Delaware High-Yield Opportunities Fund

Objective

Delaware High-Yield Opportunities Fund seeks total return and, as a secondary objective, high current income.

Strategy

The Fund primarily invests in high yield corporate bonds. The Fund’s manager engages thorough credit research to attempt to capture the high yield bond market’s premium return potential.

Fund information
Inception date12/30/1996
Dividends paid (if any)Monthly
Capital gains paid (if any)December
Fund identifiers
NASDAQDHOAX
CUSIP245908876
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 (04/30/2015)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)3.69%-0.05%6.85%7.69%7.62%7.21%12/30/1996
Max offer price-0.97%-4.59%5.25%6.71%7.12%6.94%
BofA Merrill Lynch U.S. High Yield Constrained Index3.77%2.58%7.52%8.16%8.29%n/a
Average annual total return as of quarter-end (03/31/2015)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.21%2.21%-1.02%6.73%7.91%7.28%7.16%12/30/1996
Max offer price-2.38%-2.38%-5.52%5.13%6.91%6.79%6.89%
BofA Merrill Lynch U.S. High Yield Constrained Index2.54%2.54%2.06%7.45%8.39%8.04%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.

Expense ratio
Gross1.11%
Net1.05%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursement from Nov. 28, 2014 through Nov. 30, 2015. Please see the fee table in the Fund's prospectus for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20152.21%n/an/an/an/a
20142.77%2.46%-2.25%-3.31%-0.47%
20133.50%-1.66%2.80%3.98%8.79%
20126.84%1.13%5.07%3.41%17.38%
20114.18%0.69%-9.43%7.27%1.91%
20105.22%-1.06%6.90%4.53%16.31%
20095.00%19.45%12.87%5.76%49.69%
2008-2.60%0.76%-7.78%-18.08%-25.83%
20073.04%0.95%-0.80%-1.52%1.61%
20063.35%0.58%3.46%4.48%12.36%
2005-0.41%1.35%1.59%0.49%3.04%
Portfolio characteristics - as of 04/30/2015
Number of holdings257
Effective maturity (weighted average) (view definition)5.95 years
Effective duration (weighted average) (view definition)4.45 years
Annualized standard deviation, 3 years (view definition)4.93
SEC 30-day yield with waiver (view definition)5.12%
SEC 30-day yield without waiver (view definition)5.04%
Portfolio turnover (last fiscal year)105%
Portfolio composition as of 04/30/2015Total may not equal 100% due to rounding.
Credits72.1%
Foreign bonds25.1%
Cash and cash equivalents2.7%
Top 10 holdings as of 04/30/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Intelsat Luxembourg S.A. 8.125 6/1/20231.3%
iHeartCommunications Inc. 9.000 9/15/20221.3%
Digicel Group Ltd. 8.250 9/30/20201.1%
Landry's Inc. 9.375 5/1/20201.0%
Columbus International Inc. 7.375 3/30/20210.9%
BWAY Holding Co. 9.125 8/15/20210.9%
Par Pharmaceutical Cos Inc. 7.375 10/15/20200.8%
VTR Finance BV 6.875 1/15/20240.8%
Zayo Group LLC / Zayo Capital Inc. 6.000 4/1/20230.8%
Immucor Inc. 11.125 8/15/20190.8%
Total % Portfolio in Top 10 holdings9.7%

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

Top sectors as of 04/30/2015
List excludes cash and cash equivalents.
Sector% of portfolio
Media12.2%
Basic industry11.6%
Energy9.7%
Telecommunications8.8%
Healthcare8.3%
Capital goods6.5%
Retail6.1%
Utility5.2%
Banking5.1%
Services5.0%
Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
20150.0000.098
20140.0580.239
20130.0000.274
20120.0000.299
20110.0000.320
20100.0000.346
20090.0000.310
20080.0000.296
20070.0000.335
20060.0000.334
20050.0000.320

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.

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)


Adam Brown

Adam H. Brown, CFA

Vice President, Portfolio Manager

Start date on the Fund: November 2014

Years of industry experience: 16

(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)


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)


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 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 fees0.64%
Distribution and service (12b-1) fees0.25%
Other expenses0.22%
Total annual fund operating expenses1.11%
Fee waivers and expense reimbursements(0.06%)
Total annual fund operating expenses after fee waivers and expense reimbursements1.05%

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 0.80% 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 High-Yield Opportunities Fund Quarterly commentary March 31, 2015

Overview

High yield bonds, as represented by the Barclays U.S. Corporate High-Yield Index, experienced a 0.7% decline during March, bringing their first quarter returns to +2.52%. Volatile oil, equity, and Treasury bond prices; uneven U.S. economic data; slowing Chinese growth; tension surrounding Yemen and the nuclear talks in Iran; and uncertain Greek debt negotiations all contributed to volatile performance during the quarter.

Returns were broadly correlated with credit quality, with BB-rated issues returning +2.7%, followed by B-rated issues at +2.2% and CCC-rated securities at +1.7%. Retail (+4.3%), food and beverage (+3.9%), and telecom (+3.0%) led all other sectors, while metals and mining (-0.8%), industrials (+1.5%), and financials (+1.6%) lagged. Yields tightened 48 basis points, to 6.06%, while spreads over Treasurys narrowed 22 basis points, to 479 basis points. (One basis point equals a hundredth of a percentage point.) (Data: Barclays.)

Despite the volatility and macro concerns noted above, technical conditions in the domestic high yield market were quite positive. Mutual fund inflows totaled $9.6 billion during the quarter, largely erasing the outflows of the previous quarter. New issuance for the quarter totaled $94 billion (a $6 billion increase from the first quarter of 2014), putting 2015 on pace to eclipse full-year 2014 issuance, which itself was the second highest on record. As a percentage of new issuance, refinancing totaled just 44%, the lowest level on an annualized basis since 2008. However, the balance thus far has been concentrated on general corporate purposes rather than leveraged buyout (LBO) activity. Nevertheless, three to four consecutive years of sub-50% refinancing has been highly predictive of a downturn in the credit cycle and an upturn in defaults, so we believe this metric should be closely watched. In the meantime, defaults remain exceptionally low, totaling just 1.8% on a trailing 12-month basis.

Within the Fund

For the first quarter, Delaware High-Yield Opportunities Fund (Institutional Class shares and Class A shares at net asset value) underperformed its benchmark, the BofA Merrill Lynch U.S. High Yield Constrained Index.

The Fund’s top sector contributors were media, retail, and utilities, while the top individual contributors were Calumet Specialty Products (refining; 0.7% of Fund's net assets), Northern Oil and Gas (exploration and production; 0.4%), and Wind Telecommunications (European wireless provider; 0.5%). Calumet Specialty Products and Northern Oil advanced as a result of stronger-than-expected earnings reported during the period. Wind Telecommunications advanced on the announcement of a partial tender for its bonds.

Conversely, the Fund’s largest sector detractors on a relative basis were energy, leisure, and telecommunications. The biggest individual detractors were Intelsat (satellite operator; 1.3%), CHC Helicopter (oilfield services; 0.2%) and Ocean Rig (offshore drilling services; 0.1%). Intelsat declined due to lower-than-expected 2015 forward guidance, while CHC Helicopter and Ocean Rig declined due to persistently low energy prices and slowing drilling activity.

Outlook

The United States is the relative star in an environment of historically low global bond yields and weak economic growth, implying the likelihood for sustained demand for U.S. credit and the potential for reasonably rapid recoveries from market declines. Credit metrics remain sound outside of commodity-based companies, and barring a significant and sustained rise in leveraged buyout (LBO)activity or an unexpected U.S. slowdown, we believe baseline high yield returns should continue to be centered on the coupon.

The Barclays U.S. Corporate High-Yield Index is composed of U.S. dollar–denominated, noninvestment grade corporate 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.

[14345]

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.

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.

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 05/28/2015)

Class APriceNet changeYTD
NAV$4.10-0.013.89%
Max offer price$4.29n/an/a

Total net assets (as of 04/30/2015)

$569.1 million all share classes

Overall Morningstar RatingTM

Load waived

With load

Class A shares (as of 04/30/2015)

Load waivedWith loadNo. of funds
Overall33599
3 Yrs32599
5 Yrs32513
10 Yrs33355
Morningstar categoryHigh Yield Bond

(View Morningstar disclosure)

Lipper ranking (as of 04/30/2015)

YTD ranking226 / 676
1 year513 / 624
3 years193 / 507
5 years135 / 423
10 years68 / 283
Lipper classificationHigh Yield Funds

(View Lipper disclosure)

Benchmark, peer group

BofA Merrill Lynch U.S. High Yield Constrained Index (view definition)

Lipper High Yield Funds Average (view definition)

Additional information