Delaware High-Yield Opportunities Fund


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


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
Investment minimums
Initial investment$1,000
Subsequent Investments$100
Systematic withdrawal balance$5,000
Account features
Payroll DeductionYes

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)4.95%-6.04%0.44%3.64%6.01%6.48%12/30/1996
Max offer price0.15%-10.20%-1.06%2.69%5.53%6.23%
BofA Merrill Lynch U.S. High Yield Constrained Index8.15%-0.88%2.90%5.26%7.33%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.26%-6.68%-0.07%3.47%5.83%6.39%12/30/1996
Max offer price-2.41%-10.84%-1.56%2.51%5.35%6.14%
BofA Merrill Lynch U.S. High Yield Constrained Index3.25%-3.96%1.77%4.71%6.88%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

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. 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 of Trustees.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
Portfolio characteristics - as of 05/31/2016BofA Merrill Lynch U.S. High Yield Constrained Index
Number of holdings2582,282
Number of credit issuers183
Portfolio turnover (last fiscal year)86%%
Effective duration (weighted average) (view definition)4.47 years4.33 years
Effective maturity (weighted average) (view definition)6.15 years6.33 years
Yield to maturity (view definition)6.88%7.65%
Average market price (view definition)$99.58$94.68
Average coupon (view definition)6.75%6.60%
Yield to worst (view definition)6.75%7.43%
SEC 30-day yield with waiver (view definition)5.40%
SEC 30-day yield without waiver (view definition)5.27%
Annualized standard deviation, 3 years (view definition)6.18n/a
Portfolio composition as of 05/31/2016Total may not equal 100% due to rounding.
Foreign bonds18.1%
Cash and cash equivalents1.7%
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
Nexstar Broadcasting Inc. 8.500 1/27/20171.2%
First Data Corp. 7.000 12/1/20231.0%
JPMorgan Chase & Co. 6.750 8/29/20491.0%
Numericable-SFR S.A. 7.375 5/1/20261.0%
Mohegan Tribal Gaming Authority 9.750 9/1/20211.0%
JBS USA LLC / JBS USA Finance Inc. 5.750 6/15/20250.8%
HUB International Ltd. 7.875 10/1/20210.8%
ESH Hospitality Inc. 5.250 5/1/20250.8%
HCA Inc. 5.375 2/1/20250.8%
IASIS Healthcare LLC / IASIS Capital Corp. 8.375 5/15/20190.8%
Total % Portfolio in Top 10 holdings9.2%

Fixed income sectors as of 05/31/2016

List excludes cash and cash equivalents.

Basic industry11.7%12.7%
Capital goods6.4%5.6%
Technology & electric5.8%5.2%
Consumer goods4.0%3.0%
Emerging markets3.0%0.0%
Real estate0.8%0.7%
Credit quality as of 05/31/2016

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

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]

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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)

Adam Brown

Adam H. Brown, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: November 2014

Years of industry experience: 17

(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)

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)

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 fees0.64%
Distribution and service (12b-1) fees0.25%
Other expenses0.23%
Total annual fund operating expenses1.12%
Fee waivers and expense reimbursements(0.07%)
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. 27, 2015 through Nov. 28, 2016. 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, 2016


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 high yield market appeared on track for another significant loss, with index values falling 6% on the back of a 23% decline in the oil price, sagging global equities, and underwhelming U.S. growth data. However, following an agreement between major Organization of the Petroleum Exporting Countries (OPEC) producers and Russia to freeze production levels, aggressive European Central Bank easing, and dovish comments from Federal Reserve officials, oil soared 26% through the end of the quarter, carrying high yield and most other risk assets well into positive territory for the period.

Not surprisingly, energy bonds (13% of the BofA Merrill Lynch High Yield Cash Pay Index) experienced the widest price swing, first falling 20% along with oil and then recovering 25% to finish with a 2.7% total return. BB-rated issues outperformed (+3.7%) due to a broad flight-to- quality and a significant Treasury rally (10-year Treasurys returned +4.8%), followed by CCC-rated bonds (+3.6%), which benefited disproportionately from the snapback in energy bonds, and then B-rated bonds (+2.5%). Sector returns were led by basic industry (+6.5%), retail (+4.9%), and leisure (+3.9%), while healthcare (+0.7%), transportation (-0.3%) and banking (-1.0%) lagged. 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 by 40 basis points to 8.3%, while the spread rose 21 basis points to 710 basis points. (A basis point equals one hundredth of a percentage point.)

We believe it is likely that the strong rally in high yield bonds since mid-February signals only that the market was significantly oversold at midquarter in the context of a modestly expanding economy and a highly accommodative Fed. And despite the bounce in oil prices, we still believe energy defaults may rise dramatically over the next 18 months, implying substantial market headline risk regardless of whether future credit losses prove to be already “priced” into the market. However, assuming employment and consumption trends hold up, the higher-quality, noncommodity sectors of the market should continue to experience below-average defaults, implying that spreads (not including energy) in the 600-plus basis point range continue to provide adequate compensation for risk. In this context, we would expect base-case returns for the balance of the year to be range-bound around the coupon.

Within the Fund

During the first quarter of 2016, 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 strongest sector contributors were consumer goods, technology, and telecommunications. The strongest individual contributors were AK Steel (steel manufacturing), HUB International (insurance broker), and Noble Energy (exploration and production). AK Steel and Noble Energy rose in sync with the oil and commodity rally that began in February, while HUB International recovered from oversold levels in late 2015.

Conversely, the Fund’s largest sector detractors on a relative basis were basic industry, energy, and banking. The biggest individual detractors were Immucor (pharmaceuticals), Credit Suisse (investment banking), and Calumet Specialty Products (refining). Immucor sold off on a weakening balance sheet, while Credit Suisse and Calumet declined on disappointing earnings.


Given our expectation of coupon-like returns, the Fund’s portfolio strategy is focused on capital preservation with an emphasis on the B and BB rating tiers. The Fund is underweight energy and industrial commodities, and overweight the more defensive healthcare, financial services, and consumer goods sectors. In each instance, we favor well-capitalized, large-cap names that exhibit strong, predictable cash flows, ample liquidity, noncomplex capital structures, and minimal refinancing risk. We believe that this strategy has the potential to outperform under the conditions described above by delivering a competitive income stream while minimizing both volatility and downside risk relative to the market as a whole.

Per Standard & Poor’s credit rating agency, bonds rated below AAA, including A, 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.

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 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 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.

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
Max offer price$3.80n/a

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

$335.2 million all share classes

Lipper ranking (as of 05/31/2016)

YTD ranking545 / 704
1 year626 / 662
3 years480 / 549
5 years331 / 442
10 years132 / 292
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