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*Monthly
Capital gains paid*December

*If any.

Fund identifiers
NASDAQDHOAX
CUSIP245908876
Investment minimums
Initial investment$1,000
Subsequent Investments$100
Systematic withdrawal balance$5,000
Account features
CheckwritingNo
Payroll DeductionYes
IRAsYes

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 (03/31/2014)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.77%8.02%8.68%17.27%8.50%7.65%12/30/1996
Max offer pricen/a3.26%7.02%16.17%8.00%7.37%
BofA Merrill Lynch U.S. High Yield Constrained Index2.99%7.51%8.69%18.13%8.54%n/a
Average annual total return as of quarter-end (03/31/2014)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.77%2.77%8.02%8.68%17.27%8.50%7.65%12/30/1996
Max offer price-1.75%-1.75%3.26%7.02%16.17%8.00%7.37%
BofA Merrill Lynch U.S. High Yield Constrained Index2.99%2.99%7.51%8.69%18.13%8.54%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%
Net1.06%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursement from Nov. 27, 2013 through Nov. 28, 2014. Please see the fee table in the Fund's prospectus for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20142.77%n/an/an/an/a
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%
20042.54%0.60%5.02%5.34%14.12%
Portfolio characteristics - as of 03/31/2014
Share assets$338.5 million
Number of holdings276
Effective maturity (weighted average) (view definition)4.96 years
Effective duration (weighted average) (view definition)3.74 years
Annualized standard deviation, 3 years (view definition)8.14
SEC 30-day yield with waiver (view definition)3.88%
SEC 30-day yield without waiver (view definition)3.82%
Portfolio turnover (last fiscal year)88%
Portfolio composition as of 03/31/2014Total may not equal 100% due to rounding.
Credits71.6%
Foreign bonds23.0%
Cash and cash equivalents2.8%
Equity securities2.7%
Top 10 holdings as of 03/31/2014
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Par Pharmaceutical Cos Inc. 7.375 10/15/20201.0%
Univision Communications Inc. 8.500 5/15/20210.8%
Algeco Scotsman Global Finance Plc 10.750 10/15/20190.8%
Intelsat Luxembourg S.A. 8.125 6/1/20230.8%
Ally Financial Inc.0.8%
Digicel Group Ltd. 8.250 9/30/20200.8%
Virgin Media Finance PLC 6.375 4/15/20230.8%
VTR Finance BV 6.875 1/15/20240.8%
Clear Channel Communications Inc. 6.750 1/30/20190.8%
ArcelorMittal 6.125 6/1/20180.7%
Total % Portfolio in Top 10 holdings8.1%

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

Top sectors as of 03/31/2014
List excludes cash and cash equivalents.
Sector% of portfolio
Energy14.6%
Healthcare10.2%
Basic industry9.4%
Media8.8%
Services8.3%
Consumer cyclical7.4%
Technology & electric7.2%
Telecommunications6.9%
Capital goods3.6%
Emerging markets3.4%
Distribution history - annual distributions (Class A)
Distributions ($ per share)
YearCapital gainsDividends
20140.0000.080
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
20040.0000.336
Thomas Chow

Thomas H. Chow, CFA

Chief Investment Officer — Corporate Credit

Start date on the Fund: December 2012

(View bio)


Paul Matlack

Paul Matlack, CFA

Senior Portfolio Manager, Fixed Income Strategist

Start date on the Fund: December 2012

(View bio)


Craig Dembeck

Craig C. Dembek, CFA

Co-Head of Credit Research, Senior Research Analyst

Start date on the Fund: December 2012

(View bio)


John McCarthy

John P. McCarthy, CFA

Co-Head of Credit Research, Senior Research Analyst

Start date on the Fund: December 2012

(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 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(0.05%)
Total annual fund operating expenses after fee waivers and expense reimbursements1.06%

1The Class A shares' distribution and service (12b-1) fee has been restated to reflect a permanent reduction to 0.25%.

2The Fund's investment manager, Delaware Management Company (Manager), is contractually waiving its investment advisory fees and/or paying expenses (excluding any 12b-1 plan, taxes, interest, inverse floater program expenses, short sale and dividend interest expenses, brokerage fees, certain insurance costs, acquired fund fees and expenses, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) to the extent necessary to prevent total annual fund operating expenses from exceeding 0.81% of the Fund's average daily net assets from Nov. 27, 2013 through Nov. 28, 2014. These waivers and reimbursements may only be terminated by agreement of the Manager and Distributor, as applicable, 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 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.

View printable commentary E-mail this page

This commentary is currently not available. Please check back later.

Delaware High-Yield Opportunities Fund Quarterly commentary March 31, 2014 Class A (DHOAX)

Overview

Against a backdrop of seesawing equity and Treasury markets, high yield bonds, as measured by the BofA Merrill Lynch U.S. High Yield Constrained Index, returned 3.0% during the first quarter, while leveraged loans returned 1.0% (data: J.P. Morgan). High yield bond yields fell 40 basis points, to 5.4%, while spreads fell 27 basis points to 413 basis points. Loan yields increased 3 basis points to 5.2%, while spreads tightened 10 basis points, to 425 basis points. (A basis point equals one one-hundredth of a percentage point.)

The seemingly inexorable decline in yields and spreads continued during the first quarter, as the high yield market successfully shrugged off volatile stock and Treasury markets along with geopolitical instability, weak U.S. economic data, and a somewhat rocky public debut by incoming Federal Reserve Chairwoman Janet Yellen. While high yield spreads have room for further compression (at least by historical standards), they have reached a post-crisis low, while yields are now deep into record low territory. However, the high yield market remains the highest yielding sector of the U.S. bond market and, as such, has continued to attract strong investor interest.

Within the Fund

For the first quarter of 2014, Delaware High-Yield Opportunities Fund (Class A shares at net asset value) generated a positive total return but underperformed that of its benchmark, the BofA Merrill Lynch U.S. High Yield Constrained Index. The Fund’s top sector contributors were basic industry, healthcare, and insurance. Top individual contributors included Algeco Scotsman (modular trailer leasing), Par Pharmaceutical (generic drug manufacturing), and American International Group (insurance).

Meanwhile, the largest detractors from relative performance on a sector level were energy, telecommunications, and utilities. Bottom performers at the individual security level included Quiksilver (outdoor sports equipment), GenOn (utility), and Akorn (ophthalmic pharmaceuticals). GenOn lagged in line with the utility sector, Quiksilver underperformed on modestly weaker-than-expected first quarter earnings, and Akorn declined on softer full-year 2014 guidance from the company.

Outlook

With a benign domestic macroeconomic environment, stable corporate credit metrics, and sustained demand for both high yield loans and bonds, conditions have remained supportive for the leveraged credit sector. However, while credit trends remain benign, the continued compression of high yield credit spreads diminishes the market’s ability to absorb future interest rate increases.

While we believe policy rates are unlikely to move anytime soon given substantial labor market slack, market rates are under no such constraint and could certainly shift higher in the event of unexpectedly strong economic growth. This risk likely accounts for the record flows into floating-rate bank loan instruments, but has also increased the average price for a BB or B-rated loan. Given a stable rate backdrop, we believe the tight spreads prevailing in the high yield bond market and high dollar price of the loan market imply that returns going forward could consist largely of income.

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.

[12428]

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.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 04/23/2014)

Class APriceNet changeYTD
NAV$4.40no chg2.89%
Max offer price$4.61n/an/a

Total net assets (as of 03/31/2014)

$686.4 million all share classes

Overall Morningstar RatingTM

Load waived

With load

Class A shares (as of 03/31/2014)

Load waivedWith loadNo. of funds
Overall43550
3 Yrs42550
5 Yrs43469
10 Yrs44332
Morningstar categoryHigh Yield Bond

(View Morningstar disclosure)

Lipper ranking (as of 03/31/2014)

YTD ranking273 / 627
1 year90 / 577
3 years76 / 468
5 years98 / 395
10 years23 / 273
Lipper classificationHigh Yield Funds

(View Lipper disclosure)

Literature

Prospectuses and reports

Benchmark, peer group

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

Lipper High Yield Funds Average (view)

Additional information