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 (03/31/2017)

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

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.20%12.82%1.39%5.06%5.90%6.70%12/30/1996
Max offer price-2.44%7.70%-0.18%4.11%5.42%6.46%
BofA Merrill Lynch U.S. High Yield Constrained Index2.71%16.87%4.64%6.85%7.43%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.20%12.82%1.39%5.06%5.90%6.70%12/30/1996
Max offer price-2.44%7.70%-0.18%4.11%5.42%6.46%
BofA Merrill Lynch U.S. High Yield Constrained Index2.71%16.87%4.64%6.85%7.43%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
20172.20%n/an/an/an/a
20162.26%3.40%5.00%1.69%12.88%
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%
Portfolio characteristics - as of 03/31/2017BofA Merrill Lynch U.S. High Yield Constrained Index
Number of holdings2041,927
Number of credit issuers163
Portfolio turnover (last fiscal year)109%%
Effective duration (weighted average) (view definition)4.46 years4.21 years
Effective maturity (weighted average) (view definition)5.66 years6.34 years
Yield to maturity (view definition)5.91%6.21%
Average market price (view definition)$103.26$100.80
Average coupon (view definition)6.59%6.48%
Yield to worst (view definition)5.58%5.88%
SEC 30-day yield with waiver (view definition)5.23%
SEC 30-day yield without waiver (view definition)5.09%
Annualized standard deviation, 3 years (view definition)5.94n/a
Portfolio composition as of 03/31/2017Total may not equal 100% due to rounding.
Credits79.8%
Foreign bonds16.6%
Cash and cash equivalents3.7%
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
Prime Security Services Borrower LLC Prime Finance Inc. 9.250 5/15/20231.2%
CSC Holdings LLC 10.875 10/15/20251.0%
BWAY Holding Co. 9.125 8/15/20211.0%
Boyd Gaming Corp. 6.375 4/1/20261.0%
VTR Finance BV 6.875 1/15/20241.0%
Freeport-McMoRan Inc. 6.875 2/15/20230.9%
Scientific Games International Inc. 10.000 12/1/20220.9%
HUB International Ltd. 7.875 10/1/20210.9%
Gardner Denver Inc. 6.875 8/15/20210.9%
Sprint Corp. 7.125 6/15/20240.8%
Total % Portfolio in Top 10 holdings9.6%

Fixed income sectors as of 03/31/2017

List excludes cash and cash equivalents.

SectorFundBenchmark
Energy13.8%14.4%
Basic industry12.6%12.2%
Media8.7%11.2%
Healthcare7.8%9.7%
Telecommunications7.2%10.0%
Services6.0%4.8%
Leisure5.4%4.5%
Technology & electric5.4%6.3%
Capital goods5.3%5.3%
Banking5.0%3.5%
Emerging markets4.0%0.0%
Retail3.5%4.6%
Consumer goods3.4%2.6%
Utility3.2%2.7%
Financial services2.1%3.8%
Insurance1.7%0.8%
Transportation0.6%1.1%
Automotive0.6%2.2%
Credit quality as of 03/31/2017
RatingFundBenchmark
AAA3.7%0.0%
BBB3.0%0.0%
BB35.7%48.2%
B45.8%37.1%
CCC11.8%14.1%

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
20170.0000.0700.000
20160.0000.2030.003
20150.0000.2340.000
20140.0580.2390.000
20130.0000.2740.000
20120.0000.2990.000
20110.0000.3200.000
20100.0000.3460.000
20090.0000.3100.000
20080.0000.2960.000
20070.0000.3350.000

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]

Watch the video

Read video transcript

Adam Brown

Adam H. Brown, CFA

Senior Vice President, Senior Portfolio Manager, Co-Head of High Yield— Macquarie Investment Management, Americas

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 — 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 fees0.65%
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 December 31, 2016

Overview

U.S. high yield bonds, as measured by the BofA Merrill Lynch U.S. Cash Pay High Yield Index, returned 1.85% during the fourth quarter of 2016, bringing full-year returns to 17.3%. This marks the largest annual gain for the sector since 2009. Though rising interest rates, volatile energy prices, and election uncertainty muted returns in October and the first week of November, the subsequent U.S. presidential victory of Donald Trump and an Organization of the Petroleum Exporting Countries (OPEC) production agreement (which caused a spike in oil prices) underwrote a 1.95% gain in high yield debt in December. Returns were correlated with risk, with CCC-rated bonds outperforming at +5.9%, followed by +2.1% for B-rated bonds, and +0.7% for BB-rated bonds.

Consistent with the pattern since mid-February 2016, the energy and metals-and-mining sectors outperformed for the quarter, resulting in full-year returns of 38% and 44%, respectively, compared to 17% for the overall high yield market. Excluding commodities, the high yield sector gained just 0.8% for the quarter and 9.5% for the year. The strongest-performing sectors were metals and mining, energy, and technology, while healthcare, paper and packaging, and utilities lagged. High yield spreads fell 71 basis points to 430 basis points, while yields declined six basis points to end the quarter at 6.08%. (A basis point equals one hundredth of a percentage point.)

Within the Fund

During the fourth 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 healthcare, basic industry, and insurance. The strongest individual contributors were Transocean (drilling rigs), Zekelman Industries (steel pipe), and Gardner Denver (industrial machinery). Transocean and Gardner Denver gained due to their exposure to the improving energy market, while Zekelman benefited from improved operating performance and a rating agency upgrade.

The Fund’s largest sector detractors were energy, financial services, and media. The largest individual detractors were Digicel (telecommunications), Tenet Healthcare (hospitals), and Dynegy (electric utility). Digicel declined due to an unfavorable currency impact on earnings, Tenet underperformed because of the potential repeal of the Affordable Care Act, and Dynegy declined due to weak 2017 earnings guidance.

Outlook

The major story for high yield in 2016 was the extraordinary recovery of the energy and commodity sectors, which helped to deliver historic returns for the market. The rally was exceptionally narrow, however, with 16 of 21 sectors underperforming the index average (source: J.P. Morgan). Given that the energy and commodity sectors are now fully valued, spreads are signaling full value across industries and rating tiers.

While overall leverage has crept steadily higher since 2010, other credit metrics, including interest coverage, liquidity, profitability, new-issue quality, and bank loan loss trends point to a healthy extension to the credit cycle. Consequently, defaults appear likely to remain well below average in 2017, suggesting that with spreads at 430 basis points as mentioned earlier, investors remain adequately compensated for both credit and liquidity risk.

Against this backdrop and our expectation of coupon-like returns in 2017, portfolio strategy is focused on income and capital preservation through an overweight in B-rated issues and an underweight in rate-sensitive BB-rated bonds and speculative CCC-rated bonds. We favor well-capitalized large-capitalization names that exhibit 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.

Bond ratings are determined by a nationally recognized statistical rating organization.

Per Standard & Poor’s credit rating agency, bonds rated below AAA are more susceptible to the adverse effects of changes in circumstances and economic conditions than those in higher-rated categories, but the obligor’s capacity to meet its financial commitment on the obligation is still strong. Bonds rated BBB exhibit adequate protection parameters, although adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments. Bonds rated BB, B, and CCC are regarded as having significant speculative characteristics, with BB indicating the least degree of speculation of the three.

[18486]

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 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 04/21/2017)

Class APriceNet change
NAV$3.83no chg
Max offer price$4.01n/a

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

$294.8 million all share classes

Morningstar ranking (as of 03/31/2017)

YTD ranking433 / 727
1 year401 / 697
3 years564 / 596
5 years334 / 471
10 years159 / 318
Morningstar categoryHigh Yield Bond

(View Morningstar disclosure)

Lipper ranking (as of 03/31/2017)

YTD ranking415 / 705
1 year384 / 673
3 years536 / 570
5 years322 / 448
10 years152 / 304
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