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A potential multisector floating-rate hedge against rising rates

Delaware Diversified Floating Rate Fund may provide a flexible, risk-conscious approach to fixed income. Its multisector investment approach allows it to seek the many pockets of opportunity that may exist within a variety of interest rate and credit environments.

A review of three recent periods — each notable for temporarily rising interest rates amid a larger, long-term downward trend — illustrates how the Fund may be able to generate competitive results amid rising rates.

In November 2010, the U.S. Federal Reserve embarked on a second round of quantitative easing, which involved purchasing $600 billion of U.S. Treasury securities financed by the expansion of the central bank’s balance sheet. Though the program was intended to help push market interest rates lower and encourage borrowing, bond yields actually rose by 135 basis points* over several months thereafter as investors’ general expectations for faster economic growth and inflation pushed a lot of money into riskier assets like equities and commodities.

October 8, 2010 through February 8, 2011

*10-year U.S. Treasury yield up 135 basis points
Total returns (%)
Delaware Diversified Floating Rate Fund — Class A shares at NAV 1.90
Barclays 10-Year U.S. Treasury Bellwethers Index -9.52
Barclays U.S. Aggregate Index -3.02
BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index (Fund benchmark) 0.10

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 performance quoted. Performance data current to the most recent month end may be obtained by visiting the Delaware Diversified Floating Rate Fund page or delawareinvestments.com/performance.

Past performance does not guarantee future results.

Use the zoom and scroll feature to get a microscopic view. Simply click on a data point and drag the mouse to create your desired timeframe and scroll through the data.

During October 2011, tentative signs of progress toward resolving the euro zone’s sovereign debt crisis, coupled with improving U.S. economic data, caused a mild increase in U.S. Treasury yields and a strong rally in credit- sensitive sectors of the fixed income market.

October 3, 2011 through October 28, 2011

*10-year U.S. Treasury yield up 63 basis points
Total returns (%)
Delaware Diversified Floating Rate Fund — Class A shares at NAV 1.23
Barclays 10-Year U.S. Treasury Bellwethers Index -3.10
Barclays U.S. Aggregate Index -0.36
BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index (Fund benchmark) 0.02

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 performance quoted. Performance data current to the most recent month end may be obtained by visiting the Delaware Diversified Floating Rate Fund page or delawareinvestments.com/performance.

Past performance does not guarantee future results.

Use the zoom and scroll feature to get a microscopic view. Simply click on a data point and drag the mouse to create your desired timeframe and scroll through the data.

Better-than-expected U.S. economic data, perceived progress in the euro zone, and a shift back to accommodative monetary policies by central banks coincided with a spike in U.S. interest rates during the first quarter of 2012.

January 31, 2012 through March 19, 2012

*10-year U.S. Treasury yield up 58 basis points
Total returns (%)
Delaware Diversified Floating Rate Fund — Class A shares at NAV 1.10
Barclays 10-Year U.S. Treasury Bellwethers Index -4.14
Barclays U.S. Aggregate Index -1.03
BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index (Fund benchmark) 0.09

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 performance quoted. Performance data current to the most recent month end may be obtained by visiting the Delaware Diversified Floating Rate Fund page or delawareinvestments.com/performance.

Past performance does not guarantee future results.

Use the zoom and scroll feature to get a microscopic view. Simply click on a data point and drag the mouse to create your desired timeframe and scroll through the data.

Average annual total returns (%) as of March 31, 2013

1Q131 1 year 3 year Lifetime2 Inception date
Class A (at NAV) 0.90 4.01 2.75 2.97 2/26/10
Class A (at Offer)3 -1.83 1.17 1.81 2.05
BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index (Fund benchmark) 0.08 0.43 0.38 0.37
Lipper Ultra Short Obligations Funds Average 0.19 1.17 1.11 1.13
Institutional Class 0.85 4.28 2.97 3.20 2/26/10
Class R 0.72 3.75 2.44 2.67 2/26/10

1 Returns for less than one year are not annualized.
2 Benchmark and Lipper lifetime returns are for Class A share comparison only.
3 Includes maximum 2.75% front-end sales charge.

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 performance quoted. Performance data current to the most recent month end may be obtained by visiting the Delaware Diversified Floating Rate Fund page or delawareinvestments.com/performance.

Expense ratio

Gross Net
Class A 1.12% 1.05%
Class C 1.82% 1.80%
Institutional Class 0.82% 0.80%
Class R 1.42% 1.30%

Net expense ratio reflects contractual waivers of certain fees and/or expense reimbursements from Nov. 28, 2012 through Nov. 28, 2013. Please see the fee table in the Fund’s prospectus for more information.

Performance

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. Performance data current to the most recent month end may be obtained by calling 800 523-1918 or visiting delawareinvestments.com/performance.

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

Performance “at NAV” assumes that no front-end sales charge applied or the investment was not redeemed. Performance “at offer” assumes that a front-end sales charge applied to the extent applicable.

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, if available, its summary prospectus, which may be obtained by visiting delawareinvestments.com or calling 800 523-1918. Investors should read the prospectus and, if available, the summary prospectus carefully before investing.

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

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, noninvestment grade bonds (junk bonds) involve higher risk than investment grade bonds. The high yield secondary market is particularly susceptible to liquidity problems when institutional investors, such as mutual funds and certain other financial institutions, temporarily stop buying bonds for regulatory, financial, or other reasons. In addition, a less liquid secondary market makes it more difficult for the Fund to obtain precise valuations of the high yield securities in its portfolio.

International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.

Because the Fund may invest in bank loans and other direct indebtedness, it is subject to the risk that the fund will not receive payment of principal, interest, and other amounts due in connection with these investments, which primarily depend on the financial condition of the borrower and the lending institution.

Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

The Fund may invest in derivatives, which may involve additional expenses and are subject to risk, including the risk that an underlying security or securities index moves in the opposite direction from what the portfolio manager anticipated. A derivative transaction depends upon the counterparties’ ability to fulfill their contractual obligations.

Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index. The Barclays U.S. Aggregate Index is a broad composite of more than 8,000 securities that tracks the investment grade domestic bond market. The Barclays 10-Year U.S. Treasury Bellwethers Index is composed of public obligations of the U.S. Treasury with a maturity of 10 years. The BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index represents the London interbank offered rate (LIBOR) with a constant 3-month average maturity. LIBOR, published by the British Bankers’ Association, is a composite of the rates of interest at which banks borrow from one another in the London market, and it is a widely used benchmark for short-term interest rates. 

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