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 (06/30/2015)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)-0.15%2.24%2.35%3.61%n/a5.15%12/31/2008
Average annual total return as of quarter-end (06/30/2015)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)-0.94%-0.15%2.24%2.35%3.61%n/a5.15%12/31/2008

Returns for less than one year are not annualized.

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

Expense ratio

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

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return

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

Portfolio characteristics - as of 05/31/2015
Number of holdings218
Effective maturity (weighted average) (view definition)5.87 years
Modified duration (view definition)4.77 years
Annualized standard deviation, 3 years (view definition)3.29
SEC 30-day yield with waiver (view definition)1.67%
SEC 30-day yield without waiver (view definition)1.62%
Portfolio turnover (last fiscal year)34%
Portfolio composition as of 06/30/2015Total may not equal 100% due to rounding.
Municipal bonds98.7%
Cash and cash equivalents1.3%

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

Top 10 holdings as of 06/30/2015
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. 4.500 6/1/20271.8%
County of Fairfax VA 5.000 4/1/20201.5%
State of Minnesota 5.000 10/1/20221.3%
Golden State Tobacco Securitization Corp. 5.000 6/1/20351.3%
Arizona Health Facilities Authority 5.000 12/1/20301.2%
State of California 5.250 9/1/20281.2%
City of San Francisco CA Public Utilities Commission Water Revenue 5.000 11/1/20271.2%
City of Phoenix Civic Improvement Corp. 5.000 7/1/20261.1%
Port Authority of New York & New Jersey 6.500 12/1/20281.1%
Railsplitter Tobacco Settlement Authority 5.250 6/1/20201.1%
Total % Portfolio in Top 10 holdings12.8%

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

Top sectors as of 06/30/2015
List excludes cash, accruals on bonds, and cash equivalents.
Sector% of portfolio
State general obligations15.1%
IDR/PCR (corporate)13.8%
Special tax13.4%
Local general obligations4.9%
Water & sewer3.8%
Top 10 states as of 06/30/2015
State% of portfolio
New York16.7%
New Jersey4.7%
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: 33

(View bio)

Greg Gizzi

Greg Gizzi 

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: December 2012

Years of industry experience: 31

(View bio)

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

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

Shareholder fees
Maximum sales charge (load) imposed on purchases as a percentage of offering pricenone
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lowernone
Annual fund operating expenses
Management fees0.49%
Distribution and service (12b-1) feesnone
Other expenses0.19%
Total annual fund operating expenses0.68%
Fee waivers and expense reimbursements(0.08%)
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, 2014 through Dec. 29, 2015. 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 March 31, 2015


Solid gains in January provided the cushion for the municipal bond market to absorb a bout of selling in February and still post a small positive return (1.01%) for the first quarter of 2015, as measured by the Barclays Municipal Bond Index. Yield changes were mixed, with AAA yields rising in the 1–3 year and 15–20 year ranges of the curve, but declining in the 5–10 year portion and at the long end of the curve (22-plus years). Even where yields rose, the increases were minimal enough that the coupon income offset any loss of principal. As a result, all maturities posted positive returns for the quarter. Market influences included, but were not limited to: monetary policy, both domestic and international; a slower domestic economy, as measured by gross domestic product (GDP) expectations; a stronger domestic jobs market; geopolitical events; and mixed technical factors within the municipal bond market.

As in 2014, investors anticipated U.S. Treasury rates to increase; instead, the 10-year benchmark U.S. Treasury yield actually declined 25 basis points, from 2.17% to 1.92%, in the first quarter. (One basis point equals a hundredth of a percentage point.) After posting 4.6% and 5.0% GDP growth in the second and third quarters of 2014, respectively, economic activity decelerated to 2.2% in the fourth quarter. Current expectations for first quarter GDP are in the 1–2% range, revised downward from earlier projections in the 3% range. As with last year, some of the deceleration is attributed to bad weather, but many economists also believe that the strong dollar is weighing on U.S. exports and manufacturing. Notably, the Federal Open Market Committee (FOMC) at its March 18 meeting removed the word “patient” with regard to the timing of future rate hikes. However, many FOMC members also downgraded projections for growth and inflation along with the path of future rate hikes. While some economic data came in below expectations over the last two months of the quarter, that weakness was offset by 200,000-plus additions to nonfarm payrolls and an unemployment rate that fell to 5.5%. Lower oil prices remain a plus to consumer spending, but have hurt energy-producing sectors and associated financial markets. The U.S. stock market, as measured by the S&P 500® Index, posted only a fractional positive return (0.95%) during the quarter. (Source: Bloomberg.)

The European Central Bank (ECB) moved in the opposite direction of the FOMC, announcing (and commencing) a large quantitative easing (QE) program. This divergence in monetary policy resulted in low yields on most European government debt as well as positive returns in the region’s equity markets and a sharply weaker euro. Meanwhile, Greece continued to struggle under a mountain of maturing debt, even as the country’s newly elected government engaged in contentious negotiations with its European counterparts. Not surprisingly, investors remain concerned that Greece eventually will exit Europe’s 19-country common currency bloc. Overall, an elevated level of geopolitical risk has unsettled consumer confidence and weighed on financial asset prices.

The municipal market underperformed other sectors of the domestic bond market during the quarter amid a continuation of the heavy supply that weighed on fixed income prices in late 2014. New-issue supply was up 59% from the same period last year, driven by a 172% increase in refunding that more than offset an 8% decrease in bonds issued for new projects. The bulge in supply was met by solid demand, however, as evidenced by $10.7 billion in new mutual fund flows through March 25, 2015. Intermediate funds experienced the largest portion of those flows, with long-term funds close behind and high yield flows remaining positive, though slowing from the torrid pace of last year.

The municipal market’s positive return during the quarter was led by longer-maturity bonds, BBB-rated securities, and the hospital sector. The Barclays High-Yield Municipal Bond Index posted a similar return (1.11%), led by strong performance in the transportation and tobacco sectors. Conversely, Puerto Rico securities returned -2.25%, exerting a drag on the high yield index. With its economy continuing to struggle, Puerto Rico was not able to place debt that would have provided the Government Development Bank with much needed liquidity. The June 2014 debt restructuring of the commonwealth’s debt also was recently struck down by a federal court.

Within the Fund

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

The primary drivers of performance for the period were the Fund’s out-of-benchmark positions in below-investment-grade debt and its overweight exposure in BBB-rated securities, as lower-rated securities outperformed the higher-rated credit tiers for the period. Additionally, the Fund’s out-of-benchmark positions in bonds with maturities of 17 years and longer positively influenced performance.

The Fund was underweight the 6-to-8 year portion of the curve, which was a detractor to performance.


In December, the FOMC eliminated its “considerable time” language when referring to the removal of its zero interest rate policy and replaced it with the word “patient.” The FOMC then removed “patient” at its March meeting, implying that changes to monetary policy going forward will be data-dependent. The current statement indicates that the committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term. The committee’s position clearly references the Fed’s dual mandate of job growth and inflation.

Although the Fed has expressed a desire to move away from its extraordinarily accommodative policy of recent years, the central bank currently is not achieving its goal of pushing inflation toward the 2% target. Weak economies around the globe and soft commodity prices are keeping U.S. inflation well in check — and the FOMC on hold. As this push-and pull played out at the Fed — and with supply/demand technicals in virtual stalemate — the primary driver of municipal bond returns has been coupon income, a dynamic we expect to persist as the year progresses. Although there may be market volatility, we believe our focus on income through our security selection process will be the primary driver of return in 2015.

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

The Barclays U.S. Aggregate Index is a broad composite that tracks the investment grade domestic bond market.

The S&P 500 Index measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the U.S. stock 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.

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 07/02/2015)

Institutional ClassPriceNet changeYTD
NAV$12.12no chg-0.27%
Max offer price$12.12n/an/a

Total net assets (as of 06/30/2015)

$760.7 million all share classes

Overall Morningstar RatingTM

Institutional Class shares (as of 05/31/2015)
RatingNo. of funds
3 Yrs4281
5 Yrs3232
10 Yrs3168
Morningstar categoryMuni National Interm

(View Morningstar disclosure)

Lipper ranking (as of 05/31/2015)

YTD ranking60 / 226
1 year50 / 222
3 years55 / 194
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