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 (08/31/2017)

as of quarter-end (06/30/2017)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)9.05%2.04%3.84%5.01%9.18%8.14%09/15/1998
Max offer price4.07%-2.56%2.25%4.04%8.67%7.88%
Bloomberg Barclays Long US Corporate Index8.52%2.08%5.07%4.93%7.81%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)4.85%3.39%4.02%5.54%9.06%8.10%09/15/1998
Max offer price0.11%-1.26%2.44%4.58%8.55%7.83%
Bloomberg Barclays Long US Corporate Index4.94%3.61%5.42%5.56%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
Gross1.00%
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%4.85%n/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 08/31/2017Bloomberg Barclays Long U.S. Corporate Index
Number of holdings1631,704
Number of credit issuers122
Portfolio turnover (last fiscal year)219%%
Effective duration (weighted average) (view definition)14.15 years14.22 years
Effective maturity (weighted average) (view definition)23.96 years23.72 years
Yield to maturity (view definition)4.12%4.15%
Average market price (view definition)$108.02$113.78
Average coupon (view definition)4.73%5.18%
Yield to worst (view definition)4.06%4.15%
SEC 30-day yield with waiver (view definition)3.04%
SEC 30-day yield without waiver (view definition)3.01%
Annualized standard deviation, 3 years (view definition)7.12n/a
Portfolio composition as of 08/31/2017Total may not equal 100% due to rounding.
Credits94.8%
U.S. government securities5.2%
Municipal bonds0.1%
Top 10 fixed income holdings as of 08/31/2017
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 3.000 5/15/20472.3%
Siemens Financieringsmaatschappij NV 4.200 3/16/20471.6%
Anheuser-Busch InBev Finance Inc. 4.900 2/1/20461.5%
Bank of America Corp. 4.443 1/20/20481.5%
Eli Lilly & Co. 3.950 5/15/20471.5%
Enel Finance International NV 4.750 5/25/20471.4%
Morgan Stanley 4.375 1/22/20471.4%
Goldman Sachs Group Inc. 5.150 5/22/20451.3%
Airbus SE 3.950 4/10/20471.3%
Rockwell Collins Inc. 4.350 4/15/20471.3%
Total % Portfolio in Top 10 holdings15.1%

Fixed income sectors as of 08/31/2017

List excludes cash and cash equivalents.

SectorFundBenchmark
Financial institutions25.1%17.5%
Utility16.9%11.7%
Consumer noncyclical14.3%17.2%
Energy10.4%11.0%
Capital goods6.9%5.1%
Communications6.6%15.1%
Consumer cyclical3.7%6.9%
Noncorporate3.4%0.0%
Basic industry3.2%4.6%
Technology2.9%6.8%
U.S. government2.3%0.0%
Transportation1.4%3.5%
Municipal bonds0.1%0.0%
Credit quality as of 08/31/2017
RatingFundBenchmark
AAA6.5%3.3%
AA5.6%8.0%
A32.1%39.5%
BBB53.5%49.2%
BB2.1%0.0%
B0.1%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 (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
Return of
capital
20170.0000.1720.000
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

Senior 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: 16

(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: 41

(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: 23

(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: 15

(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: 32

(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 Funds by Macquarie. 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.

This commentary is currently not available. Please check back later.

Delaware Extended Duration Bond Fund Quarterly commentary June 30, 2017

Overview

Investment grade markets posted strong performance for the quarter, trailing only US equities, as the positive technical backdrop was further strengthened by a reduction in supply and continued robust global demand driven by the search for yield. Domestic political turmoil or dysfunction, a failed UK snap election by Prime Minister Theresa May, lackluster inflation, the failure of Banco Popular in Spain, and increased commodity volatility have had little effect on investment grade valuations. With credit fundamentals showing signs of modest improvement and the reach-for-yield technical signaling no signs of abating, it’s difficult to point to a near-term catalyst for a material weakening in investment grade corporate risk premiums (spreads). However, we believe current investment grade valuations that are through long-term averages should limit further compression, potentially providing investors income carry-dominated returns for the second half of 2017. As such, we are monitoring market risk factors such as delays in US fiscal policy; falling inflation or the return of US dollar strength; aggressive tightening actions by the US Federal Reserve; weakness in China amid elevated leverage and weakening financial conditions; and geopolitical risks (including North Korea and Syria) given the asymmetric return profile implied by market valuations.

The Bloomberg Barclays US Corporate Investment Grade Index returned 2.54% for the quarter, outperforming duration-matched Treasurys by 112 basis points. (One basis point equals one-hundredth of a percentage point.) Sectors with longer duration profiles, such as railroads and cable/satellite, outperformed amid the ongoing Treasury curve flattening, with the 5-30 year segment down 14 basis points and the 2-30 year segment down 30 basis points. Disinflationary market sentiment has continued to drive the Treasury curve flatter, pushing long bond yields to the lowest level of the year. Subordinated bank debt also outperformed, driven by favorable first-quarter earnings and the continued compression in the senior-sub relationship. The Fed’s stress test results for US banks also confirmed the sector’s fundamental strength. Conversely, the auto sector lagged due to weak sales levels and a disappointing forward outlook. In addition, retail-focused real estate investment trust (REIT) issuers underperformed, and supermarkets came under pressure late in the quarter after Amazon’s bid for Whole Foods created uncertainty in the sector.

The record new-issue supply pace of the past few quarters finally eased with $322 billion of new issuance printed in the second quarter of 2017, down from $354 billion in the prior year. Year-to-date totals are still running slightly ahead of last year’s record pace, at $723 billion (+1.3% year over year). However, we believe supply should slow in the second half of the year driven by diminished merger-and-acquisition requirements and seasonal issuance patterns. We also believe this should serve to support the already strong investment grade market technical backdrop. In contrast, demand for US corporate debt has not subsided, with another $27 billion of inflows reported for investment grade funds for the quarter. Year-to-date inflow totals now stand at $64 billion compared to $47 billion for all of 2016. (Source: Bank of America, UBS, Lipper.)

Within the Fund

While strong security selection within investment grade corporate credit benefited Fund performance, this was partially offset by our allocation to below-investment-grade securities, as those positions underperformed the return of the benchmark, the Bloomberg Barclays Long US Corporate Index. The Fund’s out-of-benchmark exposure in emerging market debt and municipal bonds also negatively influenced performance. Conversely, the Fund’s continued overweight to the banking sector generated positive attribution, as did underweights in consumer cyclical and energy.

Outlook

Corporate fundamentals have been improving, driven by the strength of first-quarter 2017 corporate earnings, due to stronger commodity prices year-over-year, a weaker US dollar, relatively easy year-over-year comparisons given the weakness in the first quarter of 2016, and improving sentiment from CFOs, which is positive for forward guidance. Although there remains a high degree of uncertainty regarding future deregulation and tax reform, any progress along those fronts should provide additional upside in asset valuations due to investment and productivity implications.

Nonfinancial leverage remains elevated but below the cycle peak, while debt levels have stabilized. Despite improving fundamentals, the main driver of the investment grade market we believe continues to be the strong technical backdrop and global reach for yield. As euro-area growth and inflation improves, and prospects for a reduction in quantitative easing by the European Central Bank begin to grow, we believe the threat to this dynamic only increases and remains one of the key risks ahead for investment grade credit. We continue to have a positive view on investment grade credit for 2017, but we believe volatility could increase, especially from current low levels going forward, warranting slightly higher portfolio cash balances to take advantage of potential opportunities. We believe current valuations imply carry-oriented income-based returns for investors in the second half of 2017.

The Bloomberg 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 in the index have at least one year to maturity.

[232079]

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 09/25/2017)

Class APriceNet change
NAV$6.680.03
Max offer price$6.99n/a

Total net assets (as of 08/31/2017)

$673.3 million all share classes

Overall Morningstar RatingTM

 
Class A shares (as of 08/31/2017)
Class ANo. of funds
Overall4172
3 Yrs3172
5 Yrs4144
10 Yrs584
Morningstar categoryCorporate Bond

(View Morningstar disclosure)

Morningstar ranking (as of 08/31/2017)

YTD ranking3 / 229
1 year125 / 222
3 years44 / 172
5 years12 / 144
10 years2 / 84
Morningstar categoryCorporate Bond

(View Morningstar disclosure)

Lipper ranking (as of 08/31/2017)

YTD ranking9 / 263
1 year121 / 256
3 years46 / 202
5 years9 / 172
10 years3 / 111
Lipper classificationCorp Debt BBB Rated Fds

(View Lipper disclosure)

Benchmark, peer group

Bloomberg Barclays Long US Corporate Index (view definition)

Morningstar Corporate Bond Category (view definition)

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

Additional information