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
NASDAQDGCAX
CUSIP245908785
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 (05/31/2016)

as of quarter-end (03/31/2016)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)4.29%0.34%2.47%4.92%6.90%6.66%09/15/1998
Max offer price-0.35%-4.18%0.91%3.97%6.40%6.38%
Barclays U.S. Corporate Investment Grade Index5.31%3.62%3.67%4.78%6.01%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.81%-1.82%2.00%5.30%6.69%6.64%09/15/1998
Max offer price-1.76%-6.19%0.46%4.32%6.20%6.36%
Barclays U.S. Corporate Investment Grade Index3.97%0.92%3.03%5.17%5.82%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
Gross0.95%
Net0.94%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from Nov. 27, 2015 through Nov. 28, 2016. Please see the fee table in the Fund's prospectus for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20162.81%n/an/an/an/a
20152.64%-2.64%-0.94%-0.98%-1.98%
20143.64%3.53%-0.62%0.16%6.81%
20130.82%-3.51%0.47%1.71%-0.60%
20123.78%2.96%4.84%2.29%14.59%
20111.63%2.14%0.73%2.62%7.31%
20104.07%1.43%6.38%-0.71%11.49%
2009-1.98%14.62%11.46%2.89%28.84%
2008-0.02%-1.72%-6.83%0.00%-8.44%
20071.56%-0.70%1.01%1.21%3.10%
2006-0.49%-0.45%4.99%2.49%6.60%
Portfolio characteristics - as of 05/31/2016Barclays U.S. Corporate Investment Grade Index
Number of holdings2515,735
Number of credit issuers173
Portfolio turnover (last fiscal year)215%n/a
Effective duration (weighted average) (view definition)7.19 years7.33 years
Effective maturity (weighted average) (view definition)10.30 years10.72 years
Yield to maturity (view definition)3.96%3.15%
Average market price (view definition)$102.59$106.21
Average coupon (view definition)4.58%4.18%
Yield to worst (view definition)3.94%3.14%
SEC 30-day yield with waiver (view definition)2.67%
SEC 30-day yield without waiver (view definition)2.60%
Annualized standard deviation, 3 years (view definition)4.36n/a
Portfolio composition as of 05/31/2016Total may not equal 100% due to rounding.
Credits99.3%
U.S. government securities0.8%
Top 10 fixed income holdings as of 05/31/2016
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Anheuser-Busch InBev Finance Inc. 3.650 2/1/20261.4%
Chubb INA Holdings Inc. 3.350 5/3/20261.2%
Credit Suisse Group Funding Guernsey Ltd. 4.550 4/17/20261.2%
Sky PLC 3.750 9/16/20241.1%
AT&T Inc. 5.650 2/15/20471.1%
Georgia-Pacific LLC 8.000 1/15/20241.0%
KeyBank NA/Cleveland OH 3.400 5/20/20261.0%
JPMorgan Chase & Co. 4.250 10/1/20271.0%
Branch Banking & Trust Co. 3.625 9/16/20251.0%
Kansas City Power & Light Co. 3.650 8/15/20251.0%
Total % Portfolio in Top 10 holdings11.0%

Fixed income sectors as of 05/31/2016

List excludes cash and cash equivalents.

SectorFundBenchmark
Financial institutions34.2%30.9%
Communications12.6%9.7%
Consumer noncyclical12.4%15.5%
Utility11.5%7.7%
Consumer cyclical6.6%7.8%
Basic Industry6.1%3.7%
Energy4.5%9.5%
Transportation3.1%2.3%
Noncorporate3.1%0.0%
Technology3.0%7.2%
Capital goods2.3%5.3%
Credit quality as of 05/31/2016
RatingFundBenchmark
AAA0.9%1.4%
AA4.5%9.5%
A25.1%41.7%
BBB59.5%47.5%
BB4.7%0.0%
B4.9%0.0%
CCC0.5%0.0%

Total may not equal 100% due to rounding. The Fund’s investment manager, Delaware Management Company (DMC), a series of Delaware Management Business Trust, receives “Credit Quality” ratings for the underlying securities held by the Fund from three “nationally recognized statistical rating organizations” (NRSROs): Standard & Poor’s (S&P), Moody’s Investors Service, and Fitch, Inc. The credit quality breakdown is calculated by DMC based on the NRSRO ratings. If two or more NRSROs have assigned a rating to a security the higher rating (lower value) is used. If only one NRSRO rates a security, that rating is used. For securities rated by an NRSRO other than S&P, that rating is converted to the equivalent S&P credit rating. Securities that are unrated by any of the three NRSROs are included in the “not rated” category when applicable. Unrated securities do not necessarily indicate low quality. More information about securities ratings is contained in the Fund’s Statement of Additional Information.

Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
20160.0000.079
20150.0010.217
20140.0600.244
20130.0960.256
20120.1890.265
20110.1360.302
20100.2710.325
20090.0000.325
20080.0000.284
20070.0000.311
20060.0000.306

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.

Risk managed solutions

Roger Early, Head of Fixed Income Investments, discusses why the team’s assets under management, structure, and mindset are strengths that help distinguish it from others. [Runtime: 2:14]

Watch the video

Read video transcript

Mike Wildstein

Michael G. Wildstein, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: November 2014

Years of industry experience: 14

(View bio)


Roger Early

Roger A. Early, CPA, CFA

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

Start date on the Fund: May 2007

Years of industry experience: 40

(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: 21

(View bio)


J. David Hillmeyer

J. David Hillmeyer, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: November 2014

Years of industry experience: 23

(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: 14

(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: 30

(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: 29

(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: 29

(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 intermediary, 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 table below 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 fees0.48%
Distribution and service (12b-1) fees0.25%
Other expenses0.22%
Total annual fund operating expenses0.95%
Fee waivers and expense reimbursements(0.01%)
Total annual fund operating expenses after fee waivers and expense reimbursements0.94%

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. 27, 2015 through Nov. 28, 2016. 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, 2016

Overview

The fixed income market aggressively sold risk assets over the first half of the quarter and then turned on a “Draghi dime” and bought risk assets through the end of the period. The first wave of risk-buying in late February gained traction after European Central Bank (ECB) President Mario Draghi made it clear that the ECB would not hesitate to further loosen monetary policy and Federal Reserve Chairwoman Janet Yellen mentioned tightening U.S. financial conditions and increased global risks. Risk assets received an additional boost in March after the ECB acted on Draghi’s proposals and Yellen amplified her dovish comments. Significant swings in oil prices and the U.S. dollar contributed to volatility as well.

Investment grade bond markets witnessed a dramatic recovery in risk premiums and sentiment during the quarter, driven by the rally in oil prices back into the low $40s from a decade bottom of $28, continued global central bank accommodation, and better domestic economic data relative to expectations (measured by the improvement in the Citigroup U.S. Economic Surprise Index). However, downside risks remain and we expect credit risk premiums to remain volatile due to a (still) heavy new-issue supply calendar, new realities in terms of market liquidity, further global growth concerns, and commodity price uncertainty. The Barclays U.S. Corporate Investment Grade Index returned 3.97% for the quarter, outperforming duration-matched Treasurys by 16 basis points, with the majority of the performance generated in March. (A basis point equals one hundredth of a percentage point.) Metals and mining outpaced all other sectors within the index, posting an 11.2% return for the quarter, driven by the corresponding rally in commodity prices, with iron ore up more than 20% for the period and copper up 10% from its mid-January lows, although we question the sustainability of such improvement in the face of weak global growth. Drillers and financials, particularly subordinated bank debt, were the underperformers during the quarter. Investment grade bond supply ended the quarter at $360 billion, slightly ahead of last year”s record pace (the first quarter of 2015 was the second highest on record) but still historically high as the mergers-and-acquisitions funding pipeline from 2015 remains intact (source: Bank of America).

High yield bonds, as measured by the BofA Merrill Lynch High Yield Cash Pay Index, returned +3.23% during the first quarter, snapping a string of three consecutive quarterly losses for the asset class. Through mid-February the market appeared on track for yet another significant loss; however, the increase in oil prices carried high yield and most other risk assets well into positive territory for the period. Unsurprisingly, energy bonds (13% of the BofA Merrill Lynch High Yield Cash Pay Index) experienced the widest price swing, falling 20% along with oil and then recovering 25% to finish with a 2.7% total return. Mutual fund flows contributed to the price action, with $5 billion leaving the high yield market through mid-February followed by nearly $14 billion of inflows over the balance of the quarter as investors chased returns. The market yield fell 40 basis points to 8.3%, while the spread rose 21 basis points to 710 basis points.

In March, U.S. gross domestic product (GDP) growth for the fourth quarter of 2015 was revised upward to a 1.4% annualized pace due to a jump in consumer spending. However, corporate profits fell 7.8% during the quarter, the biggest decline since the first quarter of 2011 (-9.2%). Profits have fallen in four of the last five quarters and are down 11.5% from a year earlier, the worst year-on-year drop since the Great Recession. Among the more positive trends, jobless claims, which have averaged about 275,000 for the past year, suggest continued strength in the pace of hiring. Until personal income and wage-and-salary income accelerate, however, consumer inflation should remain muted. Combining these factors with concerns over the pace of global economic growth, lower oil prices, and a strong U.S. dollar raises the hurdle for the next Federal Open Market Committee (FOMC) policy rate action.

With investors in perpetual Fed-watch mode, recent statements by Fed officials (other than Yellen) that appear to lean more toward a near-term tightening have been a source of uncertainty. This leaning may be the result of recent signs that inflation expectations are finally approaching the Fed”s 2% target. Though the last official Fed communication suggested two additional quarter-percentage-point increases in the federal funds rate this year, the markets are discounting only one increase in the fourth quarter of 2016. We are inclined to favor the market”s “one increase” view but believe it could come as early as summer.

Within the Fund

For the first quarter of 2016, Delaware Corporate Bond Fund (Institutional Class shares and Class A shares at net asset value) underperformed its benchmark, the Barclays U.S. Corporate Investment Grade Index. The Fund”s performance was negatively affected by a lack of exposure to higher-beta (higher-risk), lower-quality energy names, as well as by an underweight to the energy sector overall. Energy exposure represented an average of about 3.5% of the Fund’s portfolio for the period. Exposure to hybrid and euro bank debt also detracted from performance as financials, once considered a relative safe haven, came under pressure amid poor earnings results and negative headlines from European issuers.

From a duration standpoint, the Fund”s overweight to the intermediate segment (the “belly” of the curve) and a corresponding underweight to the long end, benefited performance. Amid cautious investor sentiment, dovish Fed sentiment, additional global central bank accommodation and expanding negative rate policies in Europe, the Treasury curve bull steepened over the period in the 5- to 30-year portion of the curve — a move in which rates in the short to intermediate end of the curve go down by a greater degree than those in the long end.

Outlook

Fundamentals within nonfinancials remain under pressure as rising leverage and increased use of financial engineering via accommodative policy have deteriorated credit metrics. Many multinational companies are expecting top- and bottom-line pressure in the upcoming quarter from the strength of the U.S. dollar. A decline in earnings per share driven by a decline in revenue would be a slight credit negative, as it implies a modest deceleration in growth, although we do not expect a meaningful move in spreads or credit quality, as our outlook for growth remains similar to what we”ve seen over the past few years (approximately 2%) which is generally supportive of credit. Technicals remain mixed as heavy new-issue supply has prevented secondary spreads from tightening and overall liquidity remains constrained, while institutional and foreign demand should continue to provide support to the asset class. Furthermore, the ECB”s purchase of corporate bonds should drive more European investors to the U.S. markets in search of yield as well as push some issuance overseas in the form of reverse Yankee issuance.

The recent moves in investment grade bond credit valuations (and the commodity space in particular) have been volatile, which we have seen become the new norm in capital markets. Fundamentally, signals of sluggish global growth have not changed since the beginning of the year and as a result, the large swings in bond prices we have witnessed recently are likely due to technicals (predominantly the lack of liquidity on Wall Street causing incredible price discovery, along with short-coverings). We believe this kind of volatility may continue for the foreseeable future, regardless of any material changes in fundamental or macroeconomic views. For the year, we believe investment grade credit could generate positive total and excess returns, but that volatility will remain and may create attractive entry points. We believe our credit portfolios are positioned to take advantage of such opportunities.

The BofA Merrill Lynch High Yield Cash Pay Index provides a general measure of the performance of fixed-rate, coupon-bearing bonds with an outstanding par of at least $50 million and a maturity range greater than or equal to one year. To be included in the index, bonds must be rated lower than BBB/Baa3.

The Citigroup Economic Surprise Index is a rolling measure of beats and misses of indicators relative to consensus expectations.

[16406]

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 877 693-3546. 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, non-investment-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 derivatives 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.

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 06/24/2016)

Class APriceNet change
NAV$5.800.02
Max offer price$6.07n/a

Total net assets (as of 05/31/2016)

$1.1 billion all share classes

Overall Morningstar RatingTM

Load waived

With load

Class A shares (as of 05/31/2016)
Load waivedWith loadNo. of funds
Overall43167
3 Yrs21167
5 Yrs43143
10 Yrs4492
Morningstar categoryCorporate Bond

(View Morningstar disclosure)

Lipper ranking (as of 05/31/2016)

YTD ranking164 / 261
1 year221 / 251
3 years138 / 208
5 years47 / 174
10 years13 / 108
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