Delaware Core Plus Bond Fund

Objective

Delaware Core Plus Bond Fund seeks maximum long-term total return, consistent with reasonable risk.

Strategy

The Fund invests at least 50% of its net assets in domestic (U.S.) investment grade debt securities. The Fund may also invest up to 30% of its net assets in high yield securities and up to 30% of its net assets in foreign securities.

Fund information
Inception date08/16/1985
Dividends paid (if any)Monthly
Capital gains paid (if any)December
Fund identifiers
NASDAQDEGGX
CUSIP246094205
Investment minimums
Initial investment$1,000
Subsequent Investments$100
Systematic withdrawal balance$5,000
Account features
CheckwritingNo
Payroll DeductionYes
IRAsYes

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 (05/31/2015)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.51%2.57%2.95%4.60%5.07%6.18%08/16/1985
Max offer price-3.04%-2.00%1.37%3.64%4.58%6.02%
Barclays U.S. Aggregate Index1.00%3.03%2.21%3.90%4.61%n/a
Average annual total return as of quarter-end (03/31/2015)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.88%1.88%5.10%3.76%4.81%5.36%6.23%08/16/1985
Max offer price-2.69%-2.69%0.35%2.18%3.85%4.88%6.07%
Barclays U.S. Aggregate Index1.61%1.61%5.72%3.10%4.41%4.93%n/a

Returns for less than one year are not annualized.

Class A shares have a maximum up-front sales charge of 4.50% 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
Gross1.18%
Net0.90%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from Nov. 28, 2014 through Nov. 30, 2015. Additionally, the Fund's Class A shares are subject to a blended 12b-1 fee of 0.10% on all shares acquired prior to June 1, 1992 and 0.25% on all shares acquired on or after June 1, 1992. All Class A shares currently bear 12b-1 fees at the same rate, the blended rate based on the formula described above. This method of calculating Class A 12b-1 fees may be discontinued at the sole discretion of the Fund's Board of Trustees.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20151.88%n/an/an/an/a
20142.39%2.37%-0.28%1.05%5.63%
20130.25%-3.17%0.43%1.01%-1.53%
20120.43%2.49%2.35%0.51%5.89%
20110.95%2.31%2.30%1.74%7.49%
20102.87%2.36%3.46%-0.96%7.88%
20090.32%7.93%8.30%2.14%19.75%
20081.53%-0.97%-3.49%1.35%-1.65%
20071.13%-0.73%2.30%2.29%5.06%
2006-1.26%-0.33%4.05%0.60%3.01%
20050.28%2.93%-1.34%0.10%1.94%
Portfolio characteristics - as of 05/31/2015
Number of holdings756
Effective maturity (weighted average) (view definition)8.09 years
Effective duration (weighted average) (view definition)5.45 years
Annualized standard deviation, 3 years (view definition)3.25
SEC 30-day yield with waiver (view definition)2.00%
SEC 30-day yield without waiver (view definition)1.78%
Portfolio turnover (last fiscal year)273%
Portfolio composition as of 05/31/2015Total may not equal 100% due to rounding.
Credits52.8%
Mortgage-backed securities34.6%
U.S. government securities7.1%
Asset-backed securities4.4%
Municipal bonds1.1%
Top 10 holdings as of 05/31/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
FNCL JUN TBA6.3%
FNCL JUL TBA3.3%
FNCL JUL TBA3.1%
United States Treasury Note/Bond 2.000 2/15/20251.9%
FNR 2011-80 CB1.7%
United States Treasury Note/Bond 3.125 8/15/20441.1%
FNCL AX53161.1%
United States Treasury Note/Bond 3.000 5/15/20451.1%
United States Treasury Note/Bond 1.375 4/30/20200.9%
FNCL 8905270.8%
Total % Portfolio in Top 10 holdings21.3%

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

Top sectors as of 05/31/2015
List excludes cash and cash equivalents.
Sector% of portfolio
Investment grade credits34.9%
MBS and CMOs28.5%
High yield credits12.7%
Commercial mortgage-backed securities6.1%
U.S. treasury securities5.0%
Emerging markets4.8%
Asset-backed securities4.4%
Municipal bonds1.1%
International developed0.4%
Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
Return of
capital
20150.0000.1190.000
20140.0000.2650.004
20130.0000.2560.000
20120.0190.2550.000
20110.0000.2940.000
20100.0000.3370.000
20090.0000.3860.000
20080.0000.3790.000
20070.0000.3540.000
20060.0000.3190.000
20050.0000.3400.000

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.

Roger Early

Roger A. Early, CPA, CFA

Managing Director, Head of Fixed Income Investments, Senior Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy

Start date on the Fund: May 2007

Years of industry experience: 39

(View bio)


Paul Grillo

Paul Grillo, CFA

Senior Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy

Start date on the Fund: February 1997

Years of industry experience: 34

(View bio)


Craig Dembeck

Craig C. Dembek, CFA

Senior Vice President, Co-Head of Credit Research, Senior Research Analyst

Start date on the Fund: December 2012

Years of industry experience: 20

(View bio)


J. David Hillmeyer

J. David Hillmeyer, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: November 2011

Years of industry experience: 22

(View bio)


Paul Matlack

Paul A. Matlack, CFA

Senior Vice President, Senior Portfolio Manager, Fixed Income Strategist

Start date on the Fund: December 2012

Years of industry experience: 29

(View bio)


John McCarthy

John P. McCarthy, CFA

Senior Vice President, Co-Head of Credit Research, Senior Research Analyst

Start date on the Fund: December 2012

Years of industry experience: 28

(View bio)


Christopher Testa

Christopher M. Testa, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: June 2014

Years of industry experience: 28

(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 Investments® Funds. More information about these and other discounts is available from your financial advisor, in the Fund's statutory 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 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 price4.50%
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lowernone
Annual fund operating expenses
Management fees0.55%
Distribution and service (12b-1) fees0.25%
Other expenses0.38%
Total annual fund operating expenses1.18%
Fee waivers and expense reimbursements(0.28%)
Total annual fund operating expenses after fee waivers and expense reimbursements0.90%

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, 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 0.65% of the Fund's average daily net assets from Nov. 28, 2014 through Nov. 30, 2015. These waivers and reimbursements may only be terminated by agreement of the Manager and the Fund. Additionally, the Fund's Class A shares are subject to a blended 12b-1 fee of 0.10% on all shares acquired prior to June 1, 1992 and 0.25% on all shares acquired on or after June 1, 1992. All Class A shares currently bear 12b1-fees at the same rate, the blended rate based on the forumula described above. This method of calculating Class A 12b-1 fees may be discontinued at the sole discretion of the Fund's Board of Trustees.

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Delaware Core Plus Bond Fund Quarterly commentary March 31, 2015

Overview

In our fourth quarter commentary, we called for “more, not less, volatility” in 2015. And during the first quarter of 2015, the markets delivered that volatility — right out of the gate. Interest rates dropped significantly during January, before retracing and consolidating the yield change during February and March. Intermediate and long maturities led the rate decline, while corporate credit returns benefited from a combination of fixed-rate bond duration and an attractively priced yield advantage.

During the quarter, the Federal Reserve removed its previous reference to “patience” with regard to the timing of a first rate increase. Based on both its words and its “dots,” the Fed seems headed toward a rate increase regime that starts in the second half of 2015 and progresses very gradually thereafter. The Federal Open Market Committee (FOMC) made it clear, however, that its dropping the pledge to be “patient” does not guarantee a near-term move in rates. Rather, it will continue to monitor economic conditions using a data-dependent process. Of course, even that scenario would almost certainly diverge from monetary policy overseas.

As global central banks implement quantitative easing–like policies and create massive liquidity, financial assets could continue to benefit. Portfolio managers must strike a strategic balance that acknowledges the wide dispersion of potential outcomes resulting from weak economic growth and almost nonexistent inflation, but also with strong underlying support for financial asset prices.

Economic indicators in the United States showed mixed results throughout the first quarter of 2015, suggesting that domestic economic growth moderated. Data for employment and manufacturing were solid, but consumer demand and housing showed weakness. Fourth quarter gross domestic product (GDP) growth came in unrevised at 2.2%, according to the U.S. Commerce Department. Though core inflation was slightly higher during the first quarter, headline prices were lower as falling energy prices provided an important dampening effect.

During the first quarter of 2015, yields on 10-year Treasurys fell from 2.17% to 1.92% while yields on 2-year Treasurys declined from 0.67% to 0.56%. By the end of the quarter, the 3-month T-bill / 10-year T-note curve flattened by 13 basis points to 1.89%. (One basis point is a hundredth of a percentage point.) The 1-month London interbank offered rate (Libor) remained essentially unchanged for the period, ending the quarter at 0.17%. (Data: Bloomberg.) Finally, the Barclays U.S. Aggregate Index recorded a strong return in the first quarter as corporate bonds (especially those of lower quality) and longer-duration sectors led the way. Given the shift in the Treasury yield curve, short-to-intermediate-focused sectors produced lower nominal returns while BBB-rated corporates, high yield corporate bonds, and emerging market debt produced strong excess returns.

Within the Fund

Delaware Core Plus Bond Fund (Institutional Class shares and Class A shares at net asset value) outperformed its benchmark, the Barclays U.S. Aggregate Index, for the quarter.

  • The Fund’s underweight allocation to Treasury securities had no impact on relative returns, as Treasury bonds performed in line with the overall benchmark. Our focus on intermediate-term maturities contributed modestly to relative outperformance.
  • Government-backed mortgage-backed securities (MBS) tracked the Barclays U.S. Aggregate Index benchmark during the quarter. The Fund’s underweight in MBS modestly benefited relative performance while our security-specific positioning also had a positive effect. Asset-backed securities (ABS) underperformed the benchmark, as we maintained our emphasis on short-maturity and floating-rate issues. Commercial mortgage-backed securities (CMBS) had a positive effect on relative performance due to our overweight allocation and security selection.
  • The Fund’s overweight in investment grade corporate bonds helped relative performance, as corporate bonds experienced strong relative returns. Security selection had a significantly positive effect as well.
  • The high yield bond market was among the strongest sources of Fund performance during the quarter. Investments in bank loans also benefited Fund performance.
  • Positions in emerging market debt had a slight positive effect on Fund performance for the quarter. U.S. dollar–based issues experienced wider spreads and issuer-specific downturns.
  • Non-dollar developed markets, while representing only a small allocation, produced negative results during the quarter.

Outlook

Among the most important — and unresolved — economic questions facing investors is whether deflation will be a bigger risk than inflation over the next several years. That’s because despite massive money-printing efforts in recent years by key central banks, little progress has been made toward hitting inflation targets. We believe something fundamental is at work here, and critically, it could not come at a worse time.

The global debt overhang is challenging enough, but servicing debts during a period of deflation places substantially more pressure on the debtor. Sourcing the needed free cash becomes, by definition, much more difficult. If the debts are owed in other currencies, even governments may not be able to print their way out of the problem. Default risks would likely rise and could be the most fundamental source of performance challenges in risk assets. Plenty of optimistic and pessimistic market scenarios exist for the near term, but we will strive to maintain our balanced, research-driven, risk-managed approach, which we believe can help us maneuver around the challenges to come.

Mortgage-backed securities are fixed income securities that represent pools of mortgages, with investors receiving principal and interest payments as the underlying mortgage loans are paid back. Many are issued and guaranteed against default by the U.S. government or its agencies or instrumentalities, such as Freddie Mac, Fannie Mae, and Ginnie Mae. Others are issued by private financial institutions, with some fully collateralized by certificates issued or guaranteed by the U.S. government or its agencies or instrumentalities.

[14368]

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, 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.

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.

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.

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

If and when the Fund invests in forward foreign currency contracts or uses other investments to hedge against currency risks, the Fund will be subject to special risks, including counterparty risk.

The Fund may experience portfolio turnover in excess of 100%, which could result in higher transaction costs and tax liability.

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 06/29/2015)

Class APriceNet changeYTD
NAV$8.410.030.08%
Max offer price$8.81n/an/a

Total net assets (as of 05/31/2015)

$128.7 million all share classes

Overall Morningstar RatingTM

Load waived

With load

Class A shares (as of 05/31/2015)
Load waivedWith loadNo. of funds
Overall43930
3 Yrs32930
5 Yrs42809
10 Yrs43593
Morningstar categoryIntermediate-Term Bond

(View Morningstar disclosure)

Lipper ranking (as of 05/31/2015)

YTD ranking68 / 209
1 year91 / 207
3 years121 / 185
5 years88 / 153
10 years45 / 90
Lipper classificationCore Plus Bond Funds

(View Lipper disclosure)

Benchmark, peer group

Barclays U.S. Aggregate Index (view definition)

Lipper Core Plus Bond Funds Average (view definition)

Additional information