Delaware Investments Delaware Investments Delaware Investments

Delaware High-Yield Opportunities Fund

Objective

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

Strategy

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
NASDAQDHOAX
CUSIP245908876
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 (11/30/2016)

as of quarter-end (09/30/2016)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)10.86%8.09%1.28%6.25%5.94%6.60%12/30/1996
Max offer price5.79%3.29%-0.23%5.27%5.44%6.36%
BofA Merrill Lynch U.S. High Yield Constrained Index15.22%12.25%4.25%7.46%7.36%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)5.00%7.91%2.33%7.14%6.28%6.67%12/30/1996
Max offer price0.33%3.18%0.77%6.18%5.79%6.42%
BofA Merrill Lynch U.S. High Yield Constrained Index5.49%12.82%5.28%8.24%7.68%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
Gross1.14%
Net1.05%

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. 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
20162.26%3.40%5.00%n/an/a
20152.21%-0.07%-6.05%-2.80%-6.72%
20142.77%2.46%-2.25%-3.31%-0.47%
20133.50%-1.66%2.80%3.98%8.79%
20126.84%1.13%5.07%3.41%17.38%
20114.18%0.69%-9.43%7.27%1.91%
20105.22%-1.06%6.90%4.53%16.31%
20095.00%19.45%12.87%5.76%49.69%
2008-2.60%0.76%-7.78%-18.08%-25.83%
20073.04%0.95%-0.80%-1.52%1.61%
20063.35%0.58%3.46%4.48%12.36%
Portfolio characteristics - as of 11/30/2016BofA Merrill Lynch U.S. High Yield Constrained Index
Number of holdings2221,955
Number of credit issuers173
Portfolio turnover (last fiscal year)109%%
Effective duration (weighted average) (view definition)4.41 years4.33 years
Effective maturity (weighted average) (view definition)6.09 years6.35 years
Yield to maturity (view definition)6.36%6.83%
Average market price (view definition)$101.26$98.13
Average coupon (view definition)6.70%6.52%
Yield to worst (view definition)6.11%6.57%
SEC 30-day yield with waiver (view definition)5.44%
SEC 30-day yield without waiver (view definition)5.33%
Annualized standard deviation, 3 years (view definition)5.91n/a
Portfolio composition as of 11/30/2016Total may not equal 100% due to rounding.
Credits79.0%
Foreign bonds17.9%
Cash and cash equivalents3.1%
Top 10 fixed income holdings as of 11/30/2016
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Prime Security Services Borrower LLC / Prime Finance Inc. 9.250 5/15/20231.1%
SFR Group S.A. 7.375 5/1/20261.0%
Applied Systems Inc. 7.500 1/15/20221.0%
First Data Corp. 7.000 12/1/20231.0%
TransDigm Inc. 6.375 6/15/20260.9%
Kronos Acquisition Holdings Inc. 9.000 8/15/20230.9%
Boyd Gaming Corp. 6.375 4/1/20260.9%
FMG Resources August 2006 Pty Ltd. 6.875 4/1/20220.9%
Laredo Petroleum Inc. 6.250 3/15/20230.9%
Zekelman Industries Inc. 9.875 6/15/20230.8%
Total % Portfolio in Top 10 holdings9.4%

Fixed income sectors as of 11/30/2016

List excludes cash and cash equivalents.

SectorFundBenchmark
Basic industry14.0%11.8%
Energy11.5%15.1%
Media11.1%11.1%
Technology & electric7.7%6.5%
Healthcare7.6%9.2%
Telecommunications7.2%10.1%
Capital goods5.3%6.0%
Retail5.0%4.8%
Banking4.6%3.7%
Services4.3%4.5%
Leisure4.0%4.3%
Utility3.4%2.8%
Consumer goods3.2%2.6%
Emerging markets2.7%0.0%
Insurance2.0%0.8%
Financial services1.2%3.0%
Automotive0.8%2.0%
Transportation0.8%1.0%
Real estate0.7%0.7%
Credit quality as of 11/30/2016
RatingFundBenchmark
AAA3.1%0.0%
BBB3.6%0.0%
BB33.8%50.4%
B47.8%35.6%
CCC11.8%13.3%

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
20160.0000.188
20150.0000.234
20140.0580.239
20130.0000.274
20120.0000.299
20110.0000.320
20100.0000.346
20090.0000.310
20080.0000.296
20070.0000.335
20060.0000.334

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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Adam Brown

Adam H. Brown, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: November 2014

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)


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: 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 fees0.65%
Distribution and service (12b-1) fees0.25%
Other expenses0.24%
Total annual fund operating expenses1.14%
Fee waivers and expense reimbursements(0.09%)
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. 28, 2016 through Nov. 28, 2017. 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 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.

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Delaware High-Yield Opportunities Fund Quarterly commentary September 30, 2016

Overview

U.S. high yield bonds, as measured by the BofA Merrill Lynch U.S. Cash Pay High Yield Index, returned 5.50% during the third quarter, bringing year-to-date returns to 15.2% and leaving the market just 25 basis points (0.25 percentage points) shy of its strongest annual return since 2009. The euro and pound sterling high yield markets enjoyed robust performance as well, returning 3.5% and 6.2% for the quarter, and bringing year-to-date returns to 7.1% and 8.6%, respectively. Despite a backdrop of volatile Treasury and oil prices throughout the period, high yield returns benefited from generally positive economic data, dovish central bank policies at home and abroad, and strong institutional and retail demand for the asset class.

Returns were strongly correlated with risk, with CCC-rated issues leading at 8.9%, followed by B-rated bonds at 6.1%, and BB-rated bonds at 4.2%. Sector returns were uniformly positive, led by metals and mining (+10.3%), telecom (+8.3%), and chemicals (+7.2%), while utilities (+3.7%), food and beverage (+3.4%), and healthcare (+3.0%) lagged. Technical conditions remained well supported by $26 billion of coupon flow (with an estimated 50% reinvested), $6 billion of mutual fund flows, and anecdotal evidence of continued strong foreign institutional demand for high yielding U.S.-dollar assets. The market yield fell 111 basis points to 6.16%, while the spread fell 121 basis points to 501 basis points.

Within the Fund

During the third 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 capital goods, consumer goods, and retail. The strongest individual contributors were Sprint (telecommunications), FMG Resources (metals and mining), and BWAY Holding (containers). Sprint gained on stronger-than-expected operating performance, FMG benefited from balance sheet deleveraging, and BWAY gained on stable operating performance and strong market demand for high-coupon bonds.

The Fund’s largest sector detractors were energy, financials, and services. The largest individual detractors were The GEO Group (correctional facilities), Iasis Healthcare (hospitals), and Community Health Systems (hospitals). GEO Group underperformed due to the impending loss of federal prison contracts, Iasis declined because of losses associated with the Affordable Care Act, and Community Health Systems declined due to weak operating performance and rumors of a company sale.

Outlook

While oil prices fell just $2 a barrel from the beginning to the end of the third quarter, it was all volatility in between, with a decline of 18% during July, followed by moves of +21% and -10% in August, and then three 10% swings during September (source: Bloomberg). This volatility reflected not just short-term market dynamics, but the tenuous and uneven course of the U.S. recovery, the uncertain direction of policy by the U.S. Federal Reserve, European Central Bank, and Bank of Japan, and the on-again, off-again production talks of the Organization of the Petroleum Exporting Countries (OPEC). Yet, despite this tremendous macro uncertainty, the average high yield bond gained nearly $4, to $99.29, while high yield energy bonds gained more than $5, to $91.45 — both 15-month highs (source: Bank of America). In our view, this reflects, more than anything else, the overwhelming demand for yield from both U.S. and global investors, and the fact that U.S. corporate credit metrics, and bank asset quality, do not suggest any imminent downturn in the credit cycle. We still believe energy defaults should rise materially over the next 18 months, although at $50 a barrel we believe the carnage is likely to be significantly less than at $25 a barrel. A flurry of recent debt, equity, and debt-for-equity deals in the energy space indicates significant investor interest in acquiring cheap assets now that the worst has seemingly passed. Assuming broader employment and consumption trends hold up, we believe the higher-quality, noncommodity sectors of the market should continue to experience below-average defaults (currently running at 0.6%), implying that ex-energy spreads in the 500-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.

Given our expectation of coupon-like returns, portfolio strategy is focused on capital preservation, with an emphasis on the B and BB rating tiers. We are underweight energy and industrial commodities, and overweight the more defensive healthcare, financial services, and consumer goods. In each instance, we favor well-capitalized large-cap names exhibiting what we view as strong, predictable cash flows, ample liquidity, noncomplex capital structures, and minimal refinancing risk. We believe 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.

The BofA Merrill Lynch U.S. Cash Pay High Yield Index tracks the performance of U.S. dollar–denominated below-investment-grade corporate debt, currently in a coupon paying period, that is publicly issued in the U.S. domestic market. Qualifying securities must have at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule, and a minimum amount outstanding of $100 million. .

[17798]

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 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 12/08/2016)

Class APriceNet change
NAV$3.77no chg
Max offer price$3.95n/a

Total net assets (as of 11/30/2016)

$321.9 million all share classes

Overall Morningstar RatingTM

Load waived

With load

Class A shares (as of 11/30/2016)
Load waivedWith loadNo. of funds
Overall3605
3 Yrs1605
5 Yrs3469
10 Yrs3311
Morningstar categoryHigh Yield Bond

(View Morningstar disclosure)

Morningstar ranking (as of 11/30/2016)

YTD ranking430 / 711
1 year447 / 703
3 years563 / 605
5 years266 / 469
10 years150 / 311
Morningstar categoryHigh Yield Bond

(View Morningstar disclosure)

Lipper ranking (as of 11/30/2016)

YTD ranking414 / 682
1 year434 / 675
3 years529 / 572
5 years254 / 445
10 years146 / 299
Lipper classificationHigh Yield Funds

(View Lipper disclosure)

Benchmark, peer group

BofA Merrill Lynch U.S. High Yield Constrained Index (view definition)

Morningstar High-Yield Bond Category (view definition)

Lipper High Yield Funds Average (view definition)

Additional information