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
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 (03/31/2017)

as of quarter-end (03/31/2017)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.78%4.38%2.72%4.28%6.25%6.52%09/15/1998
Max offer price-2.83%-0.34%1.17%3.33%5.75%6.25%
Bloomberg Barclays U.S. Corporate Investment Grade Index1.22%3.31%3.65%3.96%5.44%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.78%4.38%2.72%4.28%6.25%6.52%09/15/1998
Max offer price-2.83%-0.34%1.17%3.33%5.75%6.25%
Bloomberg Barclays U.S. Corporate Investment Grade Index1.22%3.31%3.65%3.96%5.44%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
20171.78%n/an/an/an/a
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 03/31/2017Bloomberg Barclays U.S. Corporate Investment Grade Index
Number of holdings2655,355
Number of credit issuers178
Portfolio turnover (last fiscal year)217%n/a
Effective duration (weighted average) (view definition)7.46 years7.33 years
Effective maturity (weighted average) (view definition)11.52 years10.70 years
Yield to maturity (view definition)4.13%3.33%
Average market price (view definition)$103.34$104.11
Average coupon (view definition)4.85%4.04%
Yield to worst (view definition)4.03%3.33%
SEC 30-day yield with waiver (view definition)3.05%
SEC 30-day yield without waiver (view definition)3.04%
Annualized standard deviation, 3 years (view definition)4.16n/a
Portfolio composition as of 03/31/2017Total may not equal 100% due to rounding.
Credits98.7%
U.S. government securities1.2%
Municipal bonds0.1%
Top 10 fixed income holdings as of 03/31/2017
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
AT&T Inc. 5.250 3/1/20371.3%
Microsoft Corp. 4.250 2/6/20471.1%
Credit Suisse Group Funding Guernsey Ltd. 4.550 4/17/20261.1%
Great Plains Energy Inc. 3.900 4/1/20271.1%
Time Warner Cable LLC 7.300 7/1/20381.1%
BP Capital Markets PLC 3.216 11/28/20231.0%
Georgia-Pacific LLC 8.000 1/15/20241.0%
KeyBank NA Cleveland OH 3.400 5/20/20261.0%
Telefonica Emisiones SAU 5.213 3/8/20471.0%
Siemens Financieringsmaatschappij NV 3.125 3/16/20241.0%
Total % Portfolio in Top 10 holdings10.7%

Fixed income sectors as of 03/31/2017

List excludes cash and cash equivalents.

SectorFundBenchmark
Financial institutions36.6%31.5%
Communications14.0%9.6%
Energy9.3%9.7%
Utility9.2%6.9%
Basic Industry7.0%3.3%
Technology5.7%8.4%
Consumer noncyclical4.7%15.8%
Capital goods4.6%5.1%
Transportation3.4%2.1%
Consumer cyclical3.3%7.3%
Noncorporate1.0%0.0%
Municipal bonds0.1%0.0%
Credit quality as of 03/31/2017
RatingFundBenchmark
AAA2.9%2.1%
AA2.2%11.1%
A22.6%38.1%
BBB61.1%48.7%
BB6.9%0.0%
B4.2%0.0%
CCC0.1%0.0%

Total may not equal 100% due to rounding. The Fund’s investment manager, Delaware Management Company (DMC), a series of Macquarie Investment 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
20170.0000.069
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, Global Co-Head of Fixed Income — Macquarie Investment Management

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: 19

(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 — Macquarie Investment Management, Americas

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 March 31, 2017

Market review

Investment grade credit performed modestly well during the first quarter as the policy-driven gains earned earlier in the year faded on the heels of cooling enthusiasm for the Trump reflationary trade. The recently failed healthcare reform bill has cast doubt on the Trump administration’s ability to pass tax reform legislation and other growth initiatives, driving some of the near-term market weakness. This demonstrates the new post-election reality in investment grade markets where, despite improving credit fundamentals and strong demand technicals, the market remains driven by global political and monetary policies.

Markets showed little reaction to the United Kingdom’s formal triggering of Brexit, as the move had been broadly telegraphed, while Dutch voters let some air out of the global populist movement by backing the Liberal Party in March elections. France will be the next key election to watch, despite the current low odds of a Marine Le Pen victory, given the tail-risk consequences of a populist government and the potential for France to exit the European Union (EU).

The Bloomberg Barclays US Corporate Investment Grade Index returned 1.22% for the quarter, outperforming duration-matched Treasurys by 38 basis points (a basis point is one-hundredth of a percentage point) but lagging most other risk asset classes, such as high yield, emerging market debt, and US equities. Metals and mining was the strongest-performing sector for the quarter, driven by further improvement in base metal commodities such as iron ore (+1.9% quarter over quarter) and copper (+5.5%).

Retailers were the laggards for the quarter, with the sector under continued pressure from ecommerce disruption and shifting consumer preferences. Wirelines also underperformed amid supply pressures and merger and acquisition risk. The energy sector, particularly the high-quality integrated issuers, similarly underperformed as oil prices have faded from recent highs on a supply glut (West Texas Intermediate declined 5.8% over the quarter). Returns were inversely correlated with quality, with BBB-rated credits outperforming higher-quality bonds. Longer duration also outperformed shorter duration as the curve flattened with the 2-year to 30-year part of the curve down 12 basis points during the quarter.

Supply continues to flow at a record pace with $401 billion of new-issue printing over the quarter, up 10% year over year. Financial supply in particular was heavy — above what historically would be a strong issuance quarter for banks — as total loss-absorbing capacity (TLAC) regulatory requirements have created large issuance needs. Financial supply comprised 45% of total issuance for the quarter, compared to the first-quarter average of 40% over the past several years. In contrast, M&A has been a minor part of current supply levels — just 5% for the quarter. Regardless of the source, this heavy supply continues to be met with strong demand. Investment grade fund inflows for the quarter reached $39 billion, compared to $47 billion of inflows for all of 2016. Foreign demand remains strong as well but bears monitoring, with the European Central Bank and Bank of Japan still in easing mode, for now at least, and foreign exchange hedging costs moderating.

Sources: Bank of America, UBS, Lipper, J.P. Morgan.

Within the Fund

What worked in the Fund:

  • Security selection — Selection was strong, especially in subordinated and hybrid securities with which we’re comfortable in the banking, utilities, and asset management industries.
  • High yield and emerging market debt — Though we consider these to be more defensive credits, exposure to these strong-performing asset classes benefited Fund performance.
  • Finance companies — The Fund specifically benefited from exposure to aircraft leasing credits, one of which received full investment grade status upon being upgraded by the last of the three major credit rating agencies.

What did not work in the Fund:

  • Metals and mining, and paper — The Fund didn’t have as much exposure to higher-beta (higher-risk) names in these areas, which were the two strongest- performing industries during the quarter.
  • Consumer cyclical — The Fund was underweight industries in this sector (including home construction, automotive, and lodging), which we largely viewed as fairly valued for this point in the business and economic cycle.
  • Communications — New supply from two of the largest names in its benchmark, the Bloomberg Barclays US Corporate Investment Grade Index, as well as investor concerns around potential M&A, pressured secondary spreads in this industry.

Outlook

Credit fundamentals have shown signs of modest improvement, a trend that we expect to continue in 2017 and which is necessary to support current risk-adjusted valuations. Specifically, the fourth quarter 2016 earnings season was solid, highlighted by positive earnings trends (+5.8% year over year), marking the first series of consecutive earnings growth since the first quarter of 2015 and a driver of fundamental stabilization (source: Bloomberg). Growth in nonfinancial leverage has stabilized but it remains at peak levels; this highlights the fact that we remain in the late phase of the economic and credit cycle, which poses a risk to market stability.

From a risk compensation standpoint, investment grade valuations are currently through long-term averages, although fundamental improvement and the market technical related to the global reach for yield provides support for spread premiums. We remain mindful of the current risk-reward dynamics provided by various pockets of the credit market and continue to watch for signposts and levels that indicate valuations are becoming overstretched.

Finally, in addition to domestic political risks associated with the Trump administration’s agenda, other risks to our view include an aggressive US Federal Reserve (relative to market expectations), weakness in China’s growth trajectory, tightening credit conditions, overseas inflation leading to reduced foreign demand for US fixed income assets, and geopolitical risks, including the French election.

The Bloomberg Barclays US Corporate Investment Grade Index (formerly known as the Barclays US Corporate Investment Grade Index) is composed of US dollar-­denominated, investment grade, SEC-­registered corporate bonds issued by industrial, utility, and financial companies. All bonds have at least one year to maturity.

[19209]

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 US 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 04/27/2017)

Class APriceNet change
NAV$5.80no chg
Max offer price$6.07n/a

Total net assets (as of 03/31/2017)

$1.0 billion all share classes

Overall Morningstar RatingTM

 
Class A shares (as of 03/31/2017)
Class ANo. of funds
Overall4175
3 Yrs2175
5 Yrs4142
10 Yrs480
Morningstar categoryCorporate Bond

(View Morningstar disclosure)

Morningstar ranking (as of 03/31/2017)

YTD ranking48 / 238
1 year86 / 207
3 years132 / 175
5 years47 / 142
10 years15 / 80
Morningstar categoryCorporate Bond

(View Morningstar disclosure)

Lipper ranking (as of 03/31/2017)

YTD ranking58 / 280
1 year85 / 249
3 years138 / 214
5 years49 / 172
10 years16 / 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