Delaware Investments Delaware Investments Delaware Investments

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 (01/31/2017)

as of quarter-end (12/31/2016)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)0.48%5.45%2.92%4.20%6.26%6.50%09/15/1998
Max offer price-4.07%0.77%1.34%3.26%5.77%6.24%
Bloomberg Barclays U.S. Corporate Investment Grade Index0.31%6.06%3.72%3.74%5.50%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)-2.70%5.44%3.35%4.68%6.22%6.51%09/15/1998
Max offer price-7.10%0.75%1.80%3.71%5.73%6.24%
Bloomberg Barclays U.S. Corporate Investment Grade Index-2.83%6.11%4.23%4.14%5.47%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
Gross0.96%
Net0.94%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from Nov. 28, 2016 through Nov. 28, 2017. 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%3.31%2.02%-2.70%5.44%
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%
Portfolio characteristics - as of 01/31/2017Bloomberg Barclays U.S. Corporate Investment Grade Index
Number of holdings2595,946
Number of credit issuers177
Portfolio turnover (last fiscal year)217%n/a
Effective duration (weighted average) (view definition)7.34 years7.31 years
Effective maturity (weighted average) (view definition)10.62 years10.75 years
Yield to maturity (view definition)4.12%3.37%
Average market price (view definition)$102.25$104.05
Average coupon (view definition)4.71%4.08%
Yield to worst (view definition)4.08%3.36%
SEC 30-day yield with waiver (view definition)3.07%
SEC 30-day yield without waiver (view definition)3.04%
Annualized standard deviation, 3 years (view definition)4.15n/a
Portfolio composition as of 01/31/2017Total may not equal 100% due to rounding.
Credits95.3%
U.S. government securities4.6%
Municipal bonds0.1%
Top 10 fixed income holdings as of 01/31/2017
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Credit Suisse Group Funding Guernsey Ltd. 4.550 4/17/20261.1%
Time Warner Cable LLC 7.300 7/1/20381.1%
Georgia-Pacific LLC 8.000 1/15/20241.0%
BHP Billiton Finance USA Ltd. 6.250 10/19/20751.0%
Anadarko Petroleum Corp. 6.600 3/15/20461.0%
KeyBank NA Cleveland OH 3.400 5/20/20261.0%
Kansas City Power & Light Co. 3.650 8/15/20251.0%
American Tower Corp. 4.000 6/1/20250.9%
Woodside Finance Ltd. 8.750 3/1/20190.8%
Pennsylvania Electric Co. 5.200 4/1/20200.8%
Total % Portfolio in Top 10 holdings9.7%

Fixed income sectors as of 01/31/2017

List excludes cash and cash equivalents.

SectorFundBenchmark
Financial institutions35.3%31.4%
Communications14.7%9.1%
Energy9.8%9.7%
Utility7.8%7.7%
Consumer noncyclical6.1%15.8%
Technology5.6%8.1%
Basic Industry5.5%3.4%
Capital goods3.6%5.0%
Transportation3.3%2.2%
Consumer cyclical2.9%7.2%
Noncorporate1.0%0.0%
Municipal bonds0.1%0.0%
Credit quality as of 01/31/2017
RatingFundBenchmark
AAA6.0%2.0%
AA1.9%10.9%
A19.8%38.5%
BBB59.1%48.6%
BB8.4%0.0%
B4.4%0.0%
CCC0.4%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 Financial Services LLC (S&P), Moody’s Investors Service, and Fitch Ratings, 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
20170.0000.018
20160.0000.193
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

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: 15

(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)


Wayne Anglace

Wayne A. Anglace, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: July 2016

Years of industry experience: 18

(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: 22

(View bio)


J. David Hillmeyer

David Hillmeyer, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: November 2014

Years of industry experience: 24

(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: 31

(View bio)


John McCarthy

John P. McCarthy, CFA

Senior Vice President, Senior Portfolio Manager, Co-Head of Credit Research

Start date on the Fund: December 2012

Years of industry experience: 30

(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 expenses0.23%
Total annual fund operating expenses0.96%
Fee waivers and expense reimbursements(0.02%)
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. 28, 2016 through Nov. 28, 2017. 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 December 31, 2016

Overview

The investment grade credit market posted its worst quarter on a total return basis since mid-2015 as the massive rate selloff following the U.S. election overwhelmed a modest narrowing in credit spreads. Donald Trump’s surprising victory and the Republican sweep of Congress not only took pollsters and the market by surprise, but also changed market expectations, driving the U.S. dollar to its highest level since December 2002 and 10-year Treasury rates up by 0.59 percentage points postelection. Expectations for a more aggressive Federal Reserve, combined with the fiscal policy implications of a new government regime, were the main drivers. The Fed’s rate-setting Federal Open Market Committee (FOMC) did not disappoint, raising the federal funds rate by 25 basis points in December and also accelerating the pace of policy normalization by raising its expectations for 2017 to three rate hikes, up from two in its September “dot plot.” Conversely, the European Central Bank (ECB) sent a mostly dovish message by extending its quantitative easing program through the end of 2017 while reducing the monthly pace of purchases to 60 billion euros, noting that the program’s size or duration could be expanded as needed.

The Bloomberg Barclays U.S. Corporate Investment Grade Index returned -2.83% for the quarter, outperforming duration-matched Treasury debt by 185 basis points. Energy and metals and mining were the strongest performing sectors, driven by a strong commodity price rally, with oil up 10.2% and iron ore up more than 29% for the quarter. The Organization of the Petroleum Exporting Countries (OPEC) surprised most critics with an agreement to cut production for the first time since 2008, pushing oil prices higher and spreads tighter across all energy subsectors. Interest rate-sensitive sectors such as banks and insurance also outperformed, benefiting from the surge in rates along with a favorable total loss-absorbing capacity (TLAC) resolution for domestic banks. Longer-duration sectors such as utilities and rails underperformed for the quarter, while the media and telecom space came under pressure from AT&T’s surprise deal to acquire Time Warner Inc. for $109 billion (Source: Bloomberg.)

Supply for the quarter declined 15% from last year, to $259 billion. However, year-to-date totals for 2016 set another record at $1.3 trillion, up 4% from the previous year’s record amount. Estimates for 2017 call for lower gross and net supply in the $1.06 trillion area, as higher rates and a smaller mergers-and-acquisitions (M&A) pipeline limit issuance (source: Bank of America). We believe limited supply should be a positive technical factor for secondary market prices. In addition, the potential for overseas cash repatriation (as part of broader corporate tax reform initiatives) could also reduce issuance needs, further supporting market technicals.

Within the Fund

For the fourth quarter of 2016, Delaware Corporate Bond Fund (Institutional Class shares and Class A shares at net asset value) posted a negative return but outperformed its benchmark, the Bloomberg Barclays U.S. Corporate Investment Grade Index.

What worked in the Fund:

  • Exposure to high yield, which was one of the better performing fixed income sectors during the quarter as it was less affected by the rise in 10-year U.S. Treasury rates, which climbed 0.77 percentage points over the quarter.
  • Security selection within technology and consumer cyclicals — specifically bank loans — and contributions from Dell/EMC secured bonds and from “fallen angel” CDK Global, whose credit rating was downgraded.
  • An underweight to consumer noncyclicals, as lower-beta (lower-risk) industries such as food-and-beverage, tobacco, and supermarkets were out of favor. Healthcare and pharmaceuticals also underperformed amid concerns over a potential repeal of the Affordable Care Act.

What did not work in the Fund:

  • An underweight to the energy sector, which was the strongest-performing industry in the benchmark index, posting a close to 4.25% excess return during the quarter. Oil prices were up 11% and finished close to their peak for the year after OPEC agreed to production cuts.
  • Exposure to emerging markets and foreign/local sovereigns, groups that suffered in the wake of the 2016 U.S. elections from uncertainty about possible protectionist policies and domestic fiscal stimulus and their potential effects.
  • Adverse security selection and a slight overweight within the banking sector, primarily to subordinated and hybrid securities that typically have higher durations. Duration is a measure of the sensitivity of the price of a fixed income investment to a change in interest rates. Duration is expressed as a number of years
  • An overweight within communications, as AT&T’s surprise bid for Time Warner Inc. pushed most spreads in the industry wider.

Outlook

Investors have become more optimistic regarding the longevity of the U.S. economic and credit cycle, given the possibility of a Trump spending plan to invigorate gross domestic product (GDP) growth. While we generally agree that this scenario could prolong the fourth-longest economic expansion cycle in U.S. history, we remain mindful of risks that could affect capital markets beyond higher interest rates, an already tight U.S. labor market, and potentially higher inflation.

In 2017, we are likely to witness higher volatility for credit spreads due to uncertainty regarding fiscal policy, trade, and regulatory changes, even as multiple geopolitical risks remain. Foreign demand for yield has supported U.S. credit technicals, but any sign of reflation abroad or material U.S. dollar weakness could threaten this dynamic. Populist movements overseas could also inject a significant amount of political uncertainty in global markets as voters in the Netherlands, France, and Germany head to the polls in the coming months. Finally, slowing growth in China and the broader emerging markets complex could resurface as additional dollar strengthening — and possible U.S. protectionism — could lead to renewed pressure on emerging markets, especially China.

[18485]

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, 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

Total net assets (as of 01/31/2017)

$1.0 billion all share classes

Overall Morningstar RatingTM

 
Class A shares (as of 01/31/2017)
Class ANo. of funds
Overall4179
3 Yrs2179
5 Yrs4140
10 Yrs480
Morningstar categoryCorporate Bond

(View Morningstar disclosure)

Morningstar ranking (as of 01/31/2017)

YTD ranking96 / 243
1 year137 / 211
3 years127 / 179
5 years49 / 140
10 years15 / 80
Morningstar categoryCorporate Bond

(View Morningstar disclosure)

Lipper ranking (as of 01/31/2017)

YTD ranking103 / 281
1 year137 / 249
3 years127 / 215
5 years47 / 171
10 years17 / 111
Lipper classificationCorp Debt BBB Rated Fds

(View Lipper disclosure)

Benchmark, peer group

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

Morningstar Corporate Bond Category (view definition)

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

Additional information