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Delaware Limited-Term Diversified Income Fund


Delaware Limited-Term Diversified Income Fund seeks maximum total return, consistent with reasonable risk.


The Fund invests primarily in investment grade fixed income securities, and maintains an average effective duration from one to three years. The Fund is generally diversified across multiple types of fixed income securities.

Fund information
Inception date11/24/1985
Dividends paid (if any)Monthly
Capital gains paid (if any)November or 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 (09/30/2016)

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

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)3.09%2.77%1.87%0.99%3.38%4.97%11/24/1985
Max offer price0.23%-0.06%0.93%0.42%3.09%4.87%
Bloomberg Barclays 1-3 Year U.S. Government/Credit Index1.68%1.31%1.09%1.05%2.59%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)0.55%2.77%1.87%0.99%3.38%4.97%11/24/1985
Max offer price-2.19%-0.06%0.93%0.42%3.09%4.87%
Bloomberg Barclays 1-3 Year U.S. Government/Credit Index0.02%1.31%1.09%1.05%2.59%n/a

Returns for less than one year are not annualized.

Class A shares have a maximum up-front sales charge of 2.75% 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 reimbursement from April 29, 2016 through May 1, 2017. Please see the fee table in the Fund's prospectus for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
Portfolio characteristics - as of 09/30/2016Bloomberg Barclays 1-3 Year U.S. Government/Credit Index
Number of holdings7171,764
Number of credit issuers239
Portfolio turnover (last fiscal year)94%n/a
Effective duration (weighted average) (view definition)1.89 years1.92 years
Effective maturity (weighted average) (view definition)3.84 years1.98 years
Yield to maturity (view definition)2.00%1.05%
Average market price (view definition)$101.79$101.97
Average coupon (view definition)2.81%2.04%
Yield to worst (view definition)1.97%1.04%
SEC 30-day yield with waiver (view definition)1.21%
SEC 30-day yield without waiver (view definition)1.11%
Annualized standard deviation, 3 years (view definition)1.22n/a
Portfolio composition as of 09/30/2016Total may not equal 100% due to rounding.
Asset-backed securities32.8%
Mortgage-backed securities16.1%
Commercial mortgage-backed securities0.7%
U.S. government securities0.5%
Top 10 fixed income holdings as of 09/30/2016
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
COMET 2007-A1 A11.4%
FHR 4457 KZ1.3%
CHAIT 2015-A6 A61.1%
BACCT 2007-A4 A41.1%
MAPS1 2013-1A A1.0%
GEDFT 2012-2 A1.0%
NAVMT 2014-1 A0.9%
CHAIT 2013-A9 A0.9%
CHAIT 2014-A5 A50.9%
Total % Portfolio in Top 10 holdings12.2%

Fixed income sectors as of 09/30/2016

List excludes cash and cash equivalents.

Investment grade credits40.5%34.6%
Asset-backed securities32.8%0.0%
MBS and CMOs16.1%0.0%
High yield credits6.6%0.0%
Emerging markets2.2%0.0%
Municipal bonds0.8%0.0%
Commercial mortgage-backed securities0.7%0.0%
Credit quality as of 09/30/2016

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
Return of

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

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)

Paul Grillo

Paul Grillo, CFA

Senior Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy

Start date on the Fund: February 1999

Years of industry experience: 35

(View bio)

Adam Brown

Adam H. Brown, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: October 2013

Years of industry experience: 18

(View bio)

John McCarthy

John P. McCarthy, CFA

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

Start date on the Fund: July 2016

Years of industry experience: 29

(View bio)

Brian McDonnell

Brian C. McDonnell, CFA

Senior Vice President, Senior Portfolio Manager, Senior Structured Products Analyst, Trader

Start date on the Fund: April 2012

Years of industry experience: 27

(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 price2.75%
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 expenses0.19%
Total annual fund operating expenses0.92%
Fee waivers and expense reimbursements(0.18%)
Total annual fund operating expenses after fee waivers and expense reimbursements0.74%

1 The 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 0.59% of the Fund’s average daily net assets from Oct. 5, 2016 through Oct. 5, 2017. These waivers and reimbursements may only be terminated by agreement of the Manager and the Fund. Additionally, the Fund’s distributor, Delaware Distributors, L.P. (Distributor), has contracted to limit the Fund’s Class A shares’ 12b-1 fees to no more than 0.15% of average daily net assets from April 29, 2016 through May 1, 2017. This waiver may be terminated only by agreement of the Distributor and the Fund.

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Delaware Limited-Term Diversified Income Fund Quarterly commentary June 30, 2016


In response to ongoing support from global central banks, the Barclays U.S. Aggregate Index recorded a positive return for the second quarter of 2016, with lower-quality bonds outperforming higher-rated investment tiers within that index. Although most broad-market fixed income indices produced solid returns, high yield corporate bonds and global Treasurys ex U.S. were the strongest performers, with the asset-backed securities (ABS) and mortgage-backed securities (MBS) sectors lagging during the quarter. Rate declines within the government sector were significant, however, with yields on the 2-year and 10-year Treasury notes falling from 0.72% to 0.58% and from 1.77% to 1.47%, respectively.

A brief bout of volatility in late June triggered by the British vote to exit the European Union raised the question of whether the so-called Brexit referendum will be the first of many such actions by various countries taken in an effort to preserve their nationalist goals at the expense of a global economic agenda. Regardless of the eventual answer, the issue is almost certain to increase market uncertainty — and thus volatility — for many quarters ahead. Meanwhile, the Federal Open Market Committee’s (FOMC’s) June meeting may have foreshadowed a major shift in domestic monetary policy in coming years, with members projecting fewer rate cuts this year and significantly lower policy rates for 2017 and 2018, relative to previous expectations. Federal Reserve Chairwoman Janet Yellen gave form and substance to the numbers, citing an aging population and relatively low productivity as structural forces that could make the current low level of rates a long-lasting phenomenon.

Lagging economic indicators painted a mixed picture of the U.S. economy, with corporate profits recovering but job growth slipping. On the inflation front, core personal consumption expenditures (the Fed’s preferred inflation gauge) fell slightly to 1.6%. Until personal income and wage-and-salary income show greater evidence of acceleration, the consumer inflation trend will remain muted. Combining these factors with growing global concerns and a strong U.S. dollar, our view is that the market has priced out any rate increases by the FOMC until the middle of 2018.

As the June quarter ended, a key question remained unanswered: Will asset prices fall to a level that reflects very weak economic growth, or will central bank policies finally succeed in pushing growth to much higher levels, and thus justify current asset prices? In recent months, bond prices for many weak or declining corporate credits have risen far more than their fundamental credit metrics would support. With higher, more normal rates of growth having failed to materialize deep into an economic expansion, it is reasonable to give serious consideration to the risks of continued slow global growth.

Within the Fund

Delaware Limited-Term Diversified Income Fund (Institutional Class shares and Class A shares at net asset value) outperformed its benchmark, the Barclays 1–3 Year U.S. Government/Credit Index, for the second quarter of 2016.

The Fund’s overweight allocation to investment grade corporate bonds, combined with strong security selection in the investment grade sector, were the primary drivers of performance for the period. Out-of-benchmark allocations in MBS, commercial mortgage-backed securities (CMBS), high yield bonds, and emerging market debt also contributed to relative performance, as these sectors outperformed the return of the benchmark. Conversely, the Fund’s allocation to ABS detracted from relative performance.


We believe that an economic landscape fraught with fundamental and political uncertainty will continue to weigh heavily on domestic and global growth expectations. Globalization trends of the past 30 years are being called into question amid an increase in nationalistic leanings worldwide. These concerns should translate into an environment where corporate profits remain challenged and low interest rates present hurdles for the world’s financial companies.

Despite having spent a considerable portion of their monetary ammunition, we expect central banks to provide verbal support for markets and to take additional steps as warranted. Nevertheless, some central banks, including the Bank of Japan, have seen policies lead to unexpected outcomes that present additional challenges, rather than the expected solutions.

As always, the U.S. labor market will remain a key focus area for investors. After two months of softer payroll readings, we will look to incoming data for clues regarding wage growth, inflation expectations, and the willingness of consumers to provide additional economic support. It is our expectation that investors will continue searching for income opportunities wherever they might be found, which could lead to risk-reward dislocations across assets. In light of today’s demanding environment, we believe it is especially appropriate to maintain our longtime emphasis on a fundamental approach to investing in fixed income markets.

Mortgage-backed securities are fixed income securities that represent pools of mortgages, with investors receiving principal and interest payments as the underlying mortgage loans are paid back. Many are issued and guaranteed against default by the U.S. government or its agencies or instrumentalities, such as Freddie Mac, Fannie Mae, and Ginnie Mae. Others are issued by private financial institutions, with some fully collateralized by certificates issued or guaranteed by the U.S. government or its agencies or instrumentalities.

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


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.

If and when the Fund invests in forward foreign currency contracts or uses other investments to hedge against currency risks, the Fund will be subject to special risks, including counterparty risk.

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.

Diversification may not protect against market risk.

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 10/20/2016)

Class APriceNet change
NAV$8.57no chg
Max offer price$8.81n/a

Total net assets (as of 09/30/2016)

$990.7 million all share classes

Morningstar ranking (as of 09/30/2016)

YTD ranking150 / 589
1 year139 / 583
3 years110 / 498
5 years333 / 415
10 years63 / 283
Morningstar categoryShort-Term Bond

(View Morningstar disclosure)

Lipper ranking (as of 09/30/2016)

YTD ranking103 / 192
1 year92 / 190
3 years79 / 155
5 years101 / 111
10 years47 / 85
Lipper classificationSht-Intmt Inv Grade Debt

(View Lipper disclosure)

Benchmark, peer group

Bloomberg Barclays 1-3 Year U.S. Government/Credit Index (view definition)

Morningstar Short-Term Bond Category (view definition)

Lipper Short-Intermediate Investment Grade Debt Funds Average (view definition)

Additional information