| depreciation | | | | (24,896,807 | ) | | | | (7,038,149 | ) | | | | (9,186,007 | ) |
| Net unrealized appreciation | | | | | | | | | | | | | | | |
| (depreciation) | | | $ | 9,518,010 | | | | $ | 14,617,070 | | | | $ | (6,422,048 | ) |
Effective September 1, 2008, the Funds adopted Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157). FAS 157 defines fair value as the price that the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. FAS 157 also establishes a framework for measuring fair value and a three level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. Each Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
Level 1 – inputs are quoted prices in active markets
Level 2 – inputs are observable, directly or indirectly
Level 3 – inputs are unobservable and reflect assumptions on the part of the reporting entity
The following table summarizes the valuation of each Fund’s investments by the FAS 157 fair value hierarchy levels as of August 31, 2009:
| | Delaware Tax-Free | | Delaware Tax-Free | | Delaware National High-Yield |
| | USA Fund | | USA Intermediate Fund | | Municipal Bond Fund |
| Level 1 | | | $ | — | | | | $ | — | | | | $ | — | |
| Level 2 | | | | 554,711,355 | | | | | 501,178,831 | | | | | 78,322,411 | |
| Level 3 | | | | — | | | | | — | | | | | — | |
| Total | | | $ | 554,711,355 | | | | $ | 501,178,831 | | | | $ | 78,322,411 | |
There were no Level 3 securities at the beginning or end of the year.
100
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. Additionally, distributions from net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the years ended August 31, 2009 and 2008 was as follows:
| | Delaware Tax-Free | | Delaware Tax-Free | | Delaware National High-Yield |
| | USA Fund | | USA Intermediate Fund | | Municipal Bond Fund |
| Year ended 8/31/09 | | | | | | | | | | | | | | | |
| Tax-exempt income | | | $ | 24,389,642 | | | | $ | 15,114,111 | | | | $ | 4,103,777 | |
| Ordinary income | | | | 50,485 | | | | | — | | | | | 375 | |
| Total | | | $ | 24,440,127 | | | | $ | 15,114,111 | | | | $ | 4,104,152 | |
| | | | | | | | | | | | | | | | |
| Year ended 8/31/08 | | | | | | | | | | | | | | | |
| Tax-exempt income | | | $ | 27,608,512 | | | | $ | 12,780,404 | | | | $ | 3,633,792 | |
| Ordinary income | | | | 9,380 | | | | | 164,823 | | | | | — | |
| Total | | | $ | 27,617,892 | | | | $ | 12,945,227 | | | | $ | 3,633,792 | |
5. Components of Net Assets on a Tax Basis
As of August 31, 2009, the components of net assets on a tax basis were as follows:
| | Delaware Tax-Free | | Delaware Tax-Free | | Delaware National High-Yield |
| | USA Fund | | USA Intermediate Fund | | Municipal Bond Fund |
| Shares of beneficial interest | | | $ | 568,373,809 | | | | $ | 495,042,867 | | | | $ | 87,784,016 | |
| Distributions payable | | | | (647,279 | ) | | | | (429,934 | ) | | | | (101,222 | ) |
| Undistributed tax-exempt | | | | | | | | | | | | | | | |
| income | | | | 714,172 | | | | | 446,159 | | | | | 114,627 | |
| Post-October losses | | | | (1,510,859 | ) | | | | (525,442 | ) | | | | (564,690 | ) |
| Capital loss carryforward | | | | (11,316,576 | ) | | | | (8,275,150 | ) | | | | (2,779,570 | ) |
| Unrealized appreciation | | | | | | | | | | | | | | | |
| (depreciation) of | | | | | | | | | | | | | | | |
| investments | | | | 9,518,010 | | | | | 14,617,070 | | | | | (6,422,048 | ) |
| Net assets | | | $ | 565,131,277 | | | | $ | 500,875,570 | | | | $ | 78,031,113 | |
The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales and tax treatment of market discount and premium on debt instruments.
Post-October losses represent losses realized on investment transactions from November 1, 2008 through August 31, 2009 that, in accordance with federal income tax regulations, the Funds have elected to defer and treat as having arisen in the following fiscal year.
101
Notes to financial statements
Delaware National Tax-Free Funds
5. Components of Net Assets on a Tax Basis (continued)
For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to tax treatment of expiration of capital loss carryforwards. Results of operations and net assets were not affected by these reclassifications. For the year ended August 31, 2009, the Funds recorded the following reclassifications:
| | Delaware Tax-Free | | Delaware National High-Yield |
| | USA Fund | | Municipal Bond Fund |
| Paid-in capital | | | $ | 44,057 | | | | $ | (3,025,716 | ) |
| Accumulated net realized loss | | | | (44,057 | ) | | | | 3,039,939 | |
| Undistributed net investment income | | | | — | | | | | (14,223 | ) |
For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Capital loss carryforwards remaining at August 31, 2009 will expire as follows:
| | Delaware Tax- | | Delaware Tax-Free | | Delaware National High-Yield |
| Year of Expiration | | | Free USA Fund | | USA Intermediate Fund | | Municipal Bond Fund |
| 2010 | | | $ | — | | | | $ | — | | | | $ | 70,671 | |
| 2011 | | | | — | | | | | 249,429 | | | | | 997,721 | |
| 2012 | | | | — | | | | | 5,791 | | | | | 980,742 | |
| 2014 | | | | — | | | | | 119,427 | | | | | — | |
| 2015 | | | | — | | | | | — | | | | | 355,701 | |
| 2016 | | | | 797,494 | | | | | 2,127,384 | | | | | — | |
| 2017 | | | | 10,519,082 | | | | | 5,773,119 | | | | | 374,735 | |
| Total | | | $ | 11,316,576 | | | | $ | 8,275,150 | | | | $ | 2,779,570 | |
For the year ended August 31, 2009, capital loss carryforwards expired were $72,146 and $3,025,716 for Delaware Tax-Free USA Fund and Delaware National High-Yield Municipal Bond Fund, respectively.
102
6. Capital Shares
Transactions in capital shares were as follows:
| | Delaware Tax-Free | | Delaware Tax-Free | | Delaware National High-Yield |
| | USA Fund | | USA Intermediate Fund | | Municipal Bond Fund |
| | Year Ended | | Year Ended | | Year Ended |
| | 8/31/09 | | 8/31/08 | | 8/31/09 | | 8/31/08 | | 8/31/09 | | 8/31/08 |
| Shares sold: | | | | | | | | | | | | | | | | | | |
| Class A | | 11,607,343 | | | 3,388,412 | | | 21,288,665 | | | 18,324,376 | | | 1,543,457 | | | 1,773,356 | |
| Class B | | 7,042 | | | 26,584 | | | 16,760 | | | 11,589 | | | 36,455 | | | 5,607 | |
| Class C | | 662,828 | | | 406,318 | | | 1,748,249 | | | 646,630 | | | 298,334 | | | 372,132 | |
| Institutional Class | | 102 | | | — | | | 95 | | | — | | | 134 | | | — | |
| | | | | | | | | | | |
| Shares issued upon reinvestment of dividends and distributions: | | | | | | | | | | |
| Class A | | 1,198,786 | | | 1,177,951 | | | 885,386 | | | 807,682 | | | 269,659 | | | 196,831 | |
| Class B | | 16,525 | | | 22,514 | | | 1,659 | | | 2,797 | | | 6,137 | | | 6,395 | |
| Class C | | 46,310 | | | 36,841 | | | 52,363 | | | 38,135 | | | 26,475 | | | 16,806 | |
| Institutional Class | | 3 | | | — | | | 2 | | | — | | | 5 | | | — | |
| | | 13,538,939 | | | 5,058,620 | | | 23,993,179 | | | 19,831,209 | | | 2,180,656 | | | 2,371,127 | |
| | | | | | | | | | | | | | | | | | | |
| Shares repurchased: | | | | | | | | | | | | | | | | | | |
| Class A | | (10,115,087 | ) | | (23,486,561 | ) | | (18,287,462 | ) | | (10,209,726 | ) | | (1,230,554 | ) | | (1,336,737 | ) |
| Class B | | (350,505 | ) | | (511,114 | ) | | (56,382 | ) | | (60,640 | ) | | (209,703 | ) | | (277,041 | ) |
| Class C | | (339,849 | ) | | (428,319 | ) | | (500,042 | ) | | (992,295 | ) | | (190,984 | ) | | (137,313 | ) |
| | | (10,805,441 | ) | | (24,425,994 | ) | | (18,843,886 | ) | | (11,262,661 | ) | | (1,631,241 | ) | | (1,751,091 | ) |
| Net increase (decrease) | | 2,733,498 | | | (19,367,374 | ) | | 5,149,293 | | | 8,568,548 | | | 549,415 | | | 620,036 | |
For the years ended August 31, 2009 and 2008, the following shares and values were converted from Class B to Class A shares. The respective amounts are included in Class B redemptions and Class A subscriptions in the tables above and the statements of changes in net assets.
| | | | |
| | | | |
| | | | Year Ended | | | | | | Year Ended | | |
| | | | 8/31/09 | | | | | | 8/31/08 | | |
| | Class B | | Class A | | | | Class B | | Class A | | |
| | Shares | | Shares | | Value | | Shares | | Shares | | Value |
| Delaware Tax-Free | | | | | | | | | | | | |
| USA Fund | | 161,252 | | 161,199 | | $1,668,006 | | 227,491 | | 227,437 | | $2,547,827 |
| Delaware Tax-Free | | | | | | | | | | | | |
| USA Intermediate Fund | | 23,056 | | 23,046 | | 253,527 | | 30,904 | | 30,876 | | 346,313 |
| Delaware National High-Yield | | | | | | | | | | | | |
| Municipal Bond Fund | | 26,693 | | 26,746 | | 211,723 | | 101,537 | | 101,780 | | 1,007,808 |
103
Notes to financial statements
Delaware National Tax-Free Funds
7. Line of Credit
Each Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $225,000,000 revolving line of credit with the Bank of New York Mellon (BNY Mellon) to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee, which was allocated across the Participants on the basis of each Participant’s allocation of the entire facility. Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. The agreement expired on November 18, 2008.
Effective November 18, 2008, the Funds, along with the other Participants, entered into an amendment to the agreement with BNY Mellon for a $35,000,000 revolving line of credit. The agreement, as amended, is to be used as described above and operates in substantially the same manner as the original agreement. The agreement, as amended, expires on November 17, 2009. The Funds had no amounts outstanding as of August 31, 2009, or at any time during the year then ended.
8. Credit and Market Risk
The Funds concentrate their investments in securities issued by municipalities. The value of these investments may be adversely affected by new legislation within the state, regional or local economic conditions, and differing levels of supply and demand for municipal bonds. Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that market value may fluctuate for other reasons and there is no assurance that the insurance company will meet its obligations. A real or perceived decline in creditworthiness of a bond insurer can have an adverse impact on the value of insured bonds held in the Funds. At August 31, 2009, 20.97% of the Delaware Tax-Free USA Fund’s net assets, 17.00% of the Delaware Tax-Free USA Intermediate Fund’s net assets, and 2.82% of the Delaware National High-Yield Municipal Bond Fund’s net assets were insured by bond insurers. These securities have been identified in the statements of net assets.
Each Fund may invest a portion of its assets in high yield fixed income securities, which carry ratings of BB or lower by Standard & Poor’s Ratings Group (S&P) and/or Ba or lower by Moody’s Investors Service, Inc. (Moody’s). Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.
The Funds may invest in advanced refunded bonds, escrow secured bonds or defeased bonds. Under current federal tax laws and regulations, state and local government borrowers are permitted to refinance outstanding bonds by issuing new bonds. The issuer refinances the outstanding debt to either reduce interest costs or to remove or alter restrictive covenants imposed by the bonds being refinanced. A refunding transaction where the municipal securities are being refunded within 90 days from the issuance of the refunding issue is known as a “current refunding.” “Advance refunded bonds” are bonds in which the refunded bond issue remains outstanding for more than 90 days following the issuance of the refunding issue. In an advance refunding, the issuer will use the proceeds
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of a new bond issue to purchase high grade interest bearing debt securities which are then deposited in an irrevocable escrow account held by an escrow agent to secure all future payments of principal and interest and bond premium of the advance refunded bond. Bonds are “escrowed to maturity” when the proceeds of the refunding issue are deposited in an escrow account for investment sufficient to pay all of the principal and interest on the original interest payment and maturity dates.
Bonds are considered “pre-refunded” when the refunding issue’s proceeds are escrowed only until a permitted call date or dates on the refunded issue with the refunded issue being redeemed at the time, including any required premium. Bonds become “defeased” when the rights and interests of the bondholders and of their lien on the pledged revenues or other security under the terms of the bond contract and are substituted with an alternative source of revenues (the escrow securities) sufficient to meet payments of principal and interest to maturity or to the first call dates. Escrowed secured bonds will often receive a rating of AAA from Moody’s, S&P, and/or Fitch Ratings due to the strong credit quality of the escrow securities and the irrevocable nature of the escrow deposit agreement.
Each Fund may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair each Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, each Fund’s Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of each Fund’s limitation on investments in illiquid assets. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to each Fund’s 15% limit on investments in illiquid securities. As of August 31, 2009, there were no Rule 144A securities. Illiquid securities have been identified on the statements of net assets.
9. Contractual Obligations
The Funds enter into contracts in the normal course of business that contain a variety of indemnifications. The Funds’ maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts. Management has reviewed each Fund’s existing contracts and expects the risk of loss to be remote.
10. Sale of Delaware Investments to Macquarie Group
On August 18, 2009, Lincoln National Corporation (the parent company of Delaware Investments) and Macquarie Group (Macquarie) entered into an agreement pursuant to which Delaware Investments, including DMC, DDLP and DSC, will be acquired by Macquarie, an Australia-based global provider of banking, financial, advisory, investment and funds management services (Transaction). Upon completion of the Transaction, DMC, DDLP and DSC will be wholly-owned subsidiaries of Macquarie.
105
Notes to financial statements
Delaware National Tax-Free Funds
10. Sale of Delaware Investments to Macquarie Group (continued)
The Transaction will result in a change of control of DMC which, in turn, will cause the termination of the investment advisory agreement between DMC and the Funds. As a result, a Special Meeting of Shareholders (Meeting) of the Funds will be scheduled for the purpose of asking shareholders to approve a new investment advisory agreement between DMC and the Funds (New Agreement). If approved by shareholders, the New Agreement will take effect upon the closing of the Transaction, which is currently anticipated to occur in the fourth quarter of 2009. Shareholders of the Funds will receive proxy materials including more detailed information about the Meeting, the Transaction and the proposed New Agreement.
11. Subsequent Events
Effective August 31, 2009, the Funds adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 165, Subsequent Events (FAS 165). In accordance with FAS 165, management has evaluated whether any events or transactions occurred subsequent to August 31, 2009 through October 19, 2009, the date of issuance of the Funds’ financial statements, and determined that there were no material events or transactions other than those already disclosed that would require recognition or disclosure in the Fund’s financial statements.
In addition to the expense cap described in footnote 2, effective September 11, 2009, DMC has agreed to voluntarily waive all or a portion of its investment advisory fees and/or pay/reimburse expenses (excluding any 12b-1 plan expenses, taxes, interest, inverse floater program expenses, brokerage fees, certain insurance costs, and nonroutine expenses) in order to prevent total annual fund operating expenses from exceeding, in an aggregate amount, 0.56% and 0.60% of the Delaware Tax-Free USA Fund and Delaware National High-Yield Municipal Bond Fund’s average daily net assets, respectively until such time as the voluntary expense cap is discontinued. These fee waivers and expense reimbursements apply only to expenses paid directly by the Funds, and may be discontinued at any time because they are voluntary.
12. Tax Information (Unaudited)
The information set forth below is for each Fund’s fiscal year as required by federal laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of a fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information.
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For the fiscal year ended August 31, 2009, each Fund designates distributions paid during the year as follows:
| | (A) | | (B) | | (C) | | |
| | Long-Term Capital | | Ordinary Income | | Tax Exempt | | Total |
| | Gains Distributions | | Distributions | | Distributions | | Distributions |
| | (Tax Basis) | | (Tax Basis) | | (Tax Basis) | | (Tax Basis) |
| Delaware Tax-Free | | | | | | | | | | |
| USA Fund | | — | | 0.21 | % | | 99.79 | % | | 100.00% |
| Delaware Tax-Free | | | | | | | | | | |
| USA Intermediate Fund | | — | | — | | | 100.00 | % | | 100.00% |
| Delaware National High-Yield | | | | | | | | | | |
| Municipal Bond Fund | | — | | 0.01 | % | | 99.99 | % | | 100.00% |
(A), (B), and (C) are based on a percentage of each Fund’s total distributions.
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Report of independent
registered public accounting firm
To the Shareholders and Board of Trustees
Delaware Group® Tax-Free Funds — Delaware Tax-Free USA Fund, and Delaware Tax-Free USA Intermediate Fund
Voyageur Mutual Funds — Delaware National High-Yield Municipal Bond Fund
We have audited the accompanying statements of net assets of Delaware Group Tax-Free Fund (comprised of Delaware Tax-Free USA Fund and Delaware Tax-Free USA Intermediate Fund) and Delaware National High-Yield Municipal Bond Fund (one of the series constituting Voyageur Mutual Funds) (the “Funds”) as of August 31, 2009, 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 Funds’ 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 the standards of the Public Company Accounting Oversight Board (United States). 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. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2009 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective series constituting the Delaware Group Tax-Free Fund and Delaware National High-Yield Municipal Bond Fund of Voyageur Mutual Funds at August 31, 2009, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Philadelphia, Pennsylvania
October 19, 2009
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Other Fund information
(Unaudited)
Delaware National Tax-Free Funds
Board Consideration of Delaware Tax-Free USA Fund, Delaware Tax-Free USA Intermediate Fund and Delaware National High-Yield Municipal Bond Fund Investment Advisory Agreements
At a meeting held on May 19-21, 2009 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreements for the Delaware Tax-Free USA Fund, Delaware Tax-Free USA Intermediate Fund and National High-Yield Municipal Bond Fund (each, a “Fund” and together, the “Funds”). In making its decision, the Board considered information furnished specifically in connection with the renewal of the Investment Advisory Agreements with Delaware Management Company (“DMC”), which included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent and quality of services provided to the Funds, the costs of such services to the Funds, economies of scale and the financial condition and profitability of Delaware Investments. Reference was made to information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory and sub-advisory contracts. In addition, in connection with the Annual Meeting, reports were provided in February 2009 and included independent historical and comparative reports prepared by Lipper Inc. (“Lipper”), an independent statistical compilation organization. The Lipper reports compared each Fund’s investment performance and expenses with those of other comparable mutual funds. The independent Trustees reviewed and discussed the Lipper reports with counsel to the independent Trustees. The Board requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; the investment manager’s profitability; and any constraints or limitations on the availability of securities in certain investment styles which had in the past year inhibited, or which were likely in the future to inhibit, DMC’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of each Fund’s advisory agreement, the independent Trustees received assistance and advice from and met separately with counsel to the independent Trustees. Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, Extent and Quality of Service. The Board considered the services provided by Delaware Investments to the Funds and their shareholders. In reviewing the nature, extent and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Funds, compliance of portfolio managers with the investment policies, strategies and restrictions for the Funds, compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Investments® Family of Funds complex and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Funds’ investment advisor and the emphasis placed on research in the investment process. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed to fund matters. The Board also considered the transfer agent and shareholder
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Other Fund information
(Unaudited)
Delaware National Tax-Free Funds
Board Consideration of Delaware Tax-Free USA Fund, Delaware Tax-Free USA Intermediate Fund and Delaware National High-Yield Municipal Bond Fund Investment Advisory Agreements (continued)
services provided to Fund shareholders by DMC’s affiliate, Delaware Service Company, Inc. (“DSC”), noting DSC’s high level of service. The Board noted that Management finished upgrading investment accounting functions through outsourcing to improve the quality and lower the cost of delivering investment accounting services to the Funds. The Board once again noted the benefits provided to Fund shareholders through each shareholder’s ability to exchange an investment in one Delaware Investments® fund for the same class of shares in another Delaware Investments fund without a sales charge, to reinvest Fund dividends into additional shares of the same Fund or into additional shares of other Delaware Investments funds and the privilege to combine holdings in other Delaware Investments funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent and quality of the overall services provided by Delaware Investments.
Investment Performance. The Board placed significant emphasis on the investment performance of the Funds in view of its importance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Board meetings throughout the year, the Board gave particular weight to the Lipper reports furnished for the Annual Meeting. The Lipper reports prepared for each Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Lipper (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for each Fund was shown for the past one-, three-, five- and ten-year periods ended December 31, 2008. The Board’s objective is that each Fund’s performance for the periods considered be at or above the median of its Performance Universe. The following paragraphs summarize the performance results for the Funds and the Board’s view of such performance.
Delaware Tax-Free USA Fund – The Performance Universe for the Fund consisted of the Fund and all retail and institutional general municipal debt funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one-, three- and five-year periods was in the second quartile of its Performance Universe. The report further showed that the Fund’s total return for the ten-year period was in the first quartile. The Board was satisfied with performance.
Delaware Tax-Free USA Intermediate Fund – The Performance Universe for the Fund consisted of the Fund and all retail and institutional intermediate municipal debt funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one-year period was in the second quartile of its Performance Universe. The report further showed that the Fund’s total return for the three-year period was in the third quartile and the Fund’s total return for the five- and ten-year periods was in the first quartile. The Board was satisfied with performance.
Delaware National High-Yield Municipal Bond Fund – The Performance Universe for the Fund consisted of the Fund and all retail and institutional high yield municipal debt funds as selected
110
by Lipper. The Lipper report comparison showed that the Fund’s total return for the one-, three-, five- and ten-year periods was in the first quartile of its Performance Universe. The Board was very satisfied with performance.
Comparative Expenses. The Board considered expense comparison data for the Delaware Investments® Family of Funds. Management provided the Board with information on pricing levels and fee structures for each Fund as of October 31, 2008 and, for comparative funds, information as of their respective fiscal year end occurring on or before August 31, 2008. The Board also focused on the comparative analysis of effective management fees and total expense ratios of each Fund versus effective management fees and expense ratios of a group of similar funds as selected by Lipper (the “Expense Group”). In reviewing comparative costs, each Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. Each Fund’s total expenses were also compared with those of its Expense Group. The Lipper total expenses, for comparative consistency, were shown by Lipper for Class A shares and comparative total expenses including 12b-1 and non 12b-1 service fees. The Board considered fees paid to Delaware Investments for nonmanagement services. The Board’s objective is to limit each Fund’s total expense ratio to be competitive with that of the Expense Group. The following paragraphs summarize the expense results for the Funds and the Board’s view of such expenses.
Delaware Tax-Free USA Fund – The expense comparisons for the Fund showed that its actual management fee was in the quartile with the second lowest expenses of its Expense Group and its total expenses were in the quartile with the second highest expenses of its Expense Group. The Board gave favorable consideration to the Fund’s management fee, but noted that the Fund’s total expenses were not in line with the Board’s objective. In evaluating the total expenses, the Board considered waivers in place through December 2009 and various initiatives implemented by Management, such as the outsourcing of certain transfer agency and investment accounting services, creating an opportunity for a reduction in expenses. The Board was satisfied with Management’s efforts to improve the Fund’s total expense ratio and bring it in line with the Board’s objective.
Delaware Tax-Free USA Intermediate Fund – The expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the lowest expenses of its Expense Group. The Board was satisfied with the management fee and total expenses of the Fund in comparison to those of its Expense Group as shown in the Lipper report.
Delaware National High-Yield Municipal Bond Fund – The expense comparisons for the Fund showed that its actual management fee was in the quartile with the second lowest expenses of its Expense Group and its total expenses were in the quartile with the second highest expenses of its Expense Group. The Board gave favorable consideration to the Fund’s management fee, but noted that the Fund’s total expenses were not in line with the Board’s objective. In evaluating the total expenses, the Board considered fee waivers in place through December 2009 and various initiatives implemented by Management, such as the outsourcing of certain transfer agency and investment accounting services, creating an opportunity for reduction in expenses. The Board was satisfied with Management’s efforts to improve the Fund’s total expense ratio and bring it in line with the Board’s objective.
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Other Fund information
(Unaudited)
Delaware National Tax-Free Funds
Board Consideration of Delaware Tax-Free USA Fund, Delaware Tax-Free USA Intermediate Fund and Delaware National High-Yield Municipal Bond Fund Investment Advisory Agreements (continued)
Management Profitability. The Board considered the level of profits realized by Delaware Investments in connection with the operation of the Funds. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of Delaware Investments’ business in providing management and other services to each of the individual funds and the Delaware Investments® Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability. Management stated that the level of profits of Delaware Investments, to a certain extent, reflect recent operational cost savings and efficiencies initiated by Delaware Investments. The Board considered Delaware Investments’ efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which Delaware Investments might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of Delaware Investments.
Economies of Scale. The Trustees considered whether economies of scale are realized by Delaware Investments as each Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the standardized advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case on all assets when the asset levels specified are exceeded. The Board noted that the fee under each Fund’s management contract fell within the standard structure. The Board also noted that the Delaware Tax-Free USA Fund’s assets exceeded the first breakpoint level. The Board believed that, given the extent to which economics of scale might be realized by the advisor and its affiliates, the schedule of fees under the Investment Advisory Agreement provides a sharing of benefits with the Fund and its shareholders. Although neither the Delaware Tax-Free USA Intermediate Fund nor the Delaware National High-Yield Municipal Bond Fund has reached a size at which it can take advantage of breakpoints, the Board recognized that the fee was structured so that when the Fund grows, economies of scale may be shared.
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Fund management
Joseph R. Baxter
Senior Vice President, Head of Municipal Bond Department, Senior Portfolio Manager
Joseph R. Baxter is the head of the municipal bond department and is responsible for setting the department’s investment strategy. He is also a co-portfolio manager of the firm’s municipal bond funds and several client accounts. Before joining Delaware Investments in 1999 as head municipal bond trader, he held investment positions with First Union, most recently as a municipal portfolio manager with the Evergreen Funds. Baxter received a bachelor’s degree in finance and marketing from La Salle University.
Stephen J. Czepiel
Senior Vice President, Senior Portfolio Manager
Stephen J. Czepiel is a member of the firm’s municipal fixed income portfolio management team with primary responsibility for portfolio construction and strategic asset allocation. He is a co-portfolio manager of the firm’s municipal bond funds and client accounts. He joined Delaware Investments in July 2004 as a senior bond trader. Previously, he was vice president at both Mesirow Financial and Loop Capital Markets. He began his career in the securities industry in 1982 as a municipal bond trader at Kidder Peabody and now has more than 20 years of experience in the municipal securities industry. Czepiel earned his bachelor’s degree in finance and economics from Duquesne University.
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Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
A mutual fund is governed by a Board of Trustees/Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates
| Name, Address, | | Position(s) | | Length of |
| and Birth Date | | Held with Fund(s) | | Time Served |
| Interested Trustees |
| Patrick P. Coyne1 | | Chairman, President, | | Chairman and Trustee |
| 2005 Market Street | | Chief Executive Officer, | | since August 16, 2006 |
| Philadelphia, PA 19103 | | and Trustee | | |
| April 1963 | | | | President and |
| | | | Chief Executive Officer |
| | | | since August 1, 2006 |
| | | | | |
| Independent Trustees |
| Thomas L. Bennett | | Trustee | | Since March 2005 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
| October 1947 | | | | |
| | | | | |
| | | | | |
| | | | | |
| John A. Fry | | Trustee | | Since January 2001 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
| May 1960 | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Anthony D. Knerr | | Trustee | | Since April 1990 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
| December 1938 | | | | |
| | | | | |
| | | | | |
| Lucinda S. Landreth | | Trustee | | Since March 2005 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
| June 1947 | | | | |
| | | | | |
1 Patrick P. Coyne is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor.
114
for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
| | Number of Portfolios in | | |
| Principal Occupation(s) | | Fund Complex Overseen | | Other Directorships |
| During Past 5 Years | | by Trustee or Officer | | Held by Trustee or Officer |
| | | | | |
| Patrick P. Coyne has served in | | 81 | | Director |
| various executive capacities | | | | Kaydon Corp. |
| at different times at | | | | |
| Delaware Investments.2 | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Private Investor | | 81 | | Director |
| (March 2004–Present) | | | | Bryn Mawr Bank Corp. (BMTC) |
| | | | (April 2007–Present) |
| Investment Manager | | | | |
| Morgan Stanley & Co. | | | | |
| (January 1984–March 2004) | | | | |
| | | | | |
| President | | 81 | | Director |
| Franklin & Marshall College | | | | Community Health Systems |
| (June 2002–Present) | | | | |
| | | | | |
| Executive Vice President | | | | |
| University of Pennsylvania | | | | |
| (April 1995–June 2002) | | | | |
| | | | | |
| Founder and | | 81 | | None |
| Managing Director | | | | |
| Anthony Knerr & Associates | | | | |
| (Strategic Consulting) | | | | |
| (1990–Present) | | | | |
| | | | | |
| Chief Investment Officer | | 81 | | None |
| Assurant, Inc. (Insurance) | | | | |
| (2002–2004) | | | | |
| | | | | |
| | | | | |
2 Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent.
115
Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
| Name, Address, | | Position(s) | | Length of |
| and Birth Date | | Held with Fund(s) | | Time Served |
| Independent Trustees (continued) |
| Ann R. Leven | | Trustee | | Since October 1989 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
| November 1940 | | | | |
| | | | | |
| Thomas F. Madison | | Trustee | | Since May 19973 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
| February 1936 | | | | |
3 In 1997, several funds managed by Voyageur Fund Managers, Inc. (the “Voyageur Funds”) were incorporated into the Delaware Investments Family of Funds. Mr. Madison served as a director of the Voyageur Funds from 1993 until 1997.
116
| | Number of Portfolios in | | |
| Principal Occupation(s) | | Fund Complex Overseen | | Other Directorships |
| During Past 5 Years | | by Trustee or Officer | | Held by Trustee or Officer |
| | | | |
| Consultant | | 81 | | None |
| ARL Associates | | | | |
| (Financial Planning) | | | | |
| (1983–Present) | | | | |
| | | | | |
| President and | | 81 | | Director and Chair of |
| Chief Executive Officer | | | | Compensation Committee, |
| MLM Partners, Inc. | | | | Governance Committee |
| (Small Business Investing | | | | Member |
| and Consulting) | | | | CenterPoint Energy |
| (January 1993–Present) | | | | |
| | | | Lead Director and Chair of |
| | | | Audit and Governance |
| | | | Committees, Member of |
| | | | Compensation Committee |
| | | | Digital River, Inc. |
| | | | |
| | | | Director and Chair of |
| | | | Governance Committee, |
| | | | Audit Committee |
| | | | Member |
| | | | Rimage Corporation |
| | | | |
| | | | Director and Chair of |
| | | | Compensation Committee |
| | | | Spanlink Communications |
| | | | |
| | | | Lead Director and Member of |
| | | | Compensation and |
| | | | Governance Committees |
| | | | Valmont Industries, Inc. |
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Board of trustees/directors and officers addendum
Delaware Investments® Family of Funds
| Name, Address, | | Position(s) | | Length of |
| and Birth Date | | Held with Fund(s) | | Time Served |
| Independent Trustees (continued) |
| Janet L. Yeomans | | Trustee | | Since April 1999 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
| July 1948 | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| J. Richard Zecher | | Trustee | | Since March 2005 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
| July 1940 | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Officers | | | | |
| David F. Connor | | Vice President, | | Vice President since |
| 2005 Market Street | | Deputy General | | September 2000 |
| Philadelphia, PA 19103 | | Counsel, and Secretary | | and Secretary since |
| December 1963 | | | | October 2005 |
| | | | | |
| | | | | |
| Daniel V. Geatens | | Vice President | | Treasurer |
| 2005 Market Street | | and Treasurer | | since October 25, 2007 |
| Philadelphia, PA 19103 | | | | |
| October 1972 | | | | |
| | | | | |
| David P. O’Connor | | Senior Vice President, | | Senior Vice President, |
| 2005 Market Street | | General Counsel, | | General Counsel, and |
| Philadelphia, PA 19103 | | and Chief Legal Officer | | Chief Legal Officer |
| February 1966 | | | | since October 2005 |
| | | | | |
| Richard Salus | | Senior Vice President | | Chief Financial Officer |
| 2005 Market Street | | and Chief Financial Officer | | since November 2006 |
| Philadelphia, PA 19103 | | | | |
| October 1963 | | | | |
| | | | | |
4 David F. Connor, Daniel V. Geatens, David P. O’Connor, and Richard Salus serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant.
118
| Number of Portfolios in | |
| Principal Occupation(s) | Fund Complex Overseen | Other Directorships |
| During Past 5 Years | by Trustee or Officer | Held by Trustee or Officer |
| | | |
| Vice President and Treasurer | 81 | None |
| (January 2006–Present) | | |
| Vice President — Mergers & Acquisitions | | |
| (January 2003–January 2006), and | | |
| Vice President | | |
| (July 1995–January 2003) | | |
| 3M Corporation | | |
| | | |
| Founder | 81 | Director and Audit |
| Investor Analytics | | Committee Member |
| (Risk Management) | | Investor Analytics |
| (May 1999–Present) | | |
| | | |
| Founder | | |
| Sutton Asset Management | | |
| (Hedge Fund) | | |
| (September 1996–Present) | | |
| | | |
| David F. Connor has served as | 81 | None4 |
| Vice President and Deputy | | |
| General Counsel of | | |
| Delaware Investments | | |
| since 2000. | | |
| | | |
| Daniel V. Geatens has served | 81 | None4 |
| in various capacities at | | |
| different times at | | |
| Delaware Investments. | | |
| | | |
| David P. O’Connor has served in | 81 | None4 |
| various executive and legal | | |
| capacities at different times | | |
| at Delaware Investments. | | |
| | | |
| Richard Salus has served in | 81 | None4 |
| various executive capacities | | |
| at different times at | | |
| Delaware Investments. | | |
| | | |
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800 523-1918.
119
About the organization
Board of trustees | | | |
| | | | |
Patrick P. Coyne
Chairman, President, and
Chief Executive Officer
Delaware Investments®
Family of Funds
Philadelphia, PA Thomas L. Bennett
Private Investor
Rosemont, PA John A. Fry
President
Franklin & Marshall
College
Lancaster, PA | Anthony D. Knerr
Founder and Managing
Director
Anthony Knerr &
Associates
New York, NY Lucinda S. Landreth
Former Chief Investment
Officer
Assurant, Inc.
Philadelphia, PA | Ann R. Leven
Consultant
ARL Associates
New York, NY Thomas F. Madison
President and
Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN | Janet L. Yeomans
Vice President and
Treasurer
3M Corporation
St. Paul, MN J. Richard Zecher
Founder
Investor Analytics
Scottsdale, AZ |
| | | | |
| Affiliated officers | | | |
| | | | |
David F. Connor
Vice President, Deputy
General Counsel, and
Secretary
Delaware Investments
Family of Funds
Philadelphia, PA | Daniel V. Geatens
Vice President and
Treasurer
Delaware Investments
Family of Funds
Philadelphia, PA | David P. O’Connor
Senior Vice President,
General Counsel,
and Chief Legal Officer
Delaware Investments
Family of Funds
Philadelphia, PA | Richard Salus
Senior Vice President and
Chief Financial Officer
Delaware Investments
Family of Funds
Philadelphia, PA |
This annual report is for the information of Delaware Tax-Free USA Fund, Delaware Tax-Free USA Intermediate Fund, and Delaware National High-Yield Municipal Bond Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Tax-Free USA Fund, Delaware Tax-Free USA Intermediate Fund, and Delaware National High-Yield Municipal Bond Fund and the Delaware Investments Fund profile for the most recently completed calendar quarter. These documents are available at www.delawareinvestments.com. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of the investment company. You should read the prospectus carefully before you invest. The figures in this report represent past results that are not a guarantee of future results. The return and principal value of an investment in the investment company will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. |
Delaware Investments is the marketing name of Delaware Management Holdings, Inc. and its subsidiaries. Each Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. Each Fund’s Forms N-Q, as well as a description of the policies and procedures that each Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the Commission’s Web site at www.sec.gov. In addition, a description of the policies and procedures that each Fund uses to determine how to vote proxies (if any) relating to portfolio securities and each Fund’s Schedule of Investments are available without charge on each Fund’s Web site at www.delawareinvestments.com. Each Fund’s Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330. Information (if any) regarding how each Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through each Fund’s Web site at www.delawareinvestments.com; and (ii) on the Commission’s Web site at www.sec.gov. |
120
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. A copy of the registrant’s Code of Business Ethics has been posted on Delaware Investments’ internet website at www.delawareinvestments.com. Any amendments to the Code of Business Ethics, and information on any waiver from its provisions granted by the registrant, will also be posted on this website within five business days of such amendment or waiver and will remain on the website for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrant’s Board of Trustees/Directors has determined that each member of the registrant’s Audit Committee is an audit committee financial expert, as defined below. For purposes of this item, an “audit committee financial expert” is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and financial statements;
b. The ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements, or experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial reporting; and
e. An understanding of audit committee functions.
An “audit committee financial expert” shall have acquired such attributes through:
a. Education and experience as a principal financial officer, principal accounting officer, controller, public accountant, or auditor or experience in one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor, or person performing similar functions;
c. Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing, or evaluation of financial statements; or
d. Other relevant experience.
The registrant’s Board of Trustees/Directors has also determined that each member of the registrant’s Audit Committee is independent. In order to be “independent” for purposes of this item, the Audit Committee member may not: (i) other than in his or her capacity as a member of the Board of Trustees/Directors or any committee thereof, accept directly or indirectly any consulting, advisory or other compensatory fee from the issuer; or (ii) be an “interested person” of the registrant as defined in Section 2(a)(19) of the Investment Company Act of 1940.
The names of the audit committee financial experts on the registrant’s Audit Committee are set forth below:
Thomas L. Bennett 1
John A. Fry
Thomas F. Madison
J. Richard Zecher
Item 4. Principal Accountant Fees and Services
(a) Audit fees.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant’s annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $62,900 for the fiscal year ended August 31, 2009.
_______________________
1 The instructions to Form N-CSR require disclosure on the relevant experience of persons who qualify as audit committee financial experts based on “other relevant experience.” The Board of Trustees/Directors has determined that Mr. Bennett qualifies as an audit committee financial expert by virtue of his education, Chartered Financial Analyst designation, and his experience as a credit analyst, portfolio manager and the manager of other credit analysts and portfolio managers.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant’s annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $54,600 for the fiscal year ended August 31, 2008.
(b) Audit-related fees.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the registrant’s financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended August 31, 2009.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the financial statements of the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $19,074 for the registrant’s fiscal year ended August 31, 2009. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: issuance of report concerning transfer agent's system of internal accounting control pursuant to Rule 17Ad-13 of the Securities Exchange Act.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the registrant’s financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended August 31, 2008.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the financial statements of the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $19,074 for the registrant’s fiscal year ended August 31, 2008. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: issuance of report concerning transfer agent's system of internal accounting control pursuant to Rule 17Ad-13 of the Securities Exchange Act.
(c) Tax fees.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $24,100 for the fiscal year ended August 31, 2009. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended August 31, 2009.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $18,500 for the fiscal year ended August 31, 2008. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended August 31, 2008.
(d) All other fees.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended August 31, 2009.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant’s independent auditors to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended August 31, 2009.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended August 31, 2008.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant’s independent auditors to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended August 31, 2008.
(e) The registrant’s Audit Committee has established pre-approval policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X (the “Pre-Approval Policy”) with respect to services provided by the registrant’s independent auditors. Pursuant to the Pre-Approval Policy, the Audit Committee has pre-approved the services set forth in the table below with respect to the registrant up to the specified fee limits. Certain fee limits are based on aggregate fees to the registrant and other registrants within the Delaware Investments Family of Funds.
| Service | Range of Fees |
| Audit Services | |
| Statutory audits or financial audits for new Funds | up to $25,000 per Fund |
| Services associated with SEC registration statements (e.g., Form N-1A, Form N-14, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., comfort letters for closed-end Fund offerings, consents), and assistance in responding to SEC comment letters | up to $10,000 per Fund |
| Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered “audit-related services” rather than “audit services”) | up to $25,000 in the aggregate |
| Audit-Related Services | |
| Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and /or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered “audit services” rather than “audit-related services”) | up to $25,000 in the aggregate |
| Tax Services | |
| U.S. federal, state and local and international tax planning and advice (e.g., consulting on statutory, regulatory or administrative developments, evaluation of Funds’ tax compliance function, etc.) | up to $25,000 in the aggregate |
| U.S. federal, state and local tax compliance (e.g., excise distribution reviews, etc.) | up to $5,000 per Fund |
| Review of federal, state, local and international income, franchise and other tax returns | up to $5,000 per Fund |
Under the Pre-Approval Policy, the Audit Committee has also pre-approved the services set forth in the table below with respect to the registrant’s investment adviser and other entities controlling, controlled by or under common control with the investment adviser that provide ongoing services to the registrant (the “Control Affiliates”) up to the specified fee limit. This fee limit is based on aggregate fees to the investment adviser and its Control Affiliates.
| Service | Range of Fees |
| Non-Audit Services | |
| Services associated with periodic reports and other documents filed with the SEC and assistance in responding to SEC comment letters | up to $10,000 in the aggregate |
The Pre-Approval Policy requires the registrant’s independent auditors to report to the Audit Committee at each of its regular meetings regarding all services initiated since the last such report was rendered, including those services authorized by the Pre-Approval Policy.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant’s independent auditors for services rendered to the registrant and to its investment adviser and other service providers under common control with the adviser were $223,814 and $272,502 for the registrant’s fiscal years ended August 31, 2009 and August 31, 2008, respectively.
(h) In connection with its selection of the independent auditors, the registrant’s Audit Committee has considered the independent auditors’ provision of non-audit services to the registrant’s investment adviser and other service providers under common control with the adviser that were not required to be pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit Committee has determined that the independent auditors’ provision of these services is compatible with maintaining the auditors’ independence.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Investments
(a) Included as part of report to shareholders filed under Item 1 of this Form N-CSR.
(b) Divestment of securities in accordance with Section 13(c) of the Investment Company Act of 1940.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant’s fourth fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
| (a) | (1) Code of Ethics |
| |
| Not applicable. |
| |
| (2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT. |
| |
| (3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934. |
| |
| Not applicable. |
| | |
| (b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.
Name of Registrant: DELAWARE GROUP® TAX FREE FUND
| PATRICK P. COYNE |
| By: | Patrick P. Coyne |
| Title: | Chief Executive Officer |
| Date: | November 4, 2009 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| PATRICK P. COYNE |
| By: | Patrick P. Coyne |
| Title: | Chief Executive Officer |
| Date: | November 4, 2009 |
| RICHARD SALUS |
| By: | Richard Salus |
| Title: | Chief Financial Officer |
| Date: | November 4, 2009 |
