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 date01/07/1993
Dividends paid (if any)Monthly
Capital gains paid (if any)December
Fund identifiers
Investment minimums
Initial investment$1,000
Subsequent Investments$100
Systematic withdrawal balance$5,000
Account features
Payroll DeductionYes

On Sept. 25, 2014, Class B shares of the Fund converted to Class A shares.

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 (03/31/2017)

as of quarter-end (03/31/2017)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.61%-0.56%2.56%2.38%3.48%4.71%01/07/1993
Max offer price-1.17%-3.33%1.60%1.82%3.19%4.59%
Bloomberg Barclays 3-15 Year Blend Municipal Bond Index1.65%0.02%3.01%2.88%4.32%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.61%-0.56%2.56%2.38%3.48%4.71%01/07/1993
Max offer price-1.17%-3.33%1.60%1.82%3.19%4.59%
Bloomberg Barclays 3-15 Year Blend Municipal Bond Index1.65%0.02%3.01%2.88%4.32%n/a

Returns for less than one year are not annualized.

Class A shares have a maximum up-front sales charge of 2.75% and are subject to an annual distribution fee.

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, 2016 through Dec. 29, 2017. Please see the fee table in the Fund’s prospectus for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
Portfolio characteristics - as of 03/31/2017Bloomberg Barclays 3-15 Year Blend Municipal Bond Index
Number of holdings18536,305
Portfolio turnover (last fiscal year)35%n/a
Modified duration (view definition)4.81 years4.82 years
Effective maturity (weighted average) (view definition)5.90 years8.66 years
Yield to maturity (view definition)3.40%2.82%
Average market price (view definition)$113.02$110.21
Average coupon (view definition)5.30%4.76%
Yield to worst (view definition)2.55%2.22%
Alternative minimum tax4.21%3.37%
SEC 30-day yield with waiver (view definition)1.78%
SEC 30-day yield without waiver (view definition)1.59%
Annualized standard deviation, 3 years (view definition)3.11n/a
Portfolio composition as of 03/31/2017Total may not equal 100% due to rounding.
Municipal bonds99.8%
Cash and cash equivalents0.2%

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

Top 10 fixed income holdings as of 03/31/2017
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
State of Minnesota 5.000 10/1/20221.7%
State of California 5.250 9/1/20281.6%
City of San Francisco CA Public Utilities Commission Water Revenue 5.000 11/1/20271.5%
Port Authority of New York & New Jersey 6.500 12/1/20281.5%
City of Phoenix Civic Improvement Corp. 5.000 7/1/20261.5%
Railsplitter Tobacco Settlement Authority 5.250 6/1/20201.4%
Dallas Independent School District 5.000 2/15/20361.4%
Virginia Commonwealth Transportation Board 5.000 3/15/20241.3%
New York State Urban Development Corp. 5.000 3/15/20221.3%
Railsplitter Tobacco Settlement Authority 6.250 6/1/20241.3%
Total % Portfolio in Top 10 holdings14.5%

Fixed income sectors as of 03/31/2017

List excludes cash and cash equivalents.

State general obligations12.8%18.7%
Special tax12.8%10.2%
IDR/PCR (corporate)12.2%2.4%
Local general obligations8.4%14.6%
Water & sewer6.7%7.9%
Credit quality as of 03/31/2017
Not rated5.9%0.0%

Total may not equal 100% due to rounding. The Fund’s investment manager, Delaware Management Company (DMC), a series of Macquarie Investment Management Business Trust, receives “Credit Quality” ratings for the underlying securities held by the Fund from three “nationally recognized statistical rating organizations” (NRSROs): Standard & Poor’s Financial Services LLC (S&P), Moody’s Investors Service, and Fitch Ratings, Inc. The credit quality breakdown is calculated by DMC based on the NRSRO ratings. If two or more NRSROs have assigned a rating to a security the higher rating (lower value) is used. If only one NRSRO rates a security, that rating is used. Securities that are unrated by any of the three NRSROs are included in the “not rated” category when applicable. Unrated securities do not necessarily indicate low quality. More information about securities ratings is contained in the Fund’s Statement of Additional Information.

Top 10 states as of 03/31/2017
State% of portfolio
New York17.2%
New Jersey5.3%
Distribution history - annual distributions (Class A)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.

Client-focused consistency

Get a firsthand look at the Delaware Investments municipal bond group and see what drives its passion for performance.

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Joe Baxter

Joe Baxter  

Senior Vice President, Head of Municipal Bond Department, Senior Portfolio Manager — Macquarie Investment Management, Americas

Start date on the Fund: January 2003

Years of industry experience: 32

(View bio)

Steve Czepiel

Steve Czepiel  

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: July 2007

Years of industry experience: 35

(View bio)

Greg Gizzi

Greg Gizzi 

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: December 2012

Years of industry experience: 32

(View bio)

You may qualify for sales-charge discounts if you and your family invest, or agree to invest in the future, at least $100,000 in Delaware Funds by Macquarie. More information about these and other discounts is available from your financial intermediary, in the Fund's prospectus under the section entitled "About your account," and in the Fund's statement of additional information (SAI) under the section entitled "Purchasing Shares."

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 price2.75%
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) fees0.25%
Other expenses0.18%
Total annual fund operating expenses0.92%
Fee waivers and expense reimbursements(0.17%)
Total annual fund operating expenses after fee waivers and expense reimbursements0.75%

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, 2016 through Dec. 29, 2017. In addition, the Fund's distributor, Delaware Distributors, L.P. (Distributor), has contracted to limit the Class A shares' 12b-1 fees to no more than 0.15% of average daily net assets from Dec. 29, 2016 through Dec. 29, 2017. 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, 2016


On Nov. 8, Donald J. Trump was elected the 45th president of the United States and the bond market reacted with a severe selloff even as the U.S. equity market rose to record highs. The powerfully opposite reactions were due to promises regarding fiscal policy made by then-candidate Trump that would stimulate economic growth through lower taxes and an infrastructure spending program, but that also could lead to larger deficits and higher inflation. In addition, the Federal Open Market Committee (FOMC) raised the federal funds rate by 0.25 percentage points in December to a range of 0.50–0.75%. The tax-exempt market returned -3.62% for the fourth quarter and +0.25% for calendar year 2016, as measured by the Bloomberg Barclays Municipal Bond Index.

The correction in municipal bond prices actually started before the November election with issuers seemingly determined to get ahead of both the voting and the December FOMC meeting. But as supply surged, demand moderated, as measured by Lipper municipal bond fund flows. The four-week moving average of $1.2 billion inflows as of late September fell to $225 million by early November. At that level, demand was insufficient to keep up with supply, causing the Bloomberg Barclays Municipal Bond Index to post a -1.05% return in October.

Then came the election of Donald Trump, and municipal bond yields followed U.S. Treasury yields significantly higher in a swift reaction to what the bond market perceived as future expansive fiscal policy. However, despite continued outflows from municipal bond funds in December, municipal bond yields with maturities beyond five years declined and the market returned +1.17% for the month. By the end of December, the four-week moving average of outflows had reached $2.9 billion, although the void in demand for tax-exempt bonds was filled by a combination of crossover and separately managed account (SMA) buyers. The crossover buyers were attracted by the relationship between intermediate and long municipal bonds and corresponding maturity taxable bonds; these buyers generally emerge when municipal bonds are rendered cheap on a relative basis. The SMA accounts seem to be attracted to higher yields in the short to intermediate portion of the curve and are more comfortable buying individual bonds with a defined maturity.

Within the Fund

Delaware Tax-Free USA Intermediate Fund (Institutional Class shares and Class A shares at net asset value) underperformed its benchmark, the Bloomberg Barclays 3–15 Year Blend Municipal Bond Index, for the fourth quarter of 2016.

The primary detractor from performance was the Fund’s 12.28% out-of-benchmark position in long-term bonds (17-plus years). The Fund’s holdings in that sector returned -8.91% compared to the index’s overall return of -3.41%. Additionally, a 7.32% out-of-benchmark exposure to below-investment-grade bonds detracted by returning -6.02% for the quarter. Meanwhile, the Fund’s market weight allocation to the 7-year segment (6–8 years) was a modest contributor, returning 2.79% versus the index return of -3.66% for that maturity segment.


The technical environment for municipal bonds usually is favorable in January as coupon, maturity, and called bond proceeds often provide solid demand against a backdrop of light supply. However, January 2017 may not be indicative of how the rest of the year plays out. We expect continued volatility, driven both by the FOMC and by politics as President-elect Trump’s fiscal proposals work their way through Congress. Many aspects of the fiscal plans could affect the municipal market, including individual tax rates, corporate tax rates, deduction caps, and infrastructure spending. In addition, the president-elect’s trade policies may have a significant effect on the economy and the U.S. dollar. The bottom line is that we expect volatility.

We believe that individual and corporate income taxes are likely to be cut, but there will have to be a bigger discussion to place a 28% deduction cap on the municipal bond market if President-elect Trump follows through on his infrastructure plans. The municipal bond market is essential to any infrastructure program, and the cap would drive funding costs up significantly. Of course, there could be dialogue on the deduction cap, or on reviving 2009’s Build America Bond program, which used a federal subsidy to the issuer to partially pay interest cost rather than a tax-exemption to the investor. However, the program also faces challenges from fiscal hawks weary of the federal subsidy and who have refused to revive the program since its sunset at the end of 2010. At other times, the market may turn away from concerns over fiscal policy to concentrate on domestic and global growth prospects, and on the actions of central banks around the globe.

Again, we see volatility as a dominant theme in the coming year. In that environment, we believe our most prudent course of action in seeking to generate alpha is to remain true to our bottom-up (bond-by-bond), credit driven approach to security selection and portfolio construction.

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

The Bloomberg Barclays High-Yield Municipal Bond Index measures the total return performance of the long-term, noninvestment 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 of the three.


Alpha measures the portion of an investment’s total return that is independent of general market movements and is attributable to the investment’s inherent value.

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 800 523-1918. 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 state or local taxes and/or 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.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 04/21/2017)

Class APriceNet change
NAV$11.92no chg
Max offer price$12.26n/a

Total net assets (as of 03/31/2017)

$565.9 million all share classes

Overall Morningstar RatingTM

Class A shares (as of 03/31/2017)
Class ANo. of funds
3 Yrs3256
5 Yrs3224
10 Yrs3150
Morningstar categoryMuni National Interm

(View Morningstar disclosure)

Morningstar ranking (as of 03/31/2017)

YTD ranking48 / 298
1 year167 / 286
3 years145 / 256
5 years136 / 224
10 years89 / 150
Morningstar categoryMuni National Interm

(View Morningstar disclosure)

Lipper ranking (as of 03/31/2017)

YTD ranking47 / 222
1 year129 / 216
3 years88 / 199
5 years80 / 165
10 years60 / 110
Lipper classificationIntmdt Muni Debt Funds

(View Lipper disclosure)

Benchmark, peer group

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

Morningstar Muni National Intermediate Category (view definition)

Lipper Intermediate Municipal Debt Funds Average (view definition)

Additional information