Delaware Limited-Term Diversified Income Fund

Objective

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

Strategy

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
NASDAQDTRIX
CUSIP245912308
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)0.58%1.53%1.41%0.86%3.13%4.88%11/24/1985
Max offer price-2.18%-1.25%0.49%0.30%2.85%4.79%
Bloomberg Barclays 1-3 Year U.S. Government/Credit Index0.41%0.71%0.96%0.93%2.34%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)0.58%1.53%1.41%0.86%3.13%4.88%11/24/1985
Max offer price-2.18%-1.25%0.49%0.30%2.85%4.79%
Bloomberg Barclays 1-3 Year U.S. Government/Credit Index0.41%0.71%0.96%0.93%2.34%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
Gross0.92%
Net0.74%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursement from April 29, 2016 through May 2, 2017. Please see the fee table in the Fund's prospectus for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20170.58%n/an/an/an/a
20161.46%1.05%0.55%-0.65%2.42%
20151.24%-0.52%0.22%-0.30%0.62%
20140.65%0.62%-0.28%0.29%1.28%
2013-0.15%-2.22%-0.06%0.62%-1.81%
20121.20%1.30%0.57%-0.59%2.49%
20110.11%1.98%1.32%-0.64%2.78%
20101.95%0.10%1.81%-0.19%3.70%
20091.81%4.76%4.38%1.40%12.89%
20082.36%-0.96%0.18%0.65%2.21%
20071.53%-0.03%2.16%2.57%6.36%
Portfolio characteristics - as of 03/31/2017Bloomberg Barclays 1-3 Year U.S. Government/Credit Index
Number of holdings7651,512
Number of credit issuers244
Portfolio turnover (last fiscal year)124%n/a
Effective duration (weighted average) (view definition)2.69 years1.94 years
Effective maturity (weighted average) (view definition)5.19 years1.99 years
Yield to maturity (view definition)2.66%1.50%
Average market price (view definition)$99.71$101.05
Average coupon (view definition)3.24%2.05%
Yield to worst (view definition)2.61%1.50%
SEC 30-day yield with waiver (view definition)2.20%
SEC 30-day yield without waiver (view definition)2.01%
Annualized standard deviation, 3 years (view definition)1.28n/a
Portfolio composition as of 03/31/2017Total may not equal 100% due to rounding.
Credits54.5%
Asset-backed securities30.3%
Mortgage-backed securities17.1%
Commercial mortgage-backed securities0.4%
U.S. government securities-2.2%
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
FNCL 4.5 5/163.3%
United States Treasury Note Bond 2.250 2/15/20272.1%
CHAIT 2015-A6 A61.3%
BACCT 2007-A4 A41.2%
FN AL99031.2%
GEDFT 2012-2 A1.1%
CHAIT 2013-A9 A1.0%
GEDFT 2014-2 A1.0%
DCENT 2014-A1 A10.9%
CCCIT 2013-A7 A70.9%
Total % Portfolio in Top 10 holdings14.0%

Fixed income sectors as of 03/31/2017

List excludes cash and cash equivalents.

SectorFundBenchmark
Investment grade credits42.7%33.6%
Asset-backed securities30.3%0.0%
MBS and CMOs17.1%0.0%
High yield credits8.8%0.0%
Emerging markets2.5%0.0%
Municipal bonds0.5%0.0%
Commercial mortgage-backed securities0.4%0.0%
U.S. Treasury securities2.6%60.3%
Credit quality as of 03/31/2017
RatingFundBenchmark
AAA45.6%70.6%
AA6.4%8.1%
A17.3%10.5%
BBB20.5%10.7%
BB5.4%0.0%
B4.6%0.0%
CCC0.2%0.0%
Not rated0.2%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
20170.0000.0670.000
20160.0000.1410.011
20150.0000.1300.013
20140.0000.1360.004
20130.0000.0000.140
20120.0150.1750.000
20110.1250.2210.000
20100.0410.2460.000
20090.0000.3360.000
20080.0000.3480.000
20070.0000.3770.000

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

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)


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, Co-Head of High Yield— Macquarie Investment Management, Americas

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 — Macquarie Investment Management, Americas

Start date on the Fund: July 2016

Years of industry experience: 30

(View bio)


Brian McDonnell

Brian C. McDonnell, CFA

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

Start date on the Fund: April 2012

Years of industry experience: 28

(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 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 March 31, 2017

Overview

The Bloomberg Barclays US Aggregate Index recorded a positive return for the first quarter of 2017, with lower-quality BBB-rated bonds outperforming the higher-rated investment-grade credit tiers within that index on a total return basis. Most broad-market fixed income indices produced positive quarterly returns, with high yield corporate bonds and emerging market debt posting the strongest returns.

US economic indicators were generally stronger, with the Citigroup Economic Surprise Index ending the period near the highest levels since 2014. Nonfarm payroll growth, which has averaged about 200,000 a month since 2011, continued at about 210,000 a month during the first quarter. Meanwhile, core personal consumption expenditures or PCE (the Federal Reserve’s preferred inflation gauge) rose to 1.8% year-over-year while personal income and spending remained subdued. Until personal income and wage-and-salary income show greater evidence of accelerating, the consumer inflation trend is likely to remain muted.

The Trump administration got off to a rocky start on key policy initiatives; those stumbles, in turn, called into question expectations of faster economic growth. Tax reform is still on the table, however, and progress there will be critical if the popularity of the Trump reflation trade is to be maintained. Gross domestic product (GDP) forecasts that focus on sentiment-based leading indicators are showing solid growth while forecasts derived from current economic output and demand statistics are pointing to anemic growth.

With two rate increases in its last three meetings, the Federal Open Market Committee (FOMC) appears to be siding with the Trump reflation/improved sentiment side of the argument. The Fed’s talk of balance sheet management also has increased. As the Fed — and China’s central bank — have tightened policy in recent months, the fragile support system for asset prices that has been in place over the past seven-plus years may become less reliable. If the Fed and other central banks base near-term policy on hopes of a boost from fiscal initiatives, any failure on this politically driven front could result in major headwinds for economic growth and risk asset prices.

It seems that investors will have to decide where the Fed will take monetary policy. The reflation outlook means that markets are still in the early stages of a Fed tightening cycle and that there could be traditional overheating before the end of the cycle. Alternatively, if the economy doesn’t receive a reflation boost from fiscal policy, the Fed cycle could end prematurely as a very modest amount of tightening is applied to a slow-growth, fragile economy.

Within the Fund

The Fund’s outperformance for the period was driven primarily by its positioning in high grade corporate credit. Corporate bonds outperformed Treasurys, so the Fund’s overweight to the sector was additive. Additionally, our security selection was beneficial, as the Fund’s corporate holdings returned 1.91% versus 0.65% for the sector within the Bloomberg Barclays 1–3 Year US Government/Credit Index. The Fund’s portfolio construction contributed to this performance as well. The Fund is structured as a barbell with short floating-rate asset-backed securities (ABS) and longer-dated corporate bonds. We find value in the 3–5 year part of the corporate curve, and the Fund’s 40% holding in floating-rate bonds allows for investments in that part of the curve while maintaining a duration relatively close to the benchmark index. This portfolio construction is underweight the 2-year part of the curve, which historically has been the most sensitive to Fed rate hikes. The Treasury curve reflected this, with short rates underperforming longer rates as the FOMC raised the federal funds rate at its March meeting.

Within the corporate bond component of the Fund’s portfolio, the strongest contributor was the financial sector in which the Fund has an 8-percentage-point overweight. This is a sector we continue to favor and in which we opportunistically added to the Fund’s exposure over the quarter, particularly in the new-issue market.

Outlook

The Fund has an income and yield advantage over the benchmark index due to its weightings in corporate bonds and structured product sectors. We expect to maintain these overweights and to continue to maintain the portfolio’s barbell structure to maintain this yield advantage.

We will need to see a continuation of these positive fundamental trends to support current valuations. Market valuations across fixed income are now trading through long-term averages. 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, should be watched carefully for signs of a broader pullback in demand that could have global implications on the world’s economies.

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

The Citigroup Economic Surprise Index is a rolling measure of beats and misses of indicators relative to consensus expectations.

[19203]

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.

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 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.

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 04/28/2017)

Class APriceNet change
NAV$8.510.01
Max offer price$8.75n/a

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

$893.5 million all share classes

Overall Morningstar RatingTM

 
Class A shares (as of 03/31/2017)
Class ANo. of funds
Overall3444
3 Yrs4444
5 Yrs2359
10 Yrs4257
Morningstar categoryShort-Term Bond

(View Morningstar disclosure)

Morningstar ranking (as of 03/31/2017)

YTD ranking259 / 525
1 year231 / 516
3 years123 / 444
5 years263 / 359
10 years49 / 257
Morningstar categoryShort-Term Bond

(View Morningstar disclosure)

Lipper ranking (as of 03/31/2017)

YTD ranking131 / 187
1 year78 / 184
3 years81 / 156
5 years103 / 117
10 years44 / 83
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