Delaware Inflation Protected Bond Fund

Objective

Delaware Inflation Protected Bond Fund seeks to provide inflation protection and current income.

Strategy

The Fund primarily invests in inflation-indexed bonds issued by the U.S. government, its agencies and instrumentalities, and corporations.

Fund information
Inception date12/01/2004
Dividends paid (if any)Monthly
Capital gains paid (if any)December
Fund identifiers
NASDAQDIPAX
CUSIP246094882
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 (08/31/2014)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)4.01%2.63%-1.33%2.91%n/a3.79%12/01/2004
Max offer price-0.66%-2.02%-2.82%1.96%n/a3.30%
Barclays U.S. TIPS Index6.32%5.70%2.12%5.45%n/an/a
Average annual total return as of quarter-end (06/30/2014)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)3.00%4.04%0.77%-0.14%3.36%n/a3.86%12/01/2004
Max offer price-1.69%-0.64%-3.72%-1.67%2.41%n/a3.36%
Barclays U.S. TIPS Index3.81%5.83%4.44%3.55%5.55%n/an/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.

Prior to May 1, 2005, the Fund had not engaged in a broad distribution effort of its shares and had been subject to limited redemption requests. The returns reflect expense limitations that were in effect during certain periods and which may have been lower than the Fund's current expenses. The returns would have been lower without such expense limitations.

Expense ratio
Gross0.98%
Net0.84%

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
20141.01%3.00%-2.85%n/an/a
2013-1.75%-8.89%-1.08%-2.08%-13.30%
20121.12%3.67%0.99%-0.26%5.59%
20111.43%3.81%4.00%0.55%10.11%
20101.75%2.17%2.81%-0.57%6.27%
20093.67%0.81%4.19%1.59%10.63%
20086.02%-0.78%-2.87%-2.07%0.05%
20072.27%-0.86%4.43%4.88%11.05%
2006-2.02%0.34%3.48%-1.25%0.46%
2005-0.23%2.69%0.14%-0.09%2.50%
Portfolio characteristics - as of 08/31/2014
Share assets$32.9 million
Number of holdings20
Effective maturity (weighted average) (view definition)10.19 years
Effective duration (weighted average) (view definition)5.86 years
Annualized standard deviation, 3 years (view definition)5.19
SEC 30-day yield with waiver (view definition)0.76%
SEC 30-day yield without waiver (view definition)0.40%
Portfolio turnover (last fiscal year)322%

The SEC 30-day yield is an SEC standardized formula based on yield to maturity of a fund’s investments over a 30-day period. The SEC yield for the Fund is the yield on the securities within the portfolio adjusted for inflation. Because the Fund has a significant investment in Treasury Inflation-Protected Securities (TIPS), it is highly influenced by the TIPS market and the monthly inflation adjustments on these securities. This 30-day yield, because of the adjustment, may be more volatile than SEC 30-day yields of funds that do not have significant holdings of TIPS, and the Fund may not be able to repeat any exceptionally high yields produced by the Fund.

Portfolio composition as of 08/31/2014Total may not equal 100% due to rounding.
U.S. government securities71.3%
Asset-backed securities21.7%
Corporate bonds3.5%
Cash and cash equivalents3.5%
Top 10 holdings as of 08/31/2014
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
United States Treasury Inflation Indexed Bonds 1.125 1/15/202124.4%
United States Treasury Inflation Indexed Bonds 2.375 1/15/202523.6%
United States Treasury Inflation Indexed Bonds 1.375 2/15/204413.4%
United States Treasury Inflation Indexed Bonds 2.500 1/15/20295.1%
United States Treasury Note/Bond 2.375 8/15/20244.1%
CABMT 2012-1A A23.6%
CHAIT 2013-A3 A33.6%
CHAIT 2012-A10 A103.6%
PNC Preferred Funding Trust II 1.453 3/31/20493.5%
NMOTR 2012-A A2.2%
Total % Portfolio in Top 10 holdings87.1%

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

Top sectors as of 08/31/2014
List excludes cash and cash equivalents.
Sector% of portfolio
Treasury inflation-protected securities65.6%
Asset-backed securities21.7%
U.S. Treasury securities5.7%
Investment grade credits3.5%
Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
20140.0000.108
20130.0000.000
20120.8040.236
20110.4030.313
20100.3430.244
20090.0000.190
20080.0570.510
20070.0000.428
20060.0000.360
20050.0170.552
20040.0000.062

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 is only provided from June 1, 2014 onward.

3Includes both short- and long-term capital gains.

Roger Early

Roger Early, CPA, CFA, CFP

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

Start date on the Fund: May 2007

Years of industry experience: 38

(View bio)


Paul Grillo

Paul Grillo, CFA

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

Start date on the Fund: May 2007

Years of industry experience: 33

(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 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 fees0.45%
Distribution and service (12b-1) fees0.25%
Other expenses0.28%
Total annual fund operating expenses0.98%
Fee waivers and expense reimbursements(0.14%)
Total annual fund operating expenses after fee waivers and expense reimbursements0.84%

1The Class A shares' distribution and service (12b-1) fees have been restated to reflect a permanent reduction in their fees 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 fees, acquired fund fees and expenses, taxes, interest, inverse floater program expenses, short sale and dividend interest expenses, brokerage fees, certain insurance costs, 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 0.59% 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 or Distributor, as applicable, and the Fund.

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Delaware Inflation Protected Bond Fund Quarterly commentary June 30, 2014 Class A (DIPAX)

Overview

The domestic fixed income market was supported during the second quarter by continued central bank benevolence and a “Goldilocks” economy that was strong enough to sustain modest growth yet weak enough to contain inflation. Investors dismissed the poor first quarter U.S. gross domestic product report as being largely weather-related. Global asset prices also were affected by simmering geopolitical tensions in Ukraine and Iraq, as well as indications of significant healing in the U.S. labor market.

Yields were lower on longer maturities during the second quarter of 2014, with 10- to 30-year Treasury bonds showing the biggest drop in rates during the period (-0.20%). Responding to a slight improvement in economic momentum, short-term yields during the quarter were slightly higher. The 2-year/10-year Treasury curve flattened by 0.23 percentage points, to 2.07%. Ten-year Treasury inflation-protected securities (TIPS) yields followed nominals as break-even inflation rates rose from 2.14% to 2.28% and real yields fell from 0.58% to 0.25%.

Within the Fund

For the second quarter of 2014, Delaware Inflation Protected Bond Fund generated a strong positive total return but underperformed its benchmark, the Barclays U.S. TIPS Index.

The TIPS market performed well during the quarter, following the price appreciation in the 7–30 year part of the Treasury bond market as yields fell. The Fund participated in the market strength but its defensive duration (shorter than the index) caused performance to lag the index.

The Fund is maintaining its intermediate duration target to encourage lower interest rate sensitivity over a full rate cycle. The Fund’s positioning also continues to reflect our desire to avoid excessive break-even rate volatility in shorter-maturity TIPS. This is especially important in the current market environment where short-maturity TIPS are overvalued, in our opinion, because they are fully priced for the recent spike in energy prices.

Outlook

Federal Reserve forecasts suggest that short-term rates should stay near zero until at least the second quarter of 2015 and move higher at a slower-than-normal pace after that. The subdued pace of benchmark rate hikes, along with still-moderate inflation, should help keep 10-year Treasury yields below 3.5% during the remainder of 2014.

However, stronger-than-expected economic growth could cause a test of this upper band while any reasons for a return to a flight-to-quality or liquidity sentiment could create a rally that tests yield levels below 2.5%, or even 2.0%. So far, the market reaction to the actual tapering in asset purchases of $10 billion a month has been rather modest. Finally, we believe that TIPS are still at full value given the potential for continued softness in inflation.

[12900]

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.

Prior to May 1, 2005, the Fund had not engaged in a broad distribution effort of its shares and had been subject to limited redemption requests. The returns reflect expense limitations that were in effect during certain periods and which may have been lower than the Fund's current expenses. The returns would have been lower without such expense limitations.

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.

Interest payments on inflation-indexed debt securities will vary as the principal and/or interest is adjusted for inflation.

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

The Funds 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.

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.

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

Diversification may not protect against market risk.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 10/01/2014)

Class APriceNet changeYTD
NAV$8.970.051.63%
Max offer price$9.39n/an/a

Total net assets (as of 08/31/2014)

$83.2 million all share classes

Lipper ranking (as of 08/31/2014)

YTD ranking148 / 213
1 year180 / 211
3 years181 / 183
5 years127 / 133
10 yearsn/a
Lipper classificationInflation Protected Bond

(View Lipper disclosure)

Benchmark, peer group

Barclays U.S. Treasury Inflation-Protected Securities (TIPS) Index (view)

Lipper Treasury Inflation-Protected Securities (TIPS) Funds Average (view)

Additional information