Delaware Tax-Free USA Intermediate Fund


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


The Fund primarily invests in debt obligations issued by various U.S. state and local governments that provide income exempt from federal income taxes. By focusing on municipal bonds of intermediate maturity, the Fund seeks to balance relatively high tax-free income and capital preservation.

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

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

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

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

Average annual total return as of month-end (11/30/2014)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)6.54%6.28%4.01%4.42%n/a5.62%12/31/2008
Barclays 3-15 Year Blend Municipal Bond Index6.64%6.45%4.10%4.59%n/an/a
Average annual total return as of quarter-end (09/30/2014)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.23%5.77%5.96%3.88%4.06%n/a5.65%12/31/2008
Barclays 3-15 Year Blend Municipal Bond Index1.23%5.91%6.28%4.00%4.36%n/an/a

Returns for less than one year are not annualized.

Expense ratio

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

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return

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

Portfolio characteristics - as of 11/30/2014
Share assets$441.8 million
Number of holdings204
Effective maturity (weighted average) (view definition)5.42 years
Modified duration (view definition)4.53 years
Annualized standard deviation, 3 years (view definition)3.60
SEC 30-day yield with waiver (view definition)1.48%
SEC 30-day yield without waiver (view definition)1.40%
Portfolio turnover (last fiscal year)34%
Portfolio composition as of 11/30/2014Total may not equal 100% due to rounding.
Municipal bonds98.3%
Cash and cash equivalents1.7%

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

Top 10 holdings as of 11/30/2014
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
County of Fairfax VA 5.000 4/1/20201.5%
State of Minnesota 5.000 10/1/20221.3%
New York Local Government Assistance Corp. 5.000 4/1/20171.3%
State of California 5.250 9/1/20281.2%
State of Hawaii 5.000 8/1/20191.2%
City of San Francisco CA Public Utilities Commission Water Revenue 5.000 11/1/20271.2%
Port Authority of New York & New Jersey 6.500 12/1/20281.2%
City of Phoenix Civic Improvement Corp. 5.000 7/1/20261.2%
New Jersey Transportation Trust Fund Authority 5.500 6/15/20311.1%
Railsplitter Tobacco Settlement Authority 5.250 6/1/20201.1%
Total % Portfolio in Top 10 holdings12.3%

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

Top sectors as of 11/30/2014
List excludes cash, accruals on bonds, and cash equivalents.
Sector% of portfolio
State general obligations18.6%
Special tax16.0%
Local general obligations6.3%
Water & sewer5.5%
Top 10 states as of 11/30/2014
State% of portfolio
New York16.9%
New Jersey4.8%
Distribution history - annual distributions (Institutional Class)1,2
Distributions ($ per share)
YearCapital gains3Net investment

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

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

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

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

Joe Baxter

Joe Baxter  

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

Start date on the Fund: January 2003

Years of industry experience: 30

(View bio)

Steve Czepiel

Steve Czepiel  

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: July 2007

Years of industry experience: 32

(View bio)

Greg Gizzi

Greg Gizzi 

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: December 2012

Years of industry experience: 30

(View bio)

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

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

Shareholder fees
Maximum sales charge (load) imposed on purchases as a percentage of offering pricenone
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lowernone
Annual fund operating expenses
Management fees0.49%
Distribution and service (12b-1) feesnone
Other expenses0.18%
Total annual fund operating expenses0.67%
Fee waivers and expense reimbursements(0.07%)
Total annual fund operating expenses after fee waivers and expense reimbursements0.60%

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

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

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Delaware Tax-Free USA Intermediate Fund Quarterly commentary September 30, 2014


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

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

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

Within the Fund

For the third quarter of 2014, Delaware Tax-Free USA Intermediate Fund’s Class A shares at net asset value underperformed the benchmark, the Barclays 3–15 Year Blend Municipal Bond Index, while the Fund’s Institutional Class shares performed on par with the benchmark.

The primary driver of performance for the period was the Fund’s overweight exposure in BBB-rated securities and out-of-benchmark positions in below-investment-grade debt, as lower- rated securities outperformed the higher-rated credit tiers for the period. Additionally, the Fund’s overweight position within the industrial development revenue / pollution control revenue (IDR/PCR) sector positively influenced performance.

Conversely, the Fund’s underweight in bonds within the 12- to 17-year maturity range detracted from performance as bonds within this segment of the benchmark were the strongest performers for the period.


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

The Barclays Municipal Bond Index measures the total return performance of the long-term, investment grade tax-exempt bond market.

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

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

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


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

Document must be used in its entirety.

Carefully consider the Fund's investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund's prospectus and its summary prospectus, which may be obtained by clicking the prospectus link located in the right-hand sidebar or calling 800 362-7500. Investors should read the prospectus and the summary prospectus carefully before investing.

Investing involves risk, including the possible loss of principal.

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

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

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

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

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

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

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 12/19/2014)

Institutional ClassPriceNet changeYTD
NAV$12.32no chg6.72%
Max offer price$12.32n/an/a

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

$742.6 million all share classes

Lipper ranking (as of 11/30/2014)

YTD ranking72 / 216
1 year75 / 215
3 years48 / 182
5 years43 / 147
10 yearsn/a
Lipper classificationIntmdt Muni Debt Funds

(View Lipper disclosure)

Benchmark, peer group

Barclays 3–15 Year Blend Municipal Bond Index (view)

Lipper Intermediate Municipal Debt Funds Average (view)

Additional information