Delaware Extended Duration Bond Fund

Objective

Delaware Extended Duration Bond Fund seeks to provide investors with total return.

Strategy

The Fund will primarily invest in long duration investment grade corporate bonds. The Fund may also invest in unrated bonds if we believe their credit quality is comparable to those that have investment grade ratings.

Fund information
Inception date09/15/1998
Dividends paid (if any)Monthly
Capital gains paid (if any)December
Fund identifiers
NASDAQDEEAX
CUSIP245908835
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 (04/30/2017)

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

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)3.45%3.37%3.96%5.62%8.33%7.99%09/15/1998
Max offer price-1.27%-1.25%2.35%4.67%7.83%7.72%
Bloomberg Barclays Long U.S. Corporate Index3.01%4.31%5.15%5.43%7.02%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.87%3.67%4.23%5.89%8.31%7.93%09/15/1998
Max offer price-2.78%-1.02%2.64%4.91%7.81%7.66%
Bloomberg Barclays Long U.S. Corporate Index1.36%5.29%5.36%5.60%6.98%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
Gross1.00%
Net0.96%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursement 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
20171.87%n/an/an/an/a
20165.38%5.14%2.36%-5.43%7.24%
20153.22%-7.05%0.54%-1.28%-4.77%
20146.47%5.51%0.02%3.16%15.90%
2013-0.17%-5.52%-0.54%2.34%-4.00%
20121.19%6.61%5.50%2.29%16.40%
20110.99%2.64%7.97%4.10%16.50%
20103.88%4.96%7.74%-2.69%14.31%
2009-6.44%14.88%14.70%1.37%24.96%
2008-0.15%-1.61%-8.61%8.17%-2.85%
20071.02%-2.13%1.80%2.36%3.02%
Portfolio characteristics - as of 04/30/2017Bloomberg Barclays Long U.S. Corporate Index
Number of holdings1511,641
Number of credit issuers122
Portfolio turnover (last fiscal year)219%%
Effective duration (weighted average) (view definition)13.85 years14.00 years
Effective maturity (weighted average) (view definition)23.71 years23.74 years
Yield to maturity (view definition)4.37%4.42%
Average market price (view definition)$104.47$110.27
Average coupon (view definition)4.78%5.23%
Yield to worst (view definition)4.34%4.42%
SEC 30-day yield with waiver (view definition)3.26%
SEC 30-day yield without waiver (view definition)3.22%
Annualized standard deviation, 3 years (view definition)7.28n/a
Portfolio composition as of 04/30/2017Total may not equal 100% due to rounding.
Credits93.1%
U.S. government securities6.7%
Municipal bonds0.1%
Top 10 fixed income holdings as of 04/30/2017
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
United States Treasury Note Bond 2.875 11/15/20463.1%
United States Treasury Note Bond 0.625 5/31/20172.8%
Bank of America Corp. 4.443 1/20/20481.7%
Siemens Financieringsmaatschappij NV 4.200 3/16/20471.5%
JPMorgan Chase & Co. 4.260 2/22/20481.5%
Microsoft Corp. 4.250 2/6/20471.5%
Anheuser-Busch InBev Finance Inc. 4.900 2/1/20461.5%
Allstate Corp. 4.200 12/15/20461.4%
Time Warner Cable LLC 7.300 7/1/20381.4%
Morgan Stanley 4.375 1/22/20471.3%
Total % Portfolio in Top 10 holdings17.7%

Fixed income sectors as of 04/30/2017

List excludes cash and cash equivalents.

SectorFundBenchmark
Financial institutions26.2%17.6%
Utility12.7%11.5%
Consumer noncyclical12.1%17.1%
Energy9.5%11.4%
Communications8.0%14.6%
Capital goods7.5%5.3%
U.S. government6.4%0.0%
Technology5.0%7.0%
Consumer cyclical4.0%6.9%
Basic industry3.6%4.5%
Noncorporate3.1%0.0%
Transportation1.4%3.7%
Municipal bonds0.1%0.0%
Credit quality as of 04/30/2017
RatingFundBenchmark
AAA8.4%3.4%
AA4.2%8.7%
A33.2%39.7%
BBB52.8%48.2%
BB1.3%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
Return of
capital
20170.0000.0950.000
20160.0000.2160.003
20150.0100.2530.000
20140.2950.2850.000
20130.0000.2900.000
20120.4360.3030.000
20110.2660.3280.000
20100.3170.3500.000
20090.0000.3540.000
20080.0000.3040.000
20070.0000.3150.000

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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Wayne Anglace

Wayne A. Anglace, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: January 2017

Years of industry experience: 19

(View bio)


Brian McDonnell

Brian C. McDonnell, CFA

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

Start date on the Fund: January 2017

Years of industry experience: 28

(View bio)


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)


Craig Dembeck

Craig C. Dembek, CFA

Senior Vice President, Head of Credit Research — Macquarie Investment Management, Americas

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 High Yield — 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 fees0.54%
Distribution and service (12b-1) fees0.25%
Other expenses0.21%
Total annual fund operating expenses1.00%
Fee waivers and expense reimbursements(0.04%)
Total annual fund operating expenses after fee waivers and expense reimbursements0.96%

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 0.71% 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 Extended Duration Bond Fund Quarterly commentary March 31, 2017

Overview

The Bloomberg Barclays Long US Corporate Index returned 1.36% for the first quarter of 2017, outperforming duration-matched Treasurys by 2 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%).

Overall, investment grade credit performed well as risk premiums tightened; however, the long end of the corporate curve underperformed the “belly” or intermediate part of the curve from an excess return perspective due to the steepening of the 10-year/30-year Treasurys relationship. The recently failed healthcare reform bill has highlighted the risk related to the Trump administration’s ability to pass tax reform legislation and other growth initiatives, which is a key component of our constructive outlook for credit in 2017. Another component of our outlook is strong demand driven by a global reach for yield, which remains intact.

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).

Improving global growth, combined with supportive leading indicators coming out of the election, seem to set the stage for risk assets to perform well as we transitioned into 2017. Favorable earnings momentum during the third quarter of 2016 spilled over into the fourth quarter, signifying to us that the earnings recession of the prior five reporting periods had been arrested, a positive for credit fundamentals. In many ways, markets surprised investors during the first quarter of 2017.

Central banks remain an integral component in these markets, as their influence has global implications. The US Federal Reserve’s successful rate increase in March — after market participants had assigned a very low probability of a hike just two weeks prior — demonstrates the possibility that investors are becoming more accepting of rate hikes. Furthermore, investors’ interest rate expectations for the balance of the year and into 2018 now closely mirror the Fed’s forecast after deviating the past several years. We will continue to monitor the European Central Bank’s (ECB’s) policies as economic data across the euro zone are improving as well. This has led to more speculation regarding nonstandard monetary policy measures by the ECB, including the current monthly pace of corporate purchases under the corporate sector purchase programme (CSPP), declining from €80 billion to €60 billion.

Market valuations across fixed income are now trading through long-term averages and we will need to see a continuation of positive fundamental trends to support current valuations. A weaker dollar more recently should contribute to another positive quarter for fundamentals. We expect the search for global yield to remain an important component of flows. However, policies in countries that have continued to experience debt-fueled growth, such as China, must be watched carefully for signs of a broader pullback in demand that could affect the world’s economies.

Within the Fund

What worked in the Fund:

  • Security selection was strong across a number of the sectors of the Fund’s benchmark, the Bloomberg Barclays Long US Corporate Index. In particular, consumer noncyclicals (the Fund returned 2.54% versus 1.30% for the benchmark), technology (2.40% versus 1.24%), banking (2.06% versus 1.39%) and brokerage-asset managers (6.52% versus 4.72%) contributed meaningfully to the Fund’s performance.
  • Although allocations to high yield and emerging market debt were relatively small, outsized gains from these sectors (4.31% for high yield and 9.39% for emerging markets) was additive to the Fund’s performance.
  • Underweight allocations to the wireline and retail industries, which were among the weakest performing sectors within the benchmark, was additive to performance.
  • Security selection and exposure to hybrid and junior subordinated securities issued by financials contributed to Fund performance.

What did not work in the Fund:

  • Security selection and sector allocation to the metals and mining sector, especially to higher-beta (higher-risk) issuers detracted from Fund performance, as the industry was one of the strongest performers during the quarter.
  • The Fund’s exposure to US Treasurys, primarily as a duration placeholder as we looked for attractive opportunities in credit, detracted from performance given positive excess returns generated by corporate risk.
  • Security selection and sector allocation to energy, especially to the lower-beta, higher-quality integrated subsector, negatively affected the Fund’s performance.

Outlook

Credit fundamentals have shown signs of modest improvement, a trend that we expect to continue in 2017 and one that we believe is necessary to support current risk-adjusted valuations. Specifically, the fourth quarter earnings season was solid, highlighted by positive earnings trends (+5.8% year over year), including the first two quarters of consecutive earnings growth since the first quarter of 2015 (source: Bloomberg) and fundamental stabilization. Though growth in nonfinancial leverage has stabilized it remains at peak levels and highlights 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 Fed (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).

[19264]

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 bond that is held by a portfolio will be prepaid prior to maturity, at the time when interest rates are lower than what the bond was paying. A portfolio may then have 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 05/23/2017)

Class APriceNet change
NAV$6.46-0.03
Max offer price$6.76n/a

Total net assets (as of 04/30/2017)

$657.4 million all share classes

Overall Morningstar RatingTM

 
Class A shares (as of 04/30/2017)
Class ANo. of funds
Overall5175
3 Yrs3175
5 Yrs5142
10 Yrs580
Morningstar categoryCorporate Bond

(View Morningstar disclosure)

Morningstar ranking (as of 04/30/2017)

YTD ranking20 / 236
1 year104 / 208
3 years45 / 175
5 years6 / 142
10 years2 / 80
Morningstar categoryCorporate Bond

(View Morningstar disclosure)

Lipper ranking (as of 04/30/2017)

YTD ranking15 / 276
1 year98 / 248
3 years54 / 213
5 years3 / 171
10 years3 / 110
Lipper classificationCorp Debt BBB Rated Fds

(View Lipper disclosure)

Benchmark, peer group

Bloomberg Barclays Long U.S. Corporate Index (view definition)

Morningstar Corporate Bond Category (view definition)

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

Additional information