Delaware Corporate Bond Fund

Objective

Delaware Corporate Bond Fund seeks to provide investors with total return.

Strategy

The Fund primarily invests in corporate bonds, with a focus on bonds that have investment grade credit ratings. The Fund seeks total return through a combination of income and capital appreciation.

Fund information
Inception date09/15/1998
Dividends paid (if any)Monthly
Capital gains paid (if any)December
Fund identifiers
NASDAQDGCIX
CUSIP245908751

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

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 (03/31/2015)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.70%6.04%6.62%7.76%7.39%7.45%09/15/1998
Barclays U.S. Corporate Investment Grade Index2.32%6.81%5.21%6.50%5.90%n/a
Average annual total return as of quarter-end (03/31/2015)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.70%2.70%6.04%6.62%7.76%7.39%7.45%09/15/1998
Barclays U.S. Corporate Investment Grade Index2.32%2.32%6.81%5.21%6.50%5.90%n/a

Returns for less than one year are not annualized.

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
Gross0.70%
Net0.69%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements 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
20152.70%n/an/an/an/a
20143.70%3.60%-0.56%0.23%7.08%
20130.88%-3.45%0.53%1.77%-0.35%
20123.85%3.02%4.90%2.36%14.87%
20111.69%2.21%0.80%2.69%7.57%
20103.95%1.49%6.45%-0.65%11.57%
2009-1.91%14.70%11.73%2.95%29.39%
20080.04%-1.84%-6.60%0.07%-8.21%
20071.63%-0.64%1.25%1.28%3.54%
2006-0.43%-0.38%5.05%2.37%6.68%
2005-0.78%3.39%-0.96%0.51%2.11%

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

Portfolio characteristics - as of 03/31/2015
Number of holdings264
Effective maturity (weighted average) (view definition)11.30 years
Effective duration (weighted average) (view definition)7.42 years
Annualized standard deviation, 3 years (view definition)4.42
SEC 30-day yield with waiver (view definition)3.33%
SEC 30-day yield without waiver (view definition)3.32%
Portfolio turnover (last fiscal year)215%
Portfolio composition as of 03/31/2015Total may not equal 100% due to rounding.
Credits94.7%
U.S. government securities4.5%
Municipal bonds0.7%
Top 10 holdings as of 03/31/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Pennsylvania Electric Co. 5.200 4/1/20201.3%
Bank of New York Mellon Corp. 2.150 2/24/20201.2%
JPMorgan Chase & Co. 4.125 12/15/20261.0%
Dominion Gas Holdings LLC 3.600 12/15/20241.0%
Goldman Sachs Group Inc. 2.600 4/23/20201.0%
Omega Healthcare Investors Inc. 4.500 1/15/20250.9%
American International Group Inc. 4.125 2/15/20240.8%
LyondellBasell Industries NV 4.625 2/26/20550.8%
JM Smucker Co. 3.500 3/15/20250.8%
Georgia-Pacific LLC 8.000 1/15/20240.8%
Total % Portfolio in Top 10 holdings9.6%

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

Top sectors as of 03/31/2015
List excludes cash and cash equivalents.
Sector% of portfolio
Financial institutions26.2%
Energy13.2%
Communications11.2%
Utility7.7%
Consumer noncyclical7.5%
Consumer cyclical7.3%
Basic Industry7.3%
Technology5.6%
Noncorporate5.3%
Transportation2.4%
Distribution history - annual distributions (Institutional Class)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
20150.0000.078
20140.0600.260
20130.0960.271
20120.1890.280
20110.1360.317
20100.2710.341
20090.0000.338
20080.0000.297
20070.0000.325
20060.0000.320
20050.0210.309

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.

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

Mike Wildstein

Michael G. Wildstein, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: November 2014

Years of industry experience: 13

(View bio)


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: 38

(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 2014

Years of industry experience: 22

(View bio)


Kashif Ishaq

Kashif Ishaq 

Senior Vice President, Head of Investment Grade Corporate Bond Trading

Start date on the Fund: November 2013

Years of industry experience: 12

(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)


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

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 pricenone
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lowernone
Annual fund operating expenses
Management fees0.48%
Distribution and service (12b-1) feesnone
Other expenses0.22%
Total annual fund operating expenses0.70%
Fee waivers and expense reimbursements(0.01%)
Total annual fund operating expenses after fee waivers and expense reimbursements0.69%

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

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 0.69% 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.

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Delaware Corporate 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 U.S. 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 (QE) 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.

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

For the first quarter of 2015, Delaware Corporate Bond Fund (Institutional Class shares and Class A shares at net asset value) outperformed its benchmark, the Barclays U.S. Corporate Investment Grade Index.

During the quarter the market was again plagued by volatility as interest rates fluctuated and credit risk premiums shifted. Ten-year Treasury rates declined by 23 basis points to close the quarter at 1.92%, and investment grade credit spreads moved two basis points tighter, providing a tailwind to the market. (One basis point is a hundredth of a percentage point.)

Solid security selection within investment grade credit contributed meaningfully to the total return of the Fund. The outperformance was particularly noticeable in financials, consumer noncyclicals, and transportation, although an underweight in consumer noncyclicals was a partial offset. From a spread/duration standpoint, an overweight to the intermediate segment, or the “belly,” of the curve was additive to Fund performance.

We continue to use interest rate futures to manage curve and overall portfolio duration deviations relative to the index.

Conversely, high yield issues represented about 11% of the Fund’s portfolio, and although that allocation generated a positive return for the period, it nonetheless lagged the benchmark return despite strong security selection among the Fund’s BB-rated holdings.

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 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. .

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.

The Barclays U.S. Aggregate Index is a broad composite that tracks the investment grade domestic bond market.

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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 800 362-7500. 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.

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.

High yielding, noninvestment grade bonds (junk bonds) involve higher risk than investment grade bonds.

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.

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

The Funds are distributed by Delaware Distributors L.P., an affiliate of Delaware Management Holdings, Inc., and Macquarie Group Limited.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 05/01/2015)

Institutional ClassPriceNet changeYTD
NAV$5.96-0.022.01%
Max offer price$5.96n/an/a

Total net assets (as of 03/31/2015)

$1.4 billion all share classes

Lipper ranking (as of 03/31/2015)

YTD ranking37 / 210
1 year74 / 205
3 years25 / 171
5 years20 / 145
10 years9 / 95
Lipper classificationCorp Debt BBB Rated Fds

(View Lipper disclosure)

Benchmark, peer group

Barclays U.S. Corporate Investment Grade Index (view definition)

Lipper Corporate Debt Funds BBB-Rated Average (view definition)

Additional information