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 (01/31/2016)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.16%2.16%2.56%4.75%n/a5.28%12/31/2008
Average annual total return as of quarter-end (12/31/2015)
Current quarter1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.37%2.55%2.31%4.32%n/a5.17%12/31/2008
Barclays 3-15 Year Blend Municipal Bond Index1.24%3.06%2.87%4.65%n/an/a

Returns for less than one year are not annualized.

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

Expense ratio

Net expense ratio reflects contractual waivers of certain fees and/or expense reimbursements from Dec. 29, 2015 through Dec. 29, 2016. 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 12/31/2015
Number of holdings198
Effective maturity (weighted average) (view definition)5.68 years
Modified duration (view definition)4.69 years
Annualized standard deviation, 3 years (view definition)3.01
SEC 30-day yield with waiver (view definition)1.57%
SEC 30-day yield without waiver (view definition)1.50%
Portfolio turnover (last fiscal year)19%
Portfolio composition as of 01/31/2016Total may not equal 100% due to rounding.
Municipal bonds98.4%
Cash and cash equivalents1.6%

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

Top 10 holdings as of 01/31/2016
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Golden State Tobacco Securitization Corp. 5.000 6/1/20351.4%
State of Minnesota 5.000 10/1/20221.4%
State of California 5.250 9/1/20281.3%
Golden State Tobacco Securitization Corp. 4.500 6/1/20271.3%
State of Kansas Department of Transportation 5.000 9/1/20291.3%
City of San Francisco CA Public Utilities Commission Water Revenue 5.000 11/1/20271.3%
County of Montgomery MD 5.000 11/1/20281.3%
City of Phoenix Civic Improvement Corp. 5.000 7/1/20261.2%
Port Authority of New York & New Jersey 6.500 12/1/20281.2%
Railsplitter Tobacco Settlement Authority 5.250 6/1/20201.2%
Total % Portfolio in Top 10 holdings12.9%

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

Top sectors as of 01/31/2016
List excludes cash, accruals on bonds, and cash equivalents.
Sector% of portfolio
State general obligations14.2%
Special tax13.3%
IDR/PCR (corporate)9.6%
Local general obligations9.6%
Water & sewer5.0%
Top 10 states as of 01/31/2016
State% of portfolio
New York14.5%
New Jersey4.0%
Distribution history - annual distributions (Institutional Class)1,2
Distributions ($ per share)
YearCapital gains3Net investment

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

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

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

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

Joe Baxter

Joe Baxter  

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

Start date on the Fund: January 2003

Years of industry experience: 31

(View bio)

Steve Czepiel

Steve Czepiel  

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: July 2007

Years of industry experience: 34

(View bio)

Greg Gizzi

Greg Gizzi 

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: December 2012

Years of industry experience: 31

(View bio)

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

The table below 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), has contractually agreed to waive all or a portion of its investment advisory fees and/or pay/reimburse expenses (excluding any 12b-1 fees, acquired fund fees and expenses, taxes, interest, inverse floater program expenses, short sale and dividend interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) in order to prevent total annual fund operating expenses from exceeding 0.60% of the Fund's average daily net assets from Dec. 29, 2015 through Dec. 29, 2016. 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 December 31, 2015


The municipal bond market turned in another strong quarter, posting a positive return of 1.50% over the last three months of 2015, as measured by the Barclays Municipal Bond Index, and a respectable 3.30% for the calendar year. Once again, the municipal market outperformed its domestic taxable fixed income counterparts. The primary driver of performance for the quarter was technical in nature, as low supply and good demand generally drove rates lower. In addition, despite Puerto Rico’s passing legislation to claw back funds from certain public corporations to pay general obligation debt, there was no catalyst to drive a “risk off” trade in the tax-exempt market like that which has affected many other markets, such as the collapse in commodity prices, particularly oil

The municipal bond yield curve flattened during the quarter with rates rising between 11 and 27 basis points in the 1- to 4-year range, and rates declining 1 to 25 basis points in the 5- to 30-year portion of the curve. (A basis point equals one-hundredth of a percentage point.) In December, the Federal Reserve’s Open Market Committee (FOMC) raised the target fed funds rate for the first time since 2009, from a range of 0–0.25% to a range of 0.25–0.50%. The decline in municipal yields occurred despite U.S. Treasury yields and other taxable bond rates rising across the curve. This led to the lowest ratios on 10- and 30-year AAA municipal bonds versus U.S. Treasurys since April 2014 and January 2013, respectively. Going against the grain of other bond markets, the BBB rating sector of the Barclays Municipal Bond Index outperformed AAA bonds; in addition, below-investment-grade municipal bonds, as measured by the Barclays High-Yield Municipal Bond Index, outperformed investment grade municipal bonds.

Overall, the municipal market remains healthy, with low default ratios and continued growth in state tax revenues. Still, the market is not entirely without its credit problems. Unfunded pensions and other postemployment benefits (OPEB) remain a challenge for municipal budgeting. The most recent Bloomberg report shows a median funding of only 70% for pensions. Notably, Illinois has fared the worst with a 39% funding ratio while South Dakota and Wisconsin have a healthy 100% funding ratio. In a case study for politics gone awry, the State of Illinois and Commonwealth of Pennsylvania still do not have final budgets, both of which were due on June 30, 2015.

While Puerto Rico continues to trade in a vacuum, it does not appear to have the ability to resolve its own problems. The commonwealth is now looking toward the U.S. Congress to provide some type of relief and waiting for a Supreme Court ruling on the ability for its corporations to file for bankruptcy.

Within the Fund

For the fourth quarter of 2015, Delaware Tax-Free USA Intermediate Fund (Institutional Class shares and Class A shares at net asset value) outperformed its benchmark, the Barclays 3–15 Year Blend Municipal Bond Index.

The primary contributor to Fund performance during the quarter was the Fund’s out-of-benchmark exposure to long bonds (17-plus years), as these bonds outperformed the Barclays 3–15 Year Blend Municipal Bond Index’s overall return. The Barclays Municipal Bond Index’s long bond segment returned 2.31% for the quarter. Additionally, lower-tier investment grade bonds provided positive performance. The A-rated and BBB-rated bonds within the Barclays 3–15 Year Blend Municipal Bond Index returned 1.69% and 1.97%, respectively.


Financial markets are in a quandary, with one eye on anticipated Fed rate hikes and the other eye on a global risk-off trade that seems to be accelerating. The good news is that neither scenario appears to have crept into the municipal bond market, and positive technical conditions remain in place. The bad news is that the municipal market’s good relative performance versus its taxable counterparts now leaves municipal bonds rich versus other asset classes. Typically when rates rise, municipal bonds have tended to outperform U.S. Treasurys, but we begin 2016 with among the tightest ratios in the past few years. On the risk side, municipal bond spread product has not suffered the same weaker fundamentals as on the corporate credit side.

Of course, municipal bonds do not have the direct exposure to commodities that the corporate market has. Also, municipal bond fundamentals tend to operate on a lag, along with the collection of tax revenues. The most recent revenues available from the Rockefeller Institute of Government show that state tax revenues grew by 6.8% in the second calendar quarter of 2015, which is the last quarter for fiscal year 2016. Currently, the report estimates revenues for the entire fiscal year 2016 at positive 5.4%. However, these trends are not expected to continue, as 2015 tax receipts were based on a strong stock market in 2014. That will not be the case in 2016, due to stocks' weaker performance in 2015. The report’s medium forecast of personal income and sales tax gains are expected to be lower in the upcoming year. Preliminary results also show a 1.3% decline in corporate taxes for the third quarter of 2015, a more timely indicator than personal income and sales taxes.

Given the uncertainty in markets as the new year begins, we have chosen to upgrade our portfolios at the margin, which we began in the fourth quarter. It should be noted that we remain overweight credit; these moves remain at the margin and we continue to believe in our long-term philosophy that, over time, income is the most significant and predictable component of total return. We will continue to focus on our security selection as the key to excess returns.

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 measures the total return performance of the long-term, non-investment-grade tax-exempt bond market.

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

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.


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.

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

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

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

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

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

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 02/08/2016)

Institutional ClassPriceNet changeYTD
Max offer price$12.43n/an/a

Total net assets (as of 01/31/2016)

$710.9 million all share classes

Overall Morningstar RatingTM

Institutional Class shares (as of 01/31/2016)
RatingNo. of funds
3 Yrs4299
5 Yrs3251
10 Yrs3174
Morningstar categoryMuni National Interm

(View Morningstar disclosure)

Lipper ranking (as of 01/31/2016)

YTD ranking90 / 225
1 year78 / 215
3 years84 / 192
5 years66 / 159
10 yearsn/a
Lipper classificationIntmdt Muni Debt Funds

(View Lipper disclosure)

Benchmark, peer group

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

Lipper Intermediate Municipal Debt Funds Average (view definition)

Additional information