UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
N-1A
File No.
002-37707
File No. 811-02071
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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/X/
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Pre-Effective Amendment No.
______
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Post-Effective Amendment
No.
83
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/X/
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and/or
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REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
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/X/
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Amendment No.
83
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(Check appropriate box or
boxes.)
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DELAWARE GROUP INCOME FUNDS
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(Exact Name of Registrant as
Specified in Charter)
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2005 Market
Street, Philadelphia, Pennsylvania
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19103-7094
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(Address of Principal
Executive Offices)
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(Zip
Code)
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Registrants Telephone Number,
including Area Code:
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(800)
523-1918
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David F.
Connor, Esq., 2005 Market Street, Philadelphia, PA 19103-7094
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(Name and Address of Agent for
Service)
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Approximate Date of Proposed
Public Offering:
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November 28,
2012
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It is proposed
that this filing will become effective (check appropriate box):
/X/
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immediately upon filing
pursuant to paragraph (b)
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on (date) pursuant to
paragraph (b)
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60 days after filing pursuant
to paragraph (a)(1)
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on (date) pursuant to
paragraph (a)(1)
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75 days after filing pursuant
to paragraph (a)(2)
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on (date) pursuant to
paragraph (a)(2) of Rule 485.
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If
appropriate, check the following box:
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this post-effective amendment
designates a new effective date for a previously filed post-effective
amendment.
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--- C O N T E N T S ---
This Post-Effective Amendment No. 83
to Registration File No. 002-37707 includes the following:
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1.
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Facing Page
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2.
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Contents Page
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3.
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Part A -
Prospectuses
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4.
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Part B - Statement of
Additional Information
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5.
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Part C - Other
Information
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6.
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Signatures
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7.
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Exhibits
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Prospectus
Fixed income
Delaware Core Bond Fund
November 28, 2012
Nasdaq ticker symbols
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Class A
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DPFIX
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Class C
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DCBCX
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Class R
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DEBRX
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Institutional Class
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DCBIX
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The U.S. Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
Get shareholder reports and prospectuses online instead of in the mail.
Visit delawareinvestments.com/edelivery.
Fund summary
Delaware Core Bond Fund
What is the Fund's investment objective?
Delaware Core Bond Fund seeks maximum long-term total return, consistent with reasonable risk.
What are the Fund's fees and expenses?
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. 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 advisor, in the Fund's prospectus under the section entitled "About your account," and in the Fund's statement of additional information under the section entitled "Purchasing shares."
Shareholder fees (fees paid directly from your investment)
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Class
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A
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C
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R
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Inst.
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Maximum sales charge (load) imposed on purchases as a percentage of offering price
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4.50%
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none
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none
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none
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Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lower
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none
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1.00%
1
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none
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none
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Annual fund operating expenses (expenses that you pay each year as a percentage of the value of your investment)
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Class
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A
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C
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R
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Inst.
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Management fees
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0.50%
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0.50%
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0.50%
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0.50%
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Distribution and service (12b-1) fees
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0.30%
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1.00%
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0.60%
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none
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Other expenses
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0.54%
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0.54%
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0.54%
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0.54%
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Total annual fund operating expenses
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1.34%
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2.04%
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1.64%
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1.04%
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Fee waivers and expense reimbursements
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(0.44%)
2
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(0.39%)
2
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(0.49%)
2
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(0.39%)
2
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Total annual fund operating expenses after fee waivers and expense reimbursements
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0.90%
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1.65%
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1.15%
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0.65%
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1
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Class C shares redeemed within one year of purchase are subject to a 1.00% contingent deferred sales charge (CDSC).
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2
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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 plan, taxes, interest, inverse floater program expenses, 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 annual fund operating expenses from exceeding, in an aggregate amount, 0.65% of the Fund's average daily net assets from November 28, 2012 through November 28, 2013. In addition, the Fund's distributor, Delaware Distributors, L.P. (Distributor), has contracted to limit the Class A and Class R shares' 12b-1 fee for the Fund from November 28, 2012 through November 28, 2013 to no more than 0.25% and 0.50% of average daily net assets, respectively. These waivers and reimbursements may only be terminated by agreement of the Manager and the Fund.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and reflects the applicable waivers and reimbursements for the 1-year contractual period and the total operating expenses without waivers for years 2 through 10. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
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(if not redeemed)
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Class
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A
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C
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C
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R
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Inst.
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1 year
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$538
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$168
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$268
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$117
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$66
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3 years
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$814
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$602
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$602
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$469
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$292
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5 years
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$1,111
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$1,062
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$1,062
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$846
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$536
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10 years
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$1,953
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$2,338
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$2,338
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$1,903
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$1,236
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Portfolio turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 517% of the average value of its portfolio.
What are the Fund's principal investment strategies?
The Fund will invest primarily in a diversified portfolio of investment grade, fixed income obligations, including securities issued or guaranteed by the U.S. government, its agencies or instrumentalities (U.S. government securities), mortgage-backed securities, asset-backed securities, corporate bonds, and other fixed income securities.
Under normal circumstances, the Fund will invest at least 80% of its net assets in fixed income securities (80% Policy). The Fund's 80% Policy may be changed without shareholder approval. However, shareholders will be given notice at least 60 days prior to any such change.
The Fund will invest principally in debt obligations issued or guaranteed by the U.S. government and by U.S. corporations. The U.S. government securities in which the Fund may invest include a variety of securities that are issued or guaranteed as to the payment of principal and interest by the U.S. government, and by various agencies or instrumentalities that have been established or sponsored by the U.S. government. The corporate debt obligations in which the Fund may invest include, but are not limited to, bonds, notes, debentures, and commercial paper of U.S. companies.
The Fund's assets may also be invested in mortgage-backed securities issued or guaranteed by the U.S. government, its agencies or instrumentalities, or by government-sponsored corporations. Other mortgage-backed securities in which the Fund may invest are issued by certain private, nongovernment entities. Subject to quality limitations, the Fund may also invest in securities that are backed by assets such as receivables on home equity and credit card loans, automobile, mobile home, recreational vehicle and other loans, wholesale dealer floor plans, and leases.
All securities purchased by the Fund will have an investment grade rating at the time of purchase. Investment grade fixed income obligations will be those rated BBB- or higher by S&P, Baa3 or higher by Moody's, or similarly rated by another nationally recognized statistical rating organization (NRSRO), or those that are deemed to be of comparable quality. To the extent that the rating of a debt obligation held by the Fund falls below investment grade, the Fund, as soon as practicable, will dispose of the security, unless such disposal would be detrimental to the Fund in light of market conditions.
The Fund may invest up to 20% of its assets in foreign securities. The Fund intends to invest its foreign assets primarily in fixed income securities of issuers organized or having a majority of their assets or deriving a majority of their operating income in foreign countries. These fixed income securities include foreign government securities, debt obligations of foreign companies, and securities issued by supranational entities. The Fund may invest in securities issued in any currency and may hold foreign currencies. Presently, the Fund intends to invest its foreign assets primarily in U.S. dollar-denominated fixed income securities in a manner consistent with the foreign securities weighting in the Fund's benchmark, the Barclays U.S. Aggregate Index.
In unusual market conditions, in order to meet redemption requests, for temporary defensive purposes, and pending investment, the Fund may hold a substantial portion of its assets in cash or short-term fixed income obligations. Subject to certain limitations, the Fund will also be permitted to use various derivative instruments, including options, futures contracts, options on futures contracts, foreign currency transactions, interest rate swaps, and index swap agreements.
What are the principal risks of investing in the Fund?
Investing in any mutual fund involves the risk that you may lose part or all of the money you invest. Over time, the value of your investment in the Fund will increase and decrease according to changes in the value of the securities in the Fund's portfolio. Principal risks include:
Investments not guaranteed by the Manager or its affiliates
— Investments in the Fund are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies, including their subsidiaries or related companies (Macquarie Group), and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Fund, the repayment of capital from the Fund, or any particular rate of return.
Market risk
— The risk that all or a majority of the securities in a certain market — such as the stock or bond market — will decline in value because of factors such as adverse political or economic conditions, future expectations, investor confidence, or heavy institutional selling.
Interest rate risk
— The risk that securities will decrease in value if interest rates rise. This risk is generally associated with bonds.
Credit risk
— The risk that an issuer of a debt security, including a governmental issuer, may be unable to make interest payments and repay principal in a timely manner.
Prepayment risk
— The risk that the principal on a bond that is held by a portfolio will be prepaid prior to maturity at a time when interest rates are lower than what that bond was paying. A portfolio may then have to reinvest that money at a lower interest rate.
Liquidity risk
— The possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them.
Derivatives risk
— Derivative contracts, such as options, futures, and swaps, may involve additional expenses (such as the payment of premiums) and are subject to significant loss if a security, or a securities index to which a derivative contract is associated, moves in the opposite direction from what the portfolio manager anticipated. Derivative contracts are also subject to the risk that the counterparty may fail to perform its obligations under the contract due to financial difficulties (such as a bankruptcy or reorganization).
Foreign risk
— The risk that foreign securities (particularly in emerging markets) may be adversely affected by political instability; changes in currency exchange rates; inefficient markets and higher transaction costs; foreign economic conditions; or inadequate or different regulatory and accounting standards.
Currency risk
— The risk that the value of a portfolio's investments may be negatively affected by changes in foreign currency exchange rates.
Bank loans and other indebtedness
risk
— The risk that the portfolio will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower and the lending institution.
Government and regulatory risk
— The risk that governments or regulatory authorities have, from time to time, taken or considered actions that could adversely affect various sectors of the securities markets.
How has Delaware Core Bond Fund performed?
The bar chart and table below provide some indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for the 1-, 5-, and 10-year or lifetime periods compare with those of a broad measure of market performance. The Fund's past performance (before and after taxes) is not necessarily an indication of how it will perform in the future. The returns reflect expense caps in effect during certain of these periods. The returns would be lower without the expense caps. You may obtain the Fund's most recently available month-end performance by calling 800 523-1918 or by visiting our website at delawareinvestments.com/performance.
The Fund is the successor to The Intermediate Fixed Income Portfolio of the Delaware Pooled
®
Trust pursuant to the reorganization (Reorganization) of The Intermediate Fixed Income Portfolio into the Fund, which occurred on September 30, 2009. Prior to the Reorganization, the Fund had no investment operations. Accordingly, the performance information shown below for periods prior to September 30, 2009 is historical information for The Intermediate Fixed Income Portfolio. The Intermediate Fixed Income Portfolio had the same investment objective and a similar investment strategy as the Fund, and was managed by the same portfolio managers. Because the Fund's fees and expenses are higher than those of The Intermediate Fixed Income Portfolio, the Fund's performance would have been lower than that shown below for The Intermediate Fixed Income Portfolio.
Year-by-year total return (Class A)*
As of September 30, 2012, the Fund's Class A shares had a calendar year-to-date return of 4.89%. During the periods illustrated in this bar chart, the Fund's highest quarterly return was 6.18% for the quarter ended September 30, 2009 and its lowest quarterly return was -2.30% for the quarter ended June 30, 2004. The maximum Class A sales charge of 4.50%, which is normally deducted when you purchase shares, is not reflected in the highest/lowest quarterly returns or in the bar chart. If this fee were included, the returns would be less than those shown. The average annual returns in the table below do include the sales charge.
Average annual total returns for periods ended December 31, 2011*
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1 year
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5 years
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10 years or lifetime
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Class A return before taxes
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3.12%
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5.66%
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5.07%
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Class A return after taxes on distributions
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1.14%
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3.94%
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3.36%
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Class A return after taxes on distributions and sale of Fund shares
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2.05%
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3.81%
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3.30%
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Class C return before taxes (lifetime: 9/30/09-12/31/11)
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6.17%
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N/A
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5.91%
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Class R return before taxes (lifetime: 9/30/09-12/31/11)
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7.06%
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N/A
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6.38%
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Institutional Class return before taxes (lifetime: 9/30/09-12/31/11)
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8.31%
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N/A
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7.23%
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Barclays U.S. Aggregate Index (reflects no deduction for fees, expenses, or taxes)
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7.84%
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6.50%
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5.78%
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* Because the Fund has combined its retail and institutional prospectuses, the bar chart and the after tax returns in the average annual total returns table show the performance of the Fund's Class A shares.
After-tax performance is presented only for Class A shares of the Fund. The after-tax returns for other Fund classes may vary. Actual after-tax returns depend on the investor's individual tax situation and may differ from the returns shown. After-tax returns are not relevant for shares held in tax-deferred investment vehicles such as employer-sponsored 401(k) plans and individual retirement accounts (IRAs). The after-tax returns shown are calculated using the highest individual federal marginal income tax rates in effect during the periods presented and do not reflect the impact of state and local taxes.
Who manages the Fund?
Investment manager
Delaware Management Company, a series of Delaware Management Business Trust
Portfolio managers
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Title with Delaware Management Company
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Start date on the Fund
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Paul Grillo, CFA
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Senior Vice President, Co-Chief Investment Officer – Total Return Fixed Income Strategy
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February 2001
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Roger A. Early, CPA, CFA, CFP
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Senior Vice President, Co-Chief Investment Officer – Total Return Fixed Income Strategy
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May 2007
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Thomas H. Chow, CFA
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Senior Vice President, Senior Portfolio Manager
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May 2007
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Brian McDonnell, CFA
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Senior Vice President, Senior Portfolio Manager
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November 2011
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Purchase and redemption of Fund shares
You may purchase or redeem shares of the Fund on any day that the New York Stock Exchange (NYSE) is open for business (Business Day). Shares may be purchased or redeemed: through your financial advisor; through the Fund's website at delawareinvestments.com; by calling 800 523-1918; by regular mail (c/o Delaware Investments, P.O. Box 9876, Providence, RI 02940-8076); by overnight courier service (c/o Delaware Service Center, 4400 Computer Drive, Westborough, MA 01581-1722); or by wire.
For Class A and Class C shares, the minimum initial investment is generally $1,000 and subsequent investments can be made for as little as $100. The minimum initial investment for IRAs, Uniform Gifts/Transfers to Minors Act accounts, direct deposit purchase plans and automatic investment plans is $250 and through Coverdell Education Savings Accounts is $500, and subsequent investments in these accounts can be made for as little as $25. For Institutional Class shares, there is no minimum initial purchase requirement, but certain eligibility requirements must be met. The eligibility requirements are described in the prospectus under "Choosing a share class" and on the Fund's website. We may reduce or waive the minimums or eligibility requirements in certain cases. No new or subsequent investments currently are allowed in the Fund's Class B shares, except through a reinvestment of dividends or capital gains or permitted exchanges.
Tax information
The Fund's distributions generally are taxable to you as ordinary income, capital gains, or some combination of both, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an IRA.
Payments to broker/dealers and other
financial intermediaries
If you purchase shares of the Fund through a broker/dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker/dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.
How we manage the Fund
We take a disciplined approach to investing, combining investment strategies and risk management techniques that we believe can help shareholders meet their goals.
Our investment strategies
We analyze economic and market conditions, seeking to identify the securities or market sectors that we think are the best investments for the Fund. Following are descriptions of how the portfolio managers pursue the Fund's investment objective.
To meet its investment objective, the Fund will invest principally in debt obligations issued or guaranteed by the U.S. government and by U.S. corporations. The Fund's assets may also be invested in mortgage-backed securities issued or guaranteed by the U.S. government, its agencies, or instrumentalities or by government-sponsored corporations. The Fund may also invest up to 20% of its assets in foreign securities.
All securities purchased by the Fund will have an investment grade rating at the time of purchase. Investment grade fixed income obligations will be those rated BBB- or higher by S&P, Baa3 or higher by Moody's, or similarly rated by another NRSRO, or those that are deemed to be of comparable quality. To the extent that the rating of a debt obligation held by the Fund falls below investment grade, the Fund, as soon as practicable, will dispose of the security, unless such disposal would be detrimental to the Fund in light of market conditions.
The Fund's investment objective is nonfundamental. This means that the Fund's Board of Trustees (Board) may change the objective without obtaining shareholder approval. If the objective were changed, the Fund would notify shareholders at least 60 days before the change in the objective became effective.
The securities in which the Fund typically invests
Fixed income securities offer the potential for greater income payments than stocks, and also may provide capital appreciation. Please see the Fund's statement of additional information (SAI) for additional information about certain of the securities described below as well as other securities in which the Fund may invest.
U.S. government securities
U.S. government securities are direct U.S. obligations that include bills, notes, and bonds, as well as other debt securities, issued by the U.S. Treasury, and securities of U.S. government agencies or instrumentalities. U.S. Treasury securities are backed by the "full faith and credit" of the United States. Securities issued or guaranteed by federal agencies and U.S. government-sponsored instrumentalities may or may not be backed by the "full faith and credit" of the United States. In the case of securities not backed by the "full faith and credit" of the United States, investors in such securities look principally to the agency or instrumentality issuing or guaranteeing the obligation for ultimate repayment.
How the Fund uses them:
The Fund may invest in direct U.S. government obligations; however, these securities will typically be a smaller percentage of the portfolio because they generally do not offer as high a level of current income as other fixed income securities in which the Fund may invest.
Mortgage-backed securities
Mortgage-backed securities are fixed income securities that represent pools of mortgages, with investors receiving principal and interest payments as the underlying mortgage loans are paid back. Many are issued and guaranteed against default by the U.S. government or its agencies or instrumentalities, such as the Freddie Mac, Fannie Mae, and the Ginne Mae. Others are issued by private financial institutions, with some fully collateralized by certificates issued or guaranteed by the government or its agencies or instrumentalities.
How the Fund uses them:
There is no limit on government-related mortgage-backed securities. All securities will be rated investment grade at time of purchase.
The Fund may invest in mortgage-backed securities issued or guaranteed by the U.S. government, its agencies or instrumentalities or by government-sponsored corporations.
The Fund may also invest in mortgage-backed securities that are secured by the underlying collateral of the private issuer. Such securities are not government securities and are not directly guaranteed by the U.S. government in any way. These include collateralized mortgage obligations (CMOs), real estate mortgage investment conduits (REMICs), and commercial mortgage-backed securities (CMBS).
Asset-backed securities
Asset-backed securities are bonds or notes backed by accounts receivable, including home equity, automobile, or credit loans.
How the Fund uses them:
The Fund may invest in asset-backed securities that are rated investment grade.
Corporate bonds
Corporate bonds are debt obligations issued by a corporation.
How the Fund uses them:
The Fund may invest in corporate bonds rated BBB- or higher by S&P, Baa3 by Moody's, or similarly rated by another nationally recognized statistical rating organization (NRSRO), or those that are deemed to be of comparable quality.
Collateralized mortgage obligations (CMOs) and real estate mortgage investment conduits (REMICs)
CMOs are privately issued mortgage-backed bonds whose underlying value is the mortgages that are collected into different pools according to their maturity. They are issued by U.S. government agencies and private issuers. REMICs are privately issued mortgage-backed bonds whose underlying value is a fixed pool of mortgages secured by an interest in real property. Like CMOs, REMICs offer different pools according to the underlying mortgages' maturities.
How the Fund uses them:
The Fund may invest in CMOs and REMICs. Certain CMOs and REMICs may have variable or floating interest rates and others may be stripped. Stripped mortgage securities are generally considered illiquid and to such extent, together with any other illiquid investments, will not exceed 15% of the Fund's net assets, which is the Fund's limit on investments in illiquid securities. In addition, subject to certain quality and collateral limitations, the Fund may invest up to 20% of its total assets in CMOs and REMICs issued by private entities that are not collateralized by securities issued or guaranteed by the U.S. government, its agencies or instrumentalities, so called "nonagency" mortgage-backed securities.
Short-term debt investments
These instruments include: (1) time deposits, certificates of deposit, and banker's acceptances issued by U.S. banks; (2) time deposits and certificates of deposit issued by foreign banks; (3) commercial paper of the highest quality rating; (4) short-term debt obligations with the highest quality rating; (5) U.S. government securities; and (6) repurchase agreements collateralized by those instruments.
How the Fund uses them:
The Fund may invest in these instruments either as a means to achieve its investment objective or, more commonly, as temporary defensive investments or as a pending investment in the Fund's principal investment securities. When investing all or a significant portion of the Fund's assets in these instruments, the Fund may not be able to achieve its investment objective.
Foreign securities
Debt issued by a non-U.S. company or a government other than the United States or by an agency, instrumentality, or political subdivision of such government.
How the Fund uses them:
The Fund may invest up to 20% of its net assets in securities of foreign companies or governments.
Foreign currency transactions
A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency on a fixed future date at a price that is set at the time of the contract. The future date may be any number of days from the date of the contract as agreed by the parties involved.
How the Fund uses them:
Although the Fund values its assets daily in terms of U.S. dollars, it does not intend to convert its holdings of foreign currencies into U.S. dollars on a daily basis. The Fund may, however, from time to time, purchase or sell foreign currencies and/or engage in forward foreign currency transactions in order to expedite settlement of Fund transactions and to minimize currency value fluctuations.
Bank loans
A bank loan represents an interest in a loan or other direct indebtedness, such as an assignment, that entitles the acquiror of such interest to payments of interest, principal and/or other amounts due under the structure of the loan or other direct indebtedness. In addition to being structured as secured or unsecured loans, such investments could be structured as novations or assignments or represent trade or other claims owed by a company to a supplier.
How the Fund uses them:
The Fund may invest without restriction in bank loans that meet the Manager's credit standards. We perform our own independent credit analysis on each borrower and on the collateral securing each loan. We consider the nature of the industry in which the borrower operates, the nature of the borrower's assets, and the general quality and creditworthiness of the borrower. The Fund may invest in bank loans in order to enhance total return, to affect diversification, or to earn additional income. We will not use bank loans for reasons inconsistent with the Fund's investment objective.
Repurchase agreements
A repurchase agreement is an agreement between a buyer of securities, such as a fund, and a seller of securities, in which the seller agrees to buy the securities back within a specified time at the same price the buyer paid for them, plus an amount equal to an agreed-upon interest rate. Repurchase agreements are often viewed as equivalent to cash.
How the Fund uses them:
Typically, the Fund may use repurchase agreements as short-term investments for the Fund's cash position. In order to enter into these repurchase agreements, the Fund must have collateral of at least 102% of the repurchase price. The Fund will only enter into repurchase agreements in which the collateral is U.S. government securities. In the Manager's discretion, the Fund may invest overnight cash balances in short-term discount notes issued or guaranteed by the U.S. government, its agencies or instrumentalities, or government-sponsored enterprises.
Options and futures
Options represent a right to buy or sell a security or a group of securities at an agreed upon price at a future date. The purchaser of an option may or may not choose to go through with the transaction. The seller of an option, however, must go through with the transaction if its purchaser exercises the option.
Futures contracts are agreements for the purchase or sale of a security or a group of securities at a specified price, on a specified date. Unlike purchasing an option, a futures contract must be executed unless it is sold before the settlement date.
Certain options and futures may be considered derivative securities.
How the Fund uses them:
At times when we anticipate adverse conditions, we may want to protect gains on securities without actually selling them. We might use options or futures to neutralize the effect of any price declines, without selling a bond or bonds or a swap agreement or agreements, or as a hedge against changes in interest rates. We may also sell an option contract (often referred to as "writing" an option) to earn additional income for the Fund. The Fund may not engage in such transactions to the extent that obligations resulting from these activities exceed 25% of its assets.
Use of these strategies can increase the operating costs of the Fund and can lead to loss of principal.
The Fund has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act (CEA) and, therefore, is not subject to registration or regulation as a commodity pool operator under the CEA.
Restricted securities
Restricted securities are privately placed securities whose resale is restricted under U.S. securities laws.
How the Fund uses them:
The Fund may invest in privately placed securities, including those that are eligible for resale only among certain institutional buyers without registration, which are commonly known as "Rule 144A Securities." Restricted securities that are determined to be illiquid may not exceed the Fund's limit on investments in illiquid securities.
Illiquid securities
Illiquid securities are securities that do not have a ready market and cannot be readily sold within seven days at approximately the price at which a fund has valued them. Illiquid securities include repurchase agreements maturing in more than seven days.
How the Fund uses them:
The Fund may invest up to 15% of its net assets in illiquid securities.
Interest rate swap, index swap, and credit default swap agreements
In an interest rate swap, a fund receives payments from another party based on a variable or floating interest rate, in return for making payments based on a fixed interest rate. An interest rate swap can also work in reverse with a fund receiving payments based on a fixed interest rate and making payments based on a variable or floating interest rate.
In an index swap, a fund receives gains or incurs losses based on the total return of a specified index, in exchange for making interest payments to another party. An index swap can also work in reverse with a fund receiving interest payments from another party in exchange for movements in the total return of a specified index.
In a credit default swap, a fund may transfer the financial risk of a credit event occurring (a bond default, bankruptcy, or restructuring, for example) on a particular security or basket of securities to another party by paying that party a periodic premium; likewise, a fund may assume the financial risk of a credit event occurring on a particular security or basket of securities in exchange for receiving premium payments from another party.
Interest rate swaps, index swaps, and credit default swaps may be considered illiquid.
How the Fund uses them:
The Fund may use interest rate swaps to adjust its sensitivity to interest rates or to hedge against changes in interest rates. Index swaps may be used to gain exposure to markets that the Fund invests in, such as the corporate bond market. The Fund may also use index swaps as a substitute for futures or options contracts if such contracts are not directly available to the Fund on favorable terms. The Fund may enter into credit default swaps in order to hedge against a credit event, to enhance total return, or to gain exposure to certain securities or markets. The Fund may invest up to 20% of its net assets in swap agreements.
Use of these strategies can increase the operating costs of the Fund and lead to loss of principal.
The Fund may also invest in other securities, including certificates of deposit and obligations of both U.S. and foreign banks, corporate debt, and commercial paper.
Other investment strategies
Borrowing from banks
The Fund may borrow money from banks as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions. The Fund will be required to pay interest to the lending banks on the amounts borrowed. As a result, borrowing money could result in the Fund being unable to meet its investment objective.
Lending securities
The Fund may lend up to 25% of its assets to qualified broker/dealers or institutional investors for their use in securities transactions. Borrowers of the Fund's securities must provide collateral to the Fund and adjust the amount of collateral each day to reflect changes in the value of the loaned securities. These transactions may generate additional income for the Fund.
Purchasing securities on a when-issued or delayed-delivery basis
The Fund may buy or sell securities on a when-issued or delayed-delivery basis; that is, paying for securities before delivery or taking delivery at a later date. The Fund will designate cash or securities in amounts sufficient to cover its obligations, and will value the designated assets daily.
Temporary defensive positions
In response to unfavorable market conditions, the Fund may make temporary investments in cash or cash equivalents or other high-quality, short-term instruments. These investments may not be consistent with the Fund's investment objective. To the extent that the Fund holds such instruments, it may be unable to achieve its investment objective.
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may receive little or no return on your investment, and the risk that you may lose part or all of the money you invest. Before you invest in the Fund, you should carefully evaluate the risks. Because of the nature of the Fund, you should consider your investment to be a long-term investment that typically provides the best results when held for a number of years. The information below describes the principal risks you assume when investing in the Fund. Please see the SAI for a further discussion of certain of these risks and other risks not discussed here.
Market risk
Market risk is the risk that all or a majority of the securities in a certain market — such as the stock or bond market — will decline in value because of economic conditions, future expectations, investor confidence, or heavy institutional selling.
Index swaps are subject to the same market risks as the investment market or sector that the index represents. Depending on the actual movements of the index and how well the portfolio manager forecasts those movements, a fund could experience a higher or lower return than anticipated.
How the Fund strives to manage it:
We maintain a long-term investment approach and focus on securities that we believe can continue to provide returns over an extended time frame regardless of interim market fluctuations. Generally, we do not try to predict overall market movements.
In evaluating the use of an index swap for the Fund, we carefully consider how market changes could affect the swap and how that compares to our investing directly in the market the swap is intended to represent. When selecting dealers with whom we would make interest rate or index swap agreements for the Fund, we focus on those dealers with high-quality ratings and do careful credit analysis before engaging in the transaction.
Interest rate risk
Interest rate risk is the risk that securities will decrease in value if interest rates rise. The risk is greater for bonds with longer maturities than for those with shorter maturities.
Swaps may be particularly sensitive to interest rate changes. Depending on the actual movements of interest rates and how well the portfolio manager anticipates them, a fund could experience a higher or lower return than anticipated.
How the Fund strives to manage it:
The Fund will not invest in swaps with maturities of more than 10 years. Each business day (as defined below), we will calculate the amount the Fund must pay for swaps it holds and will segregate enough cash or other liquid securities to cover that amount.
Industry and security risks
Industry risk is the risk that the value of securities in a particular industry (such as financial services or manufacturing) will decline because of changing expectations for the performance of that industry.
Security risk is the risk that the value of an individual stock or bond will decline because of changing expectations for the performance of the individual company issuing the stock or bond (due to situations that could range from decreased sales to events such as a pending merger or actual or threatened bankruptcy).
How the Fund strives to manage them:
We limit the amount of the Fund's assets invested in any one industry and in any individual security or issuer. We also follow a rigorous selection process when choosing securities for the portfolio.
Credit risk
Credit risk is the risk that an issuer of a debt security, including a governmental issuer, may be unable to make interest payments and repay principal in a timely manner. Changes in an issuer's financial strength or in a security's credit rating may affect a security's value, which would impact a fund's performance.
How the Fund strives to manage it:
The Fund strives to minimize credit risk by investing primarily in higher quality, investment grade corporate bonds.
Prepayment risk
Prepayment risk is the risk that homeowners will prepay mortgages during periods of low interest rates, forcing a fund to reinvest its money at interest rates that might be lower than those on the prepaid mortgage. Prepayment risk may also affect other types of debt securities, but generally to a lesser extent than mortgage securities.
How the Fund strives to manage it:
We take into consideration the likelihood of prepayment when we select mortgages. We may look for mortgage securities that have characteristics that make them less likely to be prepaid, such as low outstanding loan balances or below-market interest rates.
Liquidity risk
Liquidity risk is the possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them. Illiquid securities may trade at a discount from comparable, more liquid investments, and may be subject to wide fluctuations in market value. A fund also may not be able to dispose of illiquid securities at a favorable time or price during periods of infrequent trading of an illiquid security.
How the Fund strives to manage it:
The Fund limits exposure to illiquid securities to no more than 15% of its net assets.
Derivatives risk
Derivatives risk is the possibility that a fund may experience a significant loss if it employs a derivatives strategy (including a strategy involving futures, options, and swaps) related to a security or a securities index and that security or index moves in the opposite direction from what the portfolio management team had anticipated. Derivatives also involve additional expenses, which could reduce any benefit or increase any loss to a fund from using the strategy.
How the Fund strives to manage it:
We will use derivatives for defensive purposes, such as to protect gains or hedge against potential losses in the portfolio without actually selling a security, to neutralize the impact of interest rate changes, to increase diversification, or to earn additional income.
Currency risk
Currency risk is the risk that the value of a fund's investments may be negatively affected by changes in foreign currency exchange rates. Adverse changes in exchange rates may reduce or eliminate any gains produced by investments that are denominated in foreign currencies and may increase any losses.
How the Fund strives to manage it:
The Fund, which has exposure to global and international investments, may be affected by changes in currency rates and exchange control regulations and may incur costs in connection with conversions between currencies. To hedge this currency risk associated with investments in non-U.S. dollar-denominated securities, we may invest in forward foreign currency contracts. These activities pose special risks that do not typically arise in connection with investments in U.S. securities. In addition, we may engage in foreign currency options and futures transactions.
Foreign risk
Foreign risk is the risk that foreign securities may be adversely affected by political instability, changes in currency exchange rates, foreign economic or government conditions, increased transaction costs, or inadequate regulatory and accounting standards.
How the Fund strives to manage it:
We attempt to reduce the risks presented by such investments by conducting world-wide fundamental research, including country visits. In addition, we monitor current economic and market conditions and trends, the political and regulatory environment, and the value of currencies in different countries in an effort to identify the most attractive countries and securities. Additionally, when currencies appear significantly overvalued compared to average real exchange rates, we may hedge exposure to those currencies for defensive purposes.
Foreign government securities risk
Foreign government securities risk involves the ability of a foreign government or government-related issuer to make timely principal and interest payments on its external debt obligations. This ability to make payments will be strongly influenced by the issuer's balance of payments, including export performance, its access to international credits and investments, fluctuations in interest rates, and the extent of its foreign reserves.
How the Fund strives to manage it:
The Fund attempts to reduce the risks associated with investing in foreign governments by limiting the portion of its assets that may be invested in such securities. The Fund will not invest more than 20% of its net assets in foreign securities.
Government and regulatory risks
Governments or regulatory authorities have, from time to time, taken or considered actions that could adversely affect various sectors of the securities markets. Government involvement in the private sector may, in some cases, include government investment in, or ownership of, companies in certain commercial business sectors; wage and price controls; or imposition of trade barriers and other protectionist measures. For example, an economic or political crisis may lead to price controls, forced mergers of companies, expropriation, the creation of government monopolies, foreign exchange controls, the introduction of new currencies (and the redenomination of financial obligations into those currencies), or other measures that could be detrimental to the investments of a fund.
How the Fund strives to manage it:
We evaluate the economic and political climate in the U.S. and abroad before selecting securities for the Fund. We typically diversify the Fund's assets among a number of different securities in a variety of sectors in order to minimize the impact to the Fund of any legislative or regulatory development affecting particular countries, issuers, or market sectors.
Bank loans and other direct indebtedness risk
Bank loans and other direct indebtedness risk involves the risk that a fund will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower. Loans that are fully secured offer a fund more protection than unsecured loans in the event of nonpayment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower's obligation, or that the collateral can be liquidated. Some loans or claims may be in default at the time of purchase. Certain of the loans and the other direct indebtedness acquired by a fund may involve revolving credit facilities or other standby financing commitments that obligate a fund to pay additional cash on a certain date or on demand. These commitments may require a fund to increase its investment in a company at a time when that fund might not otherwise decide to do so (including at a time when the company's financial condition makes it unlikely that such amounts will be repaid). To the extent that a fund is committed to advance additional funds, it will at all times hold and maintain, in a segregated account, cash or other high-grade debt obligations in an amount sufficient to meet such commitments.
As a fund may be required to rely upon another lending institution to collect and pass on to the fund amounts payable with respect to the loan and to enforce the fund's rights under the loan and other direct indebtedness, an insolvency, bankruptcy or reorganization of the lending institution may delay or prevent the fund from receiving such amounts. The highly leveraged nature of many such loans and other direct indebtedness may make such loans and other direct indebtedness especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other direct indebtedness may involve additional risk to the fund.
How the Fund strives to manage it:
These risks may not be completely eliminated, but we will attempt to reduce them through portfolio diversification, credit analysis, and attention to trends in the economy, industries, and financial markets. Should we determine that any of these securities may be illiquid, they would be subject to the Fund's restriction on illiquid securities.
Counterparty risk
If a fund enters into a derivative contract (such as a swap, futures, or options contract) or a repurchase agreement, it will be subject to the risk that the counterparty to such a contract or agreement may fail to perform its obligations under the contract or agreement due to financial difficulties (such as a bankruptcy or reorganization). As a result, the fund may experience significant delays in obtaining any recovery, may obtain only a limited recovery, or may obtain no recovery at all.
How the Fund strives to manage it:
The Fund tries to minimize this risk by considering the creditworthiness of all parties before it enters into transactions with them. The Fund may hold collateral from counterparties consistent with applicable regulations.
Disclosure of portfolio holdings information
A description of the Fund's policies and procedures with respect to the disclosure of its portfolio securities is available in the SAI.
Who manages the Fund
Investment manager
The Manager is a series of Delaware Management Business Trust, which is a subsidiary of Delaware Management Holdings, Inc. (DMHI). DMHI is a wholly owned subsidiary of Macquarie Group Ltd. The Manager makes investment decisions for the Fund, manages the Fund's business affairs, and provides daily administrative services. For its services to the Fund, the Manager was paid an aggregate fee, net of fee waivers, of 0.11% of average daily net assets during the last fiscal year.
A discussion of the basis for the Board's approval of the Fund's investment advisory contract is available in the Fund's semiannual report to shareholders for the period ended January 31, 2012.
Portfolio managers
Paul Grillo, Roger A. Early, Thomas H. Chow, and Brian McDonnell have day-to-day responsibilities for making investment decisions for the Fund.
Paul Grillo, CFA,
Senior Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy
Paul Grillo is a member of the firm's taxable fixed income portfolio management team with primary responsibility for portfolio construction and strategic asset allocation. He is also a member of the firm's asset allocation committee, which is responsible for building and managing multi-asset class portfolios. He joined Delaware Investments in 1992 as a mortgage-backed and asset-backed securities analyst, assuming portfolio management responsibilities in the mid-1990s. Grillo serves as co-lead portfolio manager for the firm's Diversified Income products and has been influential in the growth and distribution of the firm's multisector strategies. Prior to joining Delaware Investments, Grillo was a mortgage strategist and trader at Dreyfus Corporation. He also worked as a mortgage strategist and portfolio manager at Chemical Investment Group and as a financial analyst at Chemical Bank. Grillo holds a bachelor's degree in business management from North Carolina State University and an MBA with a concentration in finance from Pace University.
Roger A. Early, CPA, CFA, CFP,
Senior Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy
Roger A. Early rejoined Delaware Investments in March 2007 as a member of the firm's taxable fixed income portfolio management team, with primary responsibility for portfolio construction and strategic asset allocation. During his previous time at the firm, from 1994 to 2001, he was a senior portfolio manager in the same area, and he left Delaware Investments as head of its U.S. investment grade fixed income group. In recent years, Early was a senior portfolio manager at Chartwell Investment Partners and Rittenhouse Financial and was the chief investment officer for fixed income at Turner Investments. Prior to joining Delaware Investments in 1994, he worked for more than 10 years at Federated Investors where he managed more than $25 billion in mutual fund and institutional portfolios in the short-term and investment grade markets. He left the firm as head of institutional fixed income management. Earlier in his career, he held management positions with the Federal Reserve Bank, PNC Financial, Touche Ross, and Rockwell International. Early earned his bachelor's degree in economics from The Wharton School of the University of Pennsylvania and an MBA with concentrations in finance and accounting from the University of Pittsburgh. He is a member of the CFA Society of Philadelphia.
Thomas H. Chow, CFA,
Senior Vice President, Senior Portfolio Manager
Thomas H. Chow is a member of the firm's taxable fixed income portfolio management team, with primary responsibility for portfolio construction and strategic asset allocation in investment grade credit exposures. He is the lead portfolio manager for Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund, as well as several institutional mandates. His experience includes significant exposure to asset liability management strategies and credit risk opportunities. Prior to joining Delaware Investments in 2001 as a portfolio manager working on the Lincoln General Account, he was a trader of high grade and high yield securities, and was involved in the portfolio management of collateralized bond obligations (CBOs) and insurance portfolios at SunAmerica/AIG from 1997 to 2001. Before that, he was an analyst, trader, and portfolio manager at Conseco Capital Management from 1989 to 1997. Chow received a bachelor's degree in business analysis from Indiana University, and he is a Fellow of Life Management Institute.
Brian C. McDonnell, CFA,
Senior Vice President, Senior Portfolio Manager
Brian C. McDonnell is a member of the firm's taxable fixed income portfolio management team with primary responsibility for portfolio construction and asset allocation. Prior to joining Delaware Investments in March 2007 as a vice president and senior structured products analyst / trader, he was a managing director and head of a fixed income trading at Sovereign Securities, where he was responsible for hedging and risk management of the firm's holdings. Earlier in his career, he spent more than 10 years in various fixed income capacities with Prudential Securities in New York. McDonnell has a bachelor's degree in finance from Boston College, and he is a member of the CFA Society of Philadelphia.
The SAI provides additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio managers' ownership of Fund shares.
Manager of managers structure
The Fund and the Manager have received an exemptive order from the U.S. Securities and Exchange Commission (SEC) to operate under a manager of managers structure that permits the Manager, with the approval of the Board, to appoint and replace sub-advisors, enter into sub-advisory agreements, and materially amend and terminate sub-advisory agreements on behalf of the Fund without shareholder approval (Manager of Managers Structure). Under the Manager of Managers Structure, the Manager has ultimate responsibility, subject to oversight by the Board, for overseeing the Fund's sub-advisors and recommending to the Board their hiring, termination, or replacement. The SEC order does not apply to any sub-advisor that is affiliated with the Fund or the Manager. While the Manager does not currently expect to use the Manager of Managers Structure with respect to the Fund, the Manager may, in the future, recommend to the Board the establishment of the Manager of Managers Structure by recommending the hiring of one or more sub-advisors to manage all or a portion of the Fund's portfolio.
The Manager of Managers Structure enables the Fund to operate with greater efficiency and without incurring the expense and delays associated with obtaining shareholder approvals for matters relating to sub-advisors or sub-advisory agreements. The Manager of Managers Structure does not permit an increase in the overall management and advisory fees payable by the Fund without shareholder approval. Shareholders will be notified of any changes made to sub-advisors or sub-advisory agreements within 90 days of the changes.
Who\'s who
Board of trustees:
A mutual fund is governed by a board of trustees, which has oversight responsibility for the management of the fund's business affairs. Trustees establish procedures and oversee and review the performance of the fund's service providers.
Investment manager:
An investment manager is a company responsible for selecting portfolio investments consistent with the objective and policies stated in the mutual fund's prospectus. A written contract between a mutual fund and its investment manager specifies the services the investment manager performs and the fee the manager is entitled to receive.
Portfolio managers:
Portfolio managers make investment decisions for individual portfolios.
Distributor:
Most mutual funds continuously offer new shares to the public through distributors that are regulated as broker/dealers and are subject to the Financial Industry Regulatory Authority (FINRA) rules governing mutual fund sales practices.
Service agent:
Mutual fund companies employ service agents (sometimes called transfer agents) to maintain records of shareholder accounts, calculate and disburse dividends and capital gains, and prepare and mail shareholder statements and tax information, among other functions. Many service agents also provide customer service to shareholders.
Custodian:
Mutual funds are legally required to protect their portfolio securities, and most funds place them with a qualified bank custodian that segregates fund securities from other bank assets.
Financial advisors:
Financial advisors provide advice to their clients. They are associated with securities broker/dealers who have entered into selling and/or service arrangements with the distributor. Selling broker/dealers and financial advisors are compensated for their services generally through sales commissions, and through 12b-1 fees and/or service fees deducted from a fund's assets.
Shareholders:
Mutual fund shareholders have specific voting rights on matters such as material changes in the terms of a fund's management contract and changes to fundamental investment policies.
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share class has a different combination of sales charges, fees, and other features, you should consult your financial advisor to determine which class best suits your investment goals and time frame.
Delaware Management Trust Company will not accept applications to open new 403(b) custodial accounts or accept contributions to existing 403(b) custodial accounts.
Choosing a share class
Each share class may be eligible for purchase through programs sponsored by financial intermediaries that require the purchase of a specific class of shares.
Class A, Class C, and Class R shares of the Fund have each adopted a separate 12b-1 plan that allows it to pay distribution fees for the sale and distribution of its shares. Because these fees are paid out of the Fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
Class A
-
Class A shares have an up-front sales charge of up to 4.50% that you pay when you buy the shares.
-
If you invest $100,000 or more, your front-end sales charge will be reduced.
-
You may qualify for other reduced sales charges, and, under certain circumstances, the sales charge may be waived, as described in "How to reduce your sales charge" below.
-
Class A shares are also subject to an annual 12b-1 fee no greater than 0.30% (currently limited to 0.25%) of average daily net assets. See "Dealer compensation" below for further information.
-
Class A shares generally are not subject to a CDSC except in the limited circumstances described in the table below.
-
Class A shares generally are not available for purchase by anyone qualified to purchase Class R shares, except as described below.
Class A sales charges
The table below details your sales charges on purchases of Class A shares. The offering price for Class A shares includes the front-end sales charge. The sales charge as a percentage of the net amount invested is the maximum percentage of the amount invested rounded to the nearest hundredth. The actual sales charge that you pay as a percentage of the offering price and as a percentage of the net amount invested will vary depending on the then-current net asset value (NAV), the percentage rate of the sales charge, and rounding.
Amount of purchase
|
Sales charge as a %
of offering price
|
Sales charge as a %
of net amount invested
|
Less than $100,000
|
|
4.50%
|
|
5.13%
|
$100,000 but less than $250,000
|
|
3.50%
|
|
4.00%
|
$250,000 but less than $500,000
|
|
2.50%
|
|
3.00%
|
$500,000 but less than $1 million
|
|
2.00%
|
|
2.44%
|
$1 million or more
|
|
none*
|
|
none*
|
* There is no front-end sales charge when you purchase $1 million or more of Class A shares. However, if the Distributor paid your financial advisor a commission on your purchase of $1 million or more of Class A shares, you will have to pay a Limited CDSC of 1.00% if you redeem these shares within the first year after your purchase and 0.50% if you redeem them within the second year, unless a specific waiver of the Limited CDSC applies. The Limited CDSC will be paid to the Distributor and will be assessed on an amount equal to the lesser of: (1) the NAV at the time the Class A shares being redeemed were purchased; or (2) the NAV of such Class A shares at the time of redemption. For purposes of this formula, the "NAV at the time of purchase" will be the NAV at purchase of the Class A shares even if those shares are later exchanged for shares of another Delaware Investments
®
Fund and, in the event of an exchange of Class A shares, the "NAV of such shares at the time of redemption" will be the NAV of the shares acquired in the exchange. In determining whether a Limited CDSC is payable, it will be assumed that shares not subject to the Limited CDSC are the first redeemed followed by other shares held for the longest period of time. See "Dealer compensation" below for a description of the dealer commission that is paid.
Class C
-
Class C shares have no up-front sales charge, so the full amount of your purchase is invested in the Fund. However, you will pay a CDSC of 1.00% if you redeem your shares within 12 months after you buy them.
-
In determining whether the CDSC applies to a redemption of Class C shares, it will be assumed that shares held for more than 12 months are redeemed first followed by shares acquired through the reinvestment of dividends or distributions, and finally by shares held for 12 months or less. For further information on how the CDSC is determined, please see "Calculation of contingent deferred sales charges — Class C" below.
-
Under certain circumstances, the CDSC may be waived; please see "Waivers of contingent deferred sales charges" below for further information.
-
Class C shares are subject to an annual 12b-1 fee no greater than 1.00% of average daily net assets (of which 0.25% is a service fee) paid to the Distributor, dealers, or others for providing services and maintaining shareholder accounts.
-
Class C shares do not automatically convert to another class.
-
You may purchase only up to $1 million of Class C shares at any one time. Orders that exceed $1 million will be rejected. The limitation on maximum purchases varies for retirement plans.
Class R
-
Class R shares have no up-front sales charge, so the full amount of your purchase is invested in the Fund. Class R shares are not subject to a CDSC.
-
Class R shares are subject to an annual 12b-1 fee no greater than 0.60% (currently limited to 0.50%) of average daily net assets.
-
Class R shares do not automatically convert to another class.
-
Class R shares generally are available only to: (i) qualified and nonqualified plan shareholders covering multiple employees (including 401(k), 401(a), 457, and noncustodial 403(b) plans, as well as other nonqualified deferred compensation plans) with assets (at the time shares are considered for purchase) of $10 million or less; and (ii) individual retirement account (IRA) rollovers from plans that were previously maintained on the Delaware Investments® retirement recordkeeping system or BISYS's retirement recordkeeping system that are offering Class R shares to participants.
-
Except as noted above, no other IRAs are eligible for Class R shares (for example, no traditional IRAs, Roth IRAs, SIMPLE IRAs, SEPs, SARSEPs). For purposes of determining plan asset levels, affiliated plans may be combined at the request of the plan sponsor.
-
Any account holding Class A shares as of the date Class R shares were made available continues to be eligible to purchase Class A shares after that date. Any account holding Class R shares is not eligible to purchase Class A shares.
Institutional Class
-
Institutional Class shares have no up-front sales charge, so the full amount of your purchase is invested in the Fund.
-
Institutional Class shares do not assess a CDSC or a 12b-1 fee;
-
Institutional Class shares are available for purchase only by the following:
-
rollover IRAs from retirement plans and retirement plans introduced by persons not associated with brokers or dealers that are primarily engaged in the retail securities business;
-
tax-exempt employee benefit plans of the Manager, its affiliates, and securities dealers that have a selling agreement with the Distributor;
-
institutional advisory clients (including mutual funds) of the Manager or its affiliates, as well as those clients' affiliates, and their corporate sponsors, subsidiaries, related employee benefit plans, and rollover IRAs of, or from, such institutional advisory clients;
-
a bank, trust company, or similar financial institution investing for its own account or for the account of its trust customers for whom the financial institution is exercising investment discretion in purchasing Institutional Class shares, except where the investment is part of a program that requires payment to the financial institution of a Rule 12b-1 Plan fee;
-
RIAs investing on behalf of clients that consist solely of institutions and high net worth individuals having at least $1 million entrusted to an RIA for investment purposes (use of the Institutional Class shares is restricted to RIAs who are not affiliated or associated with a broker or dealer and who derive compensation for their services exclusively from their advisory clients);
-
certain plans qualified under Section 529 of the Internal Revenue Code, for which the Manager, Distributor, or Delaware Service Company, Inc. (DSC), or one or more of their affiliates, provide record keeping, administrative, investment management, marketing, distribution, or similar services;
-
programs sponsored by and/or controlled by financial intermediaries where: (1) such programs allow or require the purchase of Institutional Class shares; (2) the financial intermediary has entered into an agreement covering the arrangement with the Distributor and/or DSC; and (3) the financial intermediary (i) charges clients an ongoing fee for advisory, investment consulting or similar services, or (ii) offers the Institutional Class shares through a no-commission network or platform; or
-
private investment vehicles, including, but not limited to, foundations and endowments.
Calculation of contingent deferred sales charges — Class C
CDSCs are charged as a percentage of the dollar amount subject to the CDSC. The charge will be assessed on an amount equal to the lesser of the NAV at the time the shares being redeemed were purchased or the NAV of those shares at the time of redemption. No CDSC will be imposed on increases in NAV above the initial purchase price, nor will a CDSC be assessed on redemptions of shares acquired through reinvestment of dividends or capital gains distributions. For purposes of this formula, the "NAV at the time of purchase" will be the NAV at purchase of Class C shares of the Fund, even if those shares are later exchanged for shares of another Delaware Investments
®
Fund. In the event of an exchange of the shares, the "NAV of such shares at the time of redemption" will be the NAV of the shares that were acquired in the exchange.
Dealer compensation
The financial advisor that sells you shares of the Fund may be eligible to receive the following amounts as compensation for your investment in the Fund. These amounts are paid by the Distributor to the securities dealer with whom your financial advisor is associated. Institutional Class shares do not have a 12b-1 fee or sales charge so they are not included in the chart below.
|
Class A
1
|
Class C
2
|
Class R
3
|
Commission (%)
|
—
|
1.00%
|
—
|
Investment less than $100,000
|
4.00%
|
-
|
-
|
$100,000 but less than $250,000
|
3.00%
|
—
|
—
|
$250,000 but less than $500,000
|
2.00%
|
—
|
—
|
$500,000 but less than $1 million
|
1.60%
|
—
|
—
|
$1 million but less than $5 million
|
1.00%
|
—
|
—
|
$5 million but less than $25 million
|
0.50%
|
—
|
—
|
$25 million or more
|
0.25%
|
—
|
—
|
12b-1 fee to dealer
|
0.30%
|
1.00%
|
0.60%
|
1
On sales of Class A shares, the Distributor reallows to your securities dealer a portion of the front-end sales charge depending upon the amount you invested. Your securities dealer may be eligible to receive a 12b-1 fee of up to 0.30% from the date of purchase. The maximum 12b-1 fee applicable to Class A shares is 0.30%, however the Distributor has contracted to limit this amount to 0.25% from November 28, 2012 through November 28, 2013.
2
On sales of Class C shares, the Distributor may pay your securities dealer an up-front commission of 1.00%. The up-front commission includes an advance of the first year's 12b-1 service fee of up to 0.25%. During the first 12 months, the Distributor retains the full 1.00% 12b-1 fee to partially offset the up-front commission and the prepaid 0.25% service fee advanced at the time of purchase. Starting in the 13th month, your securities dealer may be eligible to receive the full 1.00% 12b-1 fee applicable to Class C. Alternatively, certain intermediaries may not be eligible to receive the up-front commission of 1.00%, but may receive the 12b-1 fee for Class C shares from the date of purchase.
3
On sales of Class R shares, the Distributor does not pay your securities dealer an up-front commission. Your securities dealer may be eligible to receive a 12b-1 fee of up to 0.60% from the date of purchase. However, the Distributor has contracted to limit this amount to 0.50% from November 28, 2012 through November 28, 2013.
Payments to intermediaries
The Distributor and its affiliates may pay additional compensation at their own expense and not as an expense of the Fund to certain affiliated or unaffiliated brokers, dealers, or other financial intermediaries (Financial Intermediaries) in connection with the sale or retention of Fund shares and/or shareholder servicing, including providing the Fund with "shelf space" or a higher profile with the Financial Intermediaries' consultants, salespersons, and customers (distribution assistance). For example, the Distributor or its affiliates may pay additional compensation to financial intermediaries for various purposes, including, but not limited to, promoting the sale of Fund shares, maintaining share balances and/or for sub-accounting, administrative, or shareholder processing services, marketing, educational support, and ticket charges. Such payments are in addition to any distribution fees, service fees, and/or transfer agency fees that may be payable by the Fund. The additional payments may be based on factors, including level of sales (based on gross or net sales or some specified minimum sales or some other similar criteria related to sales of the Fund and/or some or all other Delaware Investments
®
Funds), amount of assets invested by the Financial Intermediary's customers (which could include current or aged assets of the Fund and/or some or all other Delaware Investments
®
Funds), the Fund's advisory fees, some other agreed upon amount, or other measures as determined from time to time by the Distributor. The level of payments made to a qualifying Financial Intermediary in any given year may vary. To the extent permitted by SEC and FINRA rules and other applicable laws and regulations, the Distributor may pay, or allow its affiliates to pay, other promotional incentives or payments to Financial Intermediaries.
If a mutual fund sponsor or distributor makes greater payments for distribution assistance to your Financial Intermediary with respect to distribution of shares of that particular mutual fund than sponsors or distributors of other mutual funds make to your Financial Intermediary with respect to the distribution of the shares of their mutual funds, your Financial Intermediary and its salespersons may have a financial incentive to favor sales of shares of the mutual fund making the higher payments over shares of other mutual funds or over other investment options. In addition, depending on the arrangements in place at any particular time, a Financial Intermediary may also have a financial incentive for recommending a particular share class over other share classes. You should consult with your Financial Intermediary and review carefully any disclosure provided by such Financial Intermediary as to compensation it receives in connection with investment products it recommends or sells to you. A significant purpose of these payments is to increase sales of the Fund's shares. The Manager or its affiliates may benefit from the Distributor's or its affiliate's payment of compensation to financial intermediaries through increased fees resulting from additional assets acquired through the sale of Fund shares through financial intermediaries. In certain instances, the payments could be significant and may cause a conflict of interest for your Financial Intermediary. Any such payments will not change the net asset value (NAV) or the price of the Fund's shares.
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares. Please refer to the SAI for detailed information and eligibility requirements. You can also get additional information from your financial advisor. You or your financial advisor must notify us at the time you purchase shares if you are eligible for any of these programs. You may also need to provide information to your financial advisor or the Fund in order to qualify for a reduction in sales charges. Such information may include your Delaware Investments
®
Funds holdings in any other accounts, including retirement accounts, held indirectly or through an intermediary, and the names of qualifying family members and their holdings. We reserve the right to determine whether any purchase is entitled, by virtue of the foregoing, to the reduced sales charge. Class R and Institutional Class shares have no upfront sales charge or CDSC so they are not included in the chart below.
Letter of intent and rights of accumulation
Through a letter of intent you agree to invest a certain amount in Delaware Investments
®
Funds (except money market funds with no sales charge) over a 13-month period to qualify for reduced front-end sales charges.
You can combine your holdings or purchases of all Delaware Investments
®
Funds (except money market funds with no sales charge) as well as the holdings and purchases of your spouse and children under 21 to qualify for reduced front-end sales charges.
Class A
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Class C
|
|
Available
|
Although the letter of intent and rights of accumulation do not apply to Class C, you can combine the value of your Class A shares with your purchase of Class C shares to fulfill your letter of intent or qualify for rights of accumulation.
|
Reinvestment of redeemed shares
Up to 12 months after you redeem shares, you can reinvest the proceeds without paying a sales charge.
Class A
|
Class C
|
Available. You will not have to pay an additional front-end sales charge.
|
Not available
|
SIMPLE IRA, SEP, SARSEP, 401(k), SIMPLE 401(k), Profit Sharing, Money Purchase,
403(b)(7), and 457 Retirement Plans
These investment plans may qualify for reduced sales charges by combining the purchases of all members of the group. Members of these groups may also qualify to purchase shares without a front-end sales charge and may qualify for a waiver of any CDSCs on Class A shares.
Class A
|
Class C
|
You may not have to pay an additional front-end sales charge.
|
Not available.
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Buying Class A shares at net asset value
Class A shares of the Fund may be purchased at NAV under the following circumstances, provided that you notify the Fund in advance that the trade qualifies for this privilege. The Fund reserves the right to modify or terminate these arrangements at any time.
-
Shares purchased under the Delaware Investments® dividend reinvestment plan and, under certain circumstances, the exchange privilege and the 12-month reinvestment privilege.
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Purchases by: (i) current and former officers, Trustees/Directors, and employees of any Delaware Investments® Fund, the Manager, or any of the Manager's current affiliates and those that may in the future be created; (ii) legal counsel to the Delaware Investments® Funds; and (iii) registered representatives and employees of broker/dealers who have entered into dealer's agreements with the Distributor. At the direction of such persons, their family members (regardless of age) and any employee benefit plan established by any of the foregoing entities, counsel, or broker/dealers may also purchase shares at NAV.
-
Shareholders who own Class A shares of Delaware Cash Reserve
®
Fund as a result of a liquidation of a Delaware Investments
®
Fund may exchange into Class A shares of another Delaware Investments® Fund at NAV.
-
Purchases by bank employees who provide services in connection with agreements between the bank and unaffiliated brokers or dealers concerning sales of shares of the Delaware Investments® Funds.
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Purchases by certain officers, trustees, and key employees of institutional clients of the Manager or any of its affiliates.
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Purchases for the benefit of the clients of brokers, dealers, and registered investment advisors if such brokers, dealers, or investment advisors have entered into an agreement with the Distributor providing specifically for the purchase of Class A shares in connection with special investment products, such as wrap accounts or similar fee-based programs. Investors may be charged a fee when effecting transactions in Class A shares through a broker or agent that offers these special investment products.
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Purchases by financial institutions investing for the accounts of their trust customers if they are not eligible to purchase shares of the Fund's Institutional Class, if applicable.
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Purchases by retirement plans that are maintained on retirement platforms sponsored by financial intermediary firms, provided the financial intermediary firms or their trust companies (or entities performing similar trading/clearing functions) have entered into an agreement with respect to such retirement platforms.
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Purchases by certain legacy bank sponsored retirement plans that meet requirements set forth in the SAI.
-
Purchases by certain legacy retirement assets that meet requirements set forth in the SAI.
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Investments made by plan level and/or participant retirement accounts that are for the purpose of repaying a loan taken from such accounts.
-
Purchases by certain participants in defined contribution plans and members of their households whose plan assets will be rolled over into IRA accounts (IRA Program) where the financial intermediary has entered into an agreement specifically relating to such IRA Program with the Distributor and/or the Fund's transfer agent.
-
Purchases by certain participants of particular group retirement plans as described in the SAI.
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Loan repayments made to a Fund account in connection with loans originated from accounts previously maintained by another investment firm.
Waivers of contingent deferred sales charges
Certain sales charges may be based on historical cost. Therefore, you should maintain any records that substantiate these costs because the Fund, its transfer agent, and financial intermediaries may not maintain this information. Information about existing sales charges and sales charge reductions and waivers is available free of charge on the Delaware Investments® Funds' website at delawareinvestments.com. Additional information on sales charges can be found in the SAI, which is available upon request. Class R and Institutional Class shares have no upfront sales charge or CDSC so they are not included in the chart below.
The Fund's applicable CDSCs may be waived under the following circumstances:
Redemptions in accordance with a systematic withdrawal plan
Redemptions in accordance with a systematic withdrawal plan, provided the annual amount selected to be withdrawn under the plan does not exceed 12% of the value of the account on the date that the systematic withdrawal plan was established or modified.
Classes A
1
and C
|
Available
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Redemptions that result from the right to liquidate a shareholder's account
Redemptions that result from the right to liquidate a shareholder's account if the aggregate NAV of the shares held in the account is less than the then-effective minimum account size.
Classes A
1
and C
|
Available
|
Section 401(a) qualified retirement plan distributions
Distributions to participants or beneficiaries from a retirement plan qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (Internal Revenue Code).
Class A
1
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Class C
|
Available
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Not available
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Section 401(a) qualified retirement plan redemptions
Redemptions pursuant to the direction of a participant or beneficiary of a retirement plan qualified under Section 401(a) of the Internal Revenue Code with respect to that retirement plan.
Class A
1
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Class C
|
Available
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Not available
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Periodic distributions from an individual retirement account
Periodic distributions from an individual retirement account (traditional IRA, Roth IRA, SIMPLE IRA, SEP, SARSEP, Coverdell ESA) or a qualified plan
2
(401(k), SIMPLE 401(k), Profit Sharing, Money Purchase, 403(b)(7), and 457 Retirement Plans) not subject to a penalty under Section 72(t)(2)(A) of the Internal Revenue Code or a hardship or unforeseen emergency provision in the qualified plan as described in Treas. Reg. §1.401(k)-1(d)(3) and Section 457(d)(1)(A)(iii) of the Internal Revenue Code.
Classes A
1
and C
|
Available
|
Returns of excess contributions due to any regulatory limit
Returns of excess contributions due to any regulatory limit from an individual retirement account (traditional IRA, Roth IRA, SIMPLE IRA, SEP, SARSEP, Coverdell ESA) or a qualified plan
2
(401(k), SIMPLE 401(k), Profit Sharing, Money Purchase, 403(b)(7), and 457 Retirement Plans).
Classes A
1
and C
|
Available
|
Distributions by other employee benefit plans
Distributions by other employee benefit plans to pay benefits.
Class A
1
|
Class C
|
Available
|
Not available
|
Systematic withdrawals from a retirement account or qualified plan
Systematic withdrawals from a retirement account or qualified plan that are not subject to a penalty pursuant to Section 72(t)(2)(A) of the Internal Revenue Code or a hardship or unforeseen emergency provision in the qualified plan
2
as described in Treas. Reg. §1.401(k)-1(d)(3) and Section 457(d)(1)(A)(iii) of the Internal Revenue Code. The systematic withdrawal may be pursuant to the systematic withdrawal plan for the Delaware Investments® Funds or a systematic withdrawal permitted by the Internal Revenue Code.
Classes A
1
and C
|
Available
|
Distributions from an account of a redemption resulting from death or disability
Distributions from an account of a redemption resulting from the death or disability (as defined in Section 72(t)(2)(A) of the Internal Revenue Code) of a registered owner or a registered joint owner occurring after the purchase of the shares being redeemed. In the case of accounts established under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act or trust accounts, the waiver applies upon the death of all beneficial owners.
Classes A
1
and C
|
Available
|
Redemptions by certain legacy retirement assets
Redemptions by certain legacy retirement assets that meet the requirements set forth in the SAI.
Classes A
1
and C
|
Available
|
Redemptions by the classes of shareholders who are permitted to purchase shares at NAV
Redemptions by the classes of shareholders who are permitted to purchase shares at NAV, regardless of the size of the purchase.
Class A
1
|
Class C
|
Available
|
Not available
|
1
The waiver of Class A shares relates to a waiver of the Limited CDSC. Please note that you or your financial advisor will have to notify us at the time of purchase that the trade qualifies for such waiver.
2
Qualified plans that are fully redeemed at the direction of the plan's fiduciary are subject to any applicable CDSC or Limited CDSC, unless the redemption is due to the termination of the plan.
How to buy shares
Through your financial advisor
Your financial advisor can handle all the details of purchasing shares, including opening an account. Your financial advisor may charge a separate fee for this service.
By mail
Complete an investment slip and mail it with your check, made payable to the fund and class of shares you wish to purchase, to Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 or 4400 Computer Drive, Westborough, MA 01581-1722 for investments by overnight courier service. If you are making an initial purchase by mail, you must include a completed investment application (or an appropriate retirement plan application if you are opening a retirement account) with your check.
Please note that purchase orders submitted by mail will not be accepted until such purchase orders are received by Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 for investments by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 for investments by overnight courier service. Please do not send purchase orders to 2005 Market Street, Philadelphia, PA.
By wire
Ask your bank to wire the amount you want to invest to The Bank of New York Mellon, ABA #011001234, bank account #000073-6910. Include your account number and the name of the fund and class of shares in which you want to invest. If you are making an initial purchase by wire, you must first call us at 800 523-1918 so we can assign you an account number.
By exchange
You may exchange all or part of your investment in one or more Delaware Investments® Funds for shares of other Delaware Investments® Funds. Please keep in mind, however, that under most circumstances you are allowed to exchange only between like classes of shares. To open an account by exchange, call the Shareholder Service Center at 800 523-1918.
Through automated shareholder services
For Class A and Class C shares only, you may purchase or exchange shares through our automated telephone service, or through our website, delawareinvestments.com. For more information about how to sign up for these services, call our Shareholder Service Center at 800 523-1918.
Calculating share price
The price you pay for shares will depend on when we receive your purchase order. If your order is received by an authorized agent or us before the close of regular trading on the NYSE, which is normally 4:00 p.m. Eastern time, you will pay that day's closing share price, which is based on a fund's NAV. If your order is received after the close of regular trading on the NYSE, you will pay the next Business Day's price. We reserve the right to reject any purchase order.
We determine the NAV per share for each class of a Delaware Investments® Fund at the close of regular trading on the NYSE on each Business Day. The NAV per share for each class of a fund is calculated by subtracting the liabilities of each class from its total assets and dividing the resulting number by the number of shares outstanding for that class. We generally price securities and other assets for which market quotations are readily available at their market value. For a fund that invests primarily in foreign securities, the NAV may change on days when a shareholder will not be able to purchase or redeem fund shares because foreign markets are open at times and on days when U.S. markets are not. We price fixed income securities on the basis of valuations provided to us by an independent pricing service that uses methods approved by the Board. For all other securities, we use methods approved by the Board that are designed to price securities at their fair market values.
Fair valuation
When the Fund uses fair value pricing, it may take into account any factors it deems appropriate. The Fund may determine fair value based upon developments related to a specific security, current valuations of foreign stock indices (as reflected in U.S. futures markets), and/or U.S. sector or broad stock market indices. The prices of securities used by the Fund to calculate its NAV may differ from quoted or published prices for the same securities. Fair value pricing may involve subjective judgments and it is possible that the fair value determined for a security is materially different than the value that could be realized upon the sale of that security.
The Fund anticipates using fair value pricing for securities primarily traded on U.S. exchanges only under very limited circumstances, such as the early closing of the exchange on which a security is traded or suspension of trading in the security. The Fund may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Fund values its securities at 4:00 p.m. Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. To account for this, the Fund may frequently value many foreign equity securities using fair value prices based on third-party vendor modeling tools to the extent available.
The Board has delegated responsibility for valuing the Fund's assets to a Pricing Committee of the Manager, which operates under the policies and procedures approved by the Board and which is subject to the Board's oversight.
Retirement plans
In addition to being an appropriate investment for your IRA, Roth IRA, and Coverdell Education Savings Account, the Fund may be suitable for group retirement plans. You may establish your IRA account even if you are already a participant in an employer-sponsored retirement plan. For more information on how the Fund can play an important role in your retirement planning or for details about group plans, please consult your financial advisor, or call our Shareholder Service Center at 800 523-1918.
Document delivery
To reduce fund expenses, we try to identify related shareholders in a household and send only one copy of a fund's financial reports and prospectus. This process, called "householding," will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call our Shareholder Service Center at 800 523-1918. At any time you may view current prospectuses and financial reports on our website.
Inactive accounts
Please note that your account may be transferred to the appropriate state if no activity occurs in the account within the time period specified by state law.
How to redeem shares
When you send us a properly completed request to redeem or exchange shares and the request is received by an authorized agent or us before the close of regular trading on the NYSE (normally 4:00 p.m. Eastern time), you will receive the NAV next determined after we receive your request. If we receive your request after the close of regular trading on the NYSE, you will receive the NAV next determined on the next Business Day. We will deduct any applicable CDSCs. You may also have to pay taxes on the proceeds from your sale of shares. We will send you a check, normally the next Business Day, but no later than seven days after we receive your request to sell your shares. If you purchased your shares by check and sell them before your check has cleared, which can take up to 15 days, we will wait until your check has cleared before we send you your redemption proceeds.
If you are required to pay a CDSC when you redeem your shares, the amount subject to the fee will be based on the shares' NAV when you purchased them or their NAV when you redeem them, whichever is less. This arrangement ensures that you will not pay a CDSC on any increase in the value of your shares. You also will not pay the charge on any shares acquired by reinvesting dividends or capital gains. If you exchange shares of one fund for shares of another, you do not pay a CDSC at the time of the exchange. If you later redeem those shares, the purchase price for purposes of the CDSC formula will be the price you paid for the original shares, not the exchange price. The redemption price for purposes of this formula will be the NAV of the shares you are actually redeeming.
If you hold your shares in certificates, you must submit the certificates with your request to sell the shares. We recommend that you send your certificates by certified mail.
Through your financial advisor
Your financial advisor can handle all the details of redeeming your shares. Your financial advisor may charge a separate fee for this service.
By mail
You may redeem your shares by mail by writing to: Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 or 4400 Computer Drive, Westborough, MA 01581-1722 for redemptions by overnight courier service. All owners of the account must sign the request. For redemptions of more than $100,000, you must include a signature guarantee for each owner. Signature guarantees are also required when redemption proceeds are going to an address other than the address of record on the account.
Please note that redemption orders submitted by mail will not be considered accepted until such orders are received by Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 for redemptions by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 for redemptions by overnight courier service. Please do not send redemption requests to 2005 Market Street, Philadelphia, PA.
By telephone
You may redeem up to $100,000 of your shares by telephone. You may have the proceeds sent to you by check or, if you redeem at least $1,000 of shares, you may have the proceeds sent directly to your bank by wire. If you request a wire deposit, a bank wire fee may be deducted from your proceeds. Bank information must be on file before you request a wire redemption.
By wire
You may redeem $1,000 or more of your shares and have the proceeds deposited directly to your bank account, normally the next Business Day after we receive your request. If you request a wire deposit, a bank wire fee may be deducted from your proceeds. Bank information must be on file before you request a wire redemption.
Through automated shareholder services
For Class A, Class B, Class C, and Class R shares only, you may redeem shares through our automated telephone service or through our website, delawareinvestments.com. For more information about how to sign up for these services, call our Shareholder Service Center at 800 523-1918.
Redemptions-in-kind
The Fund has reserved the right to pay for redemptions with portfolio securities under certain conditions. See the SAI for more information on redemptions-in-kind.
Account minimums
For Class A, Class B, Class C, and Class R shares, if you redeem shares and your account balance falls below the required account minimum of $1,000 ($250 for IRAs, Roth IRAs, Uniform Gifts to Minors Act and Uniform Transfers to Minors Act accounts, or accounts with automatic investing plans, and $500 for Coverdell Education Savings Accounts) for three or more consecutive months, you will have until the end of the current calendar quarter to raise the balance to the minimum. If your account is not at the minimum by the required time, you may be charged a $9 fee for that quarter and each quarter after that until your account reaches the minimum balance. If your account does not reach the minimum balance, we may redeem your account after 60 days' written notice to you. Any CDSC that would otherwise be applicable will not apply to such a redemption.
For Institutional Class shares, if you redeem shares and your account balance falls below $250, the Fund may redeem your shares after 60 days' written notice to you.
Investor services
To help make investing with us as easy as possible, and to help you build your investments, we offer the following investor services.
Automatic investment plan
The automatic investment plan allows you to make regular monthly or quarterly investments directly from your checking account.
Direct deposit
With direct deposit, you can make additional investments through payroll deductions, recurring government or private payments such as Social Security, or direct transfers from your bank account.
Electronic delivery
With Delaware eDelivery, you can receive your fund documents electronically instead of via U.S. mail. When you sign up for eDelivery, you can access your account statements, shareholder reports, and other fund materials online, in a secure internet environment at any time, from anywhere.
Online account access
Online account access is a password-protected area of the Delaware Investments
®
Funds' website that gives you access to your account information and allows you to perform transactions in a secure internet environment.
Systematic exchange option
With the systematic exchange option, you can arrange automatic monthly exchanges between your shares in one or more Delaware Investments® Funds. These exchanges are subject to the same rules as regular exchanges (see below) and require a minimum monthly exchange of $100 per fund.
Dividend reinvestment plan
Through the dividend reinvestment plan, you can have your distributions reinvested in your account or the same share class in another Delaware Investments® Fund. The shares that you purchase through the dividend reinvestment plan are not subject to a front-end sales charge or to a CDSC. Under most circumstances, you may reinvest dividends only into like classes of shares.
Exchanges
You may generally exchange all or part of your shares for shares of the same class of another Delaware Investments® Fund without paying a front-end sales charge or a CDSC at the time of the exchange. However, if you exchange shares from a money market fund that does not have a sales charge, you will pay any applicable sales charge on your new shares. When exchanging Class C shares of one fund for the same class of shares in other funds, your new shares will be subject to the same CDSC as the shares you originally purchased. The holding period for the CDSC will also remain the same, with the amount of time you held your original shares being credited toward the holding period of your new shares. In certain other circumstances, you may also be permitted to exchange your shares for shares of a different class of the Fund, but such exchange may be subject to a sales charge for the new shares. (Please refer to the SAI for more details.) You do not pay sales charges on shares that you acquired through the reinvestment of dividends. You may have to pay taxes on your exchange. When you exchange shares, you are purchasing shares in another fund, so you should be sure to get a copy of the fund's prospectus and read it carefully before buying shares through an exchange. We may refuse the purchase side of any exchange request if, in the Manager's judgment, a fund would be unable to invest effectively in accordance with its investment objective and policies or would otherwise potentially be adversely affected.
On demand service
Through the on demand service, you or your financial advisor may transfer money between your Fund account and your predesignated bank account by telephone request. This service is not available for retirement plans. There is a minimum transfer of $25 and a maximum transfer of $100,000, except for purchases into IRAs. Delaware Investments does not charge a fee for this service; however, your bank may assess one.
Direct deposit service
Through the direct deposit service, you can have $25 or more in dividends and distributions deposited directly into your bank account. Delaware Investments does not charge a fee for this service; however, your bank may assess one. This service is not available for retirement plans.
Systematic withdrawal plan
For Class A and Class C shares, you can arrange a regular monthly or quarterly payment from your account made to you or someone you designate. If the value of your account is $5,000 or more, you can make withdrawals of at least $25 monthly, or $75 quarterly. You may also have your withdrawals deposited directly to your bank account through the direct deposit service.
The applicable Limited CDSC for Class A shares and the CDSC for Class C shares redeemed via a systematic withdrawal plan will be waived if the annual amount withdrawn in each year is less than 12% of the account balance on the date that the plan is established. If the annual amount withdrawn in any year exceeds 12% of the account balance on the date that the systematic withdrawal plan is established, all redemptions under the plan will be subject to the applicable CDSC, including an assessment for previously redeemed amounts under the plan.
Frequent trading of Fund shares
The Fund discourages purchases by market timers and purchase orders (including the purchase side of exchange orders) by shareholders identified as market timers may be rejected. The Board has adopted policies and procedures designed to detect, deter, and prevent trading activity detrimental to the Fund and its shareholders, such as market timing. The Fund will consider anyone who follows a pattern of market timing in any Delaware Investments® Fund or the Optimum Fund Trust to be a market timer and may consider anyone who has followed a similar pattern of market timing at an unaffiliated fund family to be a market timer.
Market timing of a fund occurs when investors make consecutive, rapid, short-term "roundtrips" — that is, purchases into a fund followed quickly by redemptions out of that fund. A short-term roundtrip is any redemption of fund shares within 20 Business Days of a purchase of that fund's shares. If you make a second such short-term roundtrip in a fund within 90 rolling calendar days as a previous short-term roundtrip in that fund, you may be considered a market timer. In determining whether market timing has occurred, the Fund will consider short-term roundtrips to include rapid purchases and sales of Fund shares through the exchange privilege. The Fund reserves the right to consider other trading patterns to be market timing.
Your ability to use the Fund's exchange privilege may be limited if you are identified as a market timer. If you are identified as a market timer, we will execute the redemption side of your exchange order but may refuse the purchase side of your exchange order. The Fund reserves the right to restrict or reject, without prior notice, any purchase order or exchange order for any reason, including any purchase order or exchange order accepted by any shareholder's financial intermediary or in any omnibus-type account. Transactions placed in violation of the Fund's market timing policy are not necessarily deemed accepted by the Fund and may be rejected by the Fund on the next Business Day following receipt by the Fund.
Redemptions will continue to be permitted in accordance with the Fund's current prospectus. A redemption of shares under these circumstances could be costly to a shareholder if, for example, the shares have declined in value, the shareholder recently paid a front-end sales charge, the shares are subject to a CDSC, or the sale results in adverse tax consequences. To avoid this risk, a shareholder should carefully monitor the purchases, sales, and exchanges of Fund shares and avoid frequent trading in Fund shares.
The Fund reserves the right to modify this policy at any time without notice, including modifications to the Fund's monitoring procedures and the procedures to close accounts to new purchases. Although the implementation of this policy involves judgments that are inherently subjective and may be selectively applied, we seek to make judgments and applications that are consistent with the interests of the Fund's shareholders. While we will take actions designed to detect and prevent market timing, there can be no assurance that such trading activity will be completely eliminated. Moreover, the Fund's market timing policy does not require the Fund to take action in response to frequent trading activity. If the Fund elects not to take any action in response to frequent trading, such frequent trading activity could continue.
Risks of market timing
By realizing profits through short-term trading, shareholders that engage in rapid purchases and sales or exchanges of the Fund's shares dilute the value of shares held by long-term shareholders. Volatility resulting from excessive purchases and sales or exchanges of Fund shares, especially involving large dollar amounts, may disrupt efficient portfolio management. In particular, the Fund may have difficulty implementing its long-term investment strategies if it is forced to maintain a higher level of its assets in cash to accommodate significant short-term trading activity. Excessive purchases and sales or exchanges of the Fund's shares may also force the Fund to sell portfolio securities at inopportune times to raise cash to accommodate short-term trading activity. This could adversely affect the Fund's performance, if, for example, the Fund incurs increased brokerage costs and realization of taxable capital gains without attaining any investment advantage.
A fund that invests significantly in foreign securities may be particularly susceptible to short-term trading strategies. This is because foreign securities are typically traded on markets that close well before the time a fund calculates its NAV (normally 4:00 p.m. Eastern time). Developments that occur between the closing of the foreign market and a fund's NAV calculation may affect the value of these foreign securities. The time-zone differences among international stock markets can allow a shareholder engaging in a short-term trading strategy to exploit differences in fund share prices that are based on closing prices of foreign securities established some time before a fund calculates its own share price.
Any fund that invests in securities that are thinly traded, traded infrequently, or relatively illiquid has the risk that the securities prices used to calculate the fund's NAV may not accurately reflect current market values. A shareholder may seek to engage in short-term trading to take advantage of these pricing differences. Funds that may be adversely affected by such arbitrage include, in particular, funds that significantly invest in small-cap securities, technology, and other specific industry sector securities, and in certain fixed income securities, such as high yield bonds, asset-backed securities, or municipal bonds.
Transaction monitoring procedures
The Fund, through its transfer agent, maintains surveillance procedures designed to detect excessive or short-term trading in Fund shares. This monitoring process involves several factors, which include scrutinizing transactions in Fund shares for violations of the Fund's market timing policy or other patterns of short-term or excessive trading. For purposes of these transaction monitoring procedures, the Fund may consider trading activity by multiple accounts under common ownership, control, or influence to be trading by a single entity. Trading activity identified by these factors, or as a result of any other available information, will be evaluated to determine whether such activity might constitute market timing. These procedures may be modified from time to time to improve the detection of excessive or short-term trading or to address other concerns. Such changes may be necessary or appropriate, for example, to deal with issues specific to certain retirement plans; plan exchange limits; U.S. Department of Labor regulations; certain automated or pre-established exchange, asset-allocation, or dollar cost averaging programs; or omnibus account arrangements.
Omnibus account arrangements are common forms of holding shares of the Fund, particularly among certain broker/dealers and other financial intermediaries, including sponsors of retirement plans and variable insurance products. The Fund will attempt to have financial intermediaries apply the Fund's monitoring procedures to these omnibus accounts and to the individual participants in such accounts. However, to the extent that a financial intermediary is not able or willing to monitor or enforce the Fund's frequent trading policy with respect to an omnibus account, the Fund or its agents may require the financial intermediary to impose its frequent trading policy, rather than the Fund's policy, to shareholders investing in the Fund through the financial intermediary. In addition, the Fund or its transfer agent may enter into shareholder information agreements with such financial intermediaries under which the Fund may receive information (such as taxpayer identification numbers and Fund transaction activity) in order to identify frequent trading activity.
A financial intermediary may impose different requirements or have additional restrictions on the frequency of trading than the Fund. Such restrictions may include, without limitation, requiring the trades to be placed by U.S. mail, prohibiting purchases for a designated period of time (typically 30 to 90 days) by investors who have recently purchased or redeemed Fund shares, and similar restrictions. The Fund's ability to impose such restrictions with respect to accounts traded through particular financial intermediaries may vary depending on systems capabilities, applicable contractual and legal restrictions, and cooperation of those financial intermediaries.
You should consult your financial intermediary regarding the application of such restrictions and to determine whether your financial intermediary imposes any additional or different limitations. In an effort to discourage market timers in such accounts, the Fund may consider enforcement against market timers at the participant level and at the omnibus level, up to and including termination of the omnibus account's authorization to purchase Fund shares.
Limitations on ability to detect and curtail market timing
Shareholders seeking to engage in market timing may employ a variety of strategies to avoid detection and, despite the efforts of the Fund and its agents to detect market timing in Fund shares, there is no guarantee that the Fund will be able to identify these shareholders or curtail their trading practices. In particular, the Fund may not be able to detect market timing attributable to a particular investor who effects purchase, redemption, and/or exchange activity in Fund shares through omnibus accounts. The difficulty of detecting market timing may be further compounded if these entities utilize multiple tiers or omnibus accounts.
Dividends, distributions, and taxes
Dividends and distributions
The Fund intends to qualify each year as a regulated investment company under the Code. As a regulated investment company, the Fund generally pays no federal income tax on the income and gains it distributes to you. The Fund expects to declare dividends daily and distribute all of its net investment income, if any, to shareholders as dividends monthly. The Fund will distribute net realized capital gains, if any, at least annually, usually in December. The Fund may distribute such income dividends and capital gains more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Fund. The amount of any distribution will vary, and there is no guarantee the Fund will pay either an income dividend or a capital gains distribution. We automatically reinvest all dividends and any capital gains, unless you direct us to do otherwise.
Annual statements
Each year, the Fund will send you an annual statement (Form 1099) of your account activity to assist you in completing your federal, state and local tax returns. Distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December. Prior to issuing your statement, the Fund makes every effort to reduce the number of corrected forms mailed to you. However, if the Fund finds it necessary to reclassify its distributions or adjust the cost basis of any covered shares sold or exchanged after you receive your tax statement, the Fund will send you a corrected Form 1099.
Avoid "buying a dividend"
At the time you purchase your Fund shares, the Fund's NAV may reflect undistributed income, undistributed capital gains, or net unrealized appreciation in value of portfolio securities held by the Fund. For taxable investors, a subsequent distribution to you of such amounts, although constituting a return of your investment, would be taxable. Buying shares in the Fund just before it declares an income dividend or capital gains distribution is sometimes known as "buying a dividend."
Tax considerations
Fund distributions.
The Fund expects, based on its investment objective and strategies, that its distributions, if any, will be taxable as ordinary income, capital gains, or some combination of both. This is true whether you reinvest your distributions in additional Fund shares or receive them in cash.
For federal income tax purposes, Fund distributions of short-term capital gains are taxable to you as ordinary income. Fund distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your shares. With respect to income dividends paid on or before December 31, 2012 (unless such provision is extended, possibly retroactively to January 1, 2013, or made permanent), a portion of income dividends reported by the Fund may be qualified dividend income eligible for taxation by individual shareholders at long-term capital gain rates provided certain holding period requirements are met. Because the income of the Fund is primarily derived from investments earning interest rather than dividend income, generally none or only a small portion of the income dividends paid to you by the Fund is anticipated to be qualified dividend income eligible for taxation by individuals at long-term capital gain tax rates.
Sale or redemption of Fund shares.
A sale or redemption of Fund shares is a taxable event and, accordingly, a capital gain or loss may be recognized. For tax purposes, an exchange of your Fund shares for shares of a different Delaware Investments® Fund is the same as a sale. Beginning with the 2012 calendar year, the Fund will be required to report to you and the Internal Revenue Service annually on Form 1099-B not only the gross proceeds of Fund shares you sell or redeem but also the cost basis for shares purchased or acquired on or after January 1, 2012 ("covered shares"). Cost basis will be calculated using the Fund's default method, unless you instruct the Fund to use a different calculation method. Shareholders should carefully review the cost basis information provided by the Fund and make any additional basis, holding period, or other adjustments that are required when reporting these amounts on their federal income tax returns. If your account is held by your investment representative (financial advisor or other broker), please contact that representative with respect to reporting of cost basis and available elections for your account. Tax-advantaged retirement accounts will not be affected. Additional information and updates regarding cost basis reporting and available shareholder elections will be on Delaware Investment's website at delawareinvestments.com as the information becomes available.
Medicare tax.
For taxable years beginning after December 31, 2012, an additional 3.8% Medicare tax will be imposed on certain net investment income (including ordinary dividends and capital gain distributions received from the Fund and net gains from redemptions or other taxable dispositions of Fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.
Backup withholding.
By law, if you do not provide the Fund with your proper taxpayer identification number and certain required certifications, you may be subject to backup withholding on any distributions of income, capital gains, or proceeds from the sale of your shares. The Fund also must withhold if the Internal Revenue Service instructs it to do so. When withholding is required, the amount will be 28% of any distributions or proceeds paid (for distributions and proceeds paid after December 31, 2012, the rate is scheduled to rise to 31% unless the 28% rate is extended, possibly retroactively to January 1, 2013, or made permanent).
State and local taxes.
Fund distributions and gains from the sale or exchange of your Fund shares generally are subject to state and local taxes.
Non-U.S. investors.
Non-U.S. investors may be subject to U.S. withholding tax at a 30% or lower treaty rate and U.S. estate tax and are subject to special U.S. tax certification requirements to avoid backup withholding and claim any treaty benefits. An exemption from U.S. withholding tax is provided for capital gain dividends paid by the Fund from long-term capital gains, if any. However, notwithstanding such exemption from U.S. withholding at the source, any such dividends and distributions of income and capital gains will be subject to backup withholding at a rate of 28% (or the then applicable rate) if you fail to properly certify that you are not a U.S. person.
Other Reporting and Withholding Requirements.
The Foreign Account Tax Compliance Act ("FATCA") requires the reporting to the Internal Revenue Service of certain direct and indirect ownership of foreign financial accounts by U.S. persons. Failure to provide this required information can result in a generally nonrefundable 30% tax on: (a) income dividends paid by the Fund after December 31, 2013 and (b) certain capital gain distributions (including proceeds arising from the sale Fund shares) paid by the Fund after December 31, 2016 to certain "foreign financial institutions" and "non-financial foreign entities."
This discussion of "Dividends, distributions, and taxes" is not intended or written to be used as tax advice. Because everyone's tax situation is unique, you should consult your tax professional about federal, state, local, or foreign tax consequences before making an investment in the Fund.
Certain management considerations
Investments by funds of funds and similar investment vehicles
The Fund may accept investments from funds of funds, as well as from similar investment vehicles, such as 529 Plans. A "529 Plan" is a college savings program that operates under Section 529 of the Internal Revenue Code. From time to time, the Fund may experience large investments or redemptions due to allocations or rebalancings by these funds of funds and/or similar investment vehicles. While it is impossible to predict the overall impact of these transactions over time, there could be adverse effects on portfolio management. For example, the Fund may be required to sell securities or invest cash at times when it would not otherwise do so. These transactions could also have tax consequences if sales of securities result in gains, and could also increase transaction costs or portfolio turnover.
Financial highlights
The financial highlights table is intended to help you understand the Fund's financial performance for the past 5 years or, if shorter, the period of the Fund's operations. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). The information for the 2012, 2011, and 2010 fiscal periods has been audited by PricewaterhouseCoopers LLP, independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the annual report, which is available upon request by calling 800 523-1918. For the fiscal years prior to 2010, the Fund's prior independent registered public accounting firm audited the Fund's financial statements.
|
Year ended
|
Period from
|
|
Year ended
|
|
Class A Shares
|
7/31/12
|
7/31/11
|
11/1/09
to 7/31/10
1
|
10/31/09
2
|
10/31/08
2
|
10/31/07
2
|
Net asset value, beginning of period
|
$10.890
|
$10.750
|
$10.370
|
$9.200
|
$9.880
|
$9.940
|
Income (loss) from investment operations:
|
|
|
|
|
|
|
Net investment income
3
|
0.140
|
0.199
|
0.159
|
0.445
|
0.460
|
0.457
|
Net realized and unrealized gain (loss)
|
0.707
|
0.274
|
0.434
|
1.195
|
(0.643)
|
(0.014)
|
Total from investment operations
|
0.847
|
0.473
|
0.593
|
1.640
|
(0.183)
|
0.443
|
|
|
|
|
|
|
|
Less dividends and distributions from:
|
|
|
|
|
|
|
Net investment income
|
(0.205)
|
(0.249)
|
(0.213)
|
(0.470)
|
(0.497)
|
(0.503)
|
Net realized gain
|
(0.382)
|
(0.084)
|
—
|
—
|
—
|
—
|
Total dividends and distributions
|
(0.587)
|
(0.333)
|
(0.213)
|
(0.470)
|
(0.497)
|
(0.503)
|
|
|
|
|
|
|
|
Net asset value, end of period
|
$11.150
|
$10.890
|
$10.750
|
$10.370
|
$9.200
|
$9.880
|
|
|
|
|
|
|
|
Total return
4
|
8.03%
|
4.49%
|
5.89%
|
18.29%
|
(2.07%)
|
4.68%
|
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$3,021
|
$4,348
|
$4,022
|
$6,346
|
$6,757
|
$13,791
|
Ratio of expenses to average net assets
|
0.90%
|
0.90%
|
0.90%
|
0.70%
|
0.39%
|
0.39%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
1.34%
|
1.46%
|
2.25%
|
1.60%
|
1.12%
|
0.66%
|
Ratio of net investment income to average net assets
|
1.27%
|
1.86%
|
2.04%
|
4.35%
|
4.66%
|
4.61%
|
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly
|
0.83%
|
1.30%
|
0.69%
|
3.45%
|
3.93%
|
4.33%
|
Portfolio turnover
|
517%
|
503%
|
528%
|
346%
|
391%
|
251%
|
1
|
During the period ended July 31, 2010, the Fund changed its fiscal year end from October to July. Ratios have been annualized and portfolio turnover and total return have not been annualized.
|
2
|
Effective September 30, 2009, the Fund received all of the assets and liabilities of the Delaware Pooled
®
Trust — The Intermediate Fixed Income Portfolio (the Portfolio). The Class A shares financial highlights for the periods prior to September 30, 2009 reflect the performance of the Institutional Class shares of the Portfolio. Fees paid by the Portfolio were less than Class A share fees, and performance would have been lower if Class A fees were paid.
|
3
|
The average shares outstanding method has been applied for per share information.
|
4
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect.
|
|
Year ended
|
|
Period from
|
Class C Shares
|
7/31/12
|
7/31/11
|
11/1/09 to 7/31/10
1
|
9/30/09
2
to 10/31/09
|
Net asset value, beginning of period
|
$10.930
|
$10.790
|
$10.370
|
$10.310
|
Income from investment operations:
|
|
|
|
|
Net investment income
3
|
0.058
|
0.120
|
0.103
|
0.030
|
Net realized and unrealized gain
|
0.707
|
0.273
|
0.469
|
0.059
|
Total from investment operations
|
0.765
|
0.393
|
0.572
|
0.089
|
|
|
|
|
|
Less dividends and distributions from:
|
|
|
|
|
Net investment income
|
(0.123)
|
(0.169)
|
(0.152)
|
(0.029)
|
Net realized gain
|
(0.382)
|
(0.084)
|
—
|
—
|
Total dividends and distributions
|
(0.505)
|
(0.253)
|
(0.152)
|
(0.029)
|
|
|
|
|
|
Net asset value, end of period
|
$11.190
|
$10.930
|
$10.790
|
$10.370
|
|
|
|
|
|
Total return
4
|
7.20%
|
3.70%
|
5.67%
|
0.86%
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$1,483
|
$347
|
$145
|
$2
|
Ratio of expenses to average net assets
|
1.65%
|
1.65%
|
1.65%
|
1.65%
|
Ratio of expenses to average net assets prior to fees waived
|
2.04%
|
2.16%
|
2.95%
|
5.32%
|
Ratio of net investment income to average net assets
|
0.52%
|
1.11%
|
1.29%
|
3.33%
|
Ratio of net investment income (loss) to average net assets
prior to fees waived
|
0.13%
|
0.60%
|
(0.01%)
|
(0.34%)
|
Portfolio turnover
|
517%
|
503%
|
528%
|
346%
5
|
1
|
During the period ended July 31, 2010, the Fund changed its fiscal year end from October to July. Ratios have been annualized and portfolio turnover and total return have not been annualized.
|
2
|
Date of commencement of operations; ratios have been annualized and total return has not been annualized.
|
3
|
The average shares outstanding method has been applied for per share information.
|
4
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect.
|
5
|
Portfolio turnover is representative of the Fund for the entire year.
|
|
|
Year ended
|
|
Period from
|
Class R Shares
|
7/31/12
|
7/31/11
|
11/1/09 to 7/31/10
1
|
9/30/09
2
to 10/31/09
|
Net asset value, beginning of period
|
$10.920
|
$10.830
|
$10.370
|
$10.310
|
Income from investment operations:
|
|
|
|
|
Net investment income
3
|
0.113
|
0.174
|
0.141
|
0.035
|
Net realized and unrealized gain
|
0.700
|
0.226
4
|
0.510
|
0.059
|
Total from investment operations
|
0.813
|
0.400
4
|
0.651
|
0.094
|
|
|
|
|
|
Less dividends and distributions from:
|
|
|
|
|
Net investment income
|
(0.181)
|
(0.226)
|
(0.191)
|
(0.034)
|
Net realized gain
|
(0.382)
|
(0.084)
|
—
|
—
|
Total dividends and distributions
|
(0.563)
|
(0.310)
|
(0.191)
|
(0.034)
|
|
|
|
|
|
Net asset value, end of period
|
$11.170
|
$10.920
4
|
$10.830
|
$10.370
|
|
|
|
|
|
Total return
5
|
7.68%
|
3.76%
4
|
6.44%
|
0.90%
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$2
|
$2
|
$2
|
$2
|
Ratio of expenses to average net assets
|
1.15%
|
1.15%
|
1.15%
|
1.15%
|
Ratio of expenses to average net assets prior to fees waived
|
1.64%
|
1.76%
|
2.55%
|
4.92%
|
Ratio of net investment income to average net assets
|
1.02%
|
1.61%
|
1.79%
|
3.83%
|
Ratio of net investment income to average net assets
prior to fees waived
|
0.53%
|
1.00%
|
0.39%
|
0.06%
|
Portfolio turnover
|
517%
|
503%
|
528%
|
346%
6
|
1
|
During the period ended July 31, 2010, the Fund changed its fiscal year end from October to July. Ratios have been annualized and portfolio turnover and total return have not been annualized.
|
2
|
Date of commencement of operations; ratios have been annualized and total return has not been annualized.
|
3
|
The average shares outstanding method has been applied for per share information.
|
4
|
Includes adjustments from the period ending July 31, 2010 in the amount of $13 (or $0.063 per share) which impacted total return by -0.59%. The adjustment is to correct a mis-allocation of distributions among share classes which had no impact on distribution amounts reported and paid to shareholders.
|
5
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect.
|
6
|
Portfolio turnover is representative of the Fund for the entire year.
|
|
|
Year ended
|
|
Period from
|
Institutional Class Shares
|
7/31/12
|
7/30/11
|
11/1/09 to 7/31/10
1
|
9/30/09
2
to 10/31/09
|
Net asset value, beginning of period
|
$10.980
|
$10.830
|
$10.370
|
$10.310
|
Income from investment operations:
|
|
|
|
|
Net investment income
3
|
0.168
|
0.227
|
0.181
|
0.039
|
Net realized and unrealized gain
|
0.708
|
0.285
|
0.512
|
0.060
|
Total from investment operations
|
0.876
|
0.512
|
0.693
|
0.099
|
|
|
|
|
|
Less dividends and distributions from:
|
|
|
|
|
Net Investment Income
|
(0.234)
|
(0.278)
|
(0.233)
|
(0.039)
|
Net realized gain
|
(0.382)
|
(0.084)
|
—
|
—
|
Total dividends and distributions
|
(0.616)
|
(0.362)
|
(0.233)
|
(0.039)
|
|
|
|
|
|
Net asset value, end of period
|
$11.240
|
$10.980
|
$10.830
|
$10.370
|
|
|
|
|
|
Total return
4
|
8.25%
|
4.83%
|
6.76%
|
0.96%
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$24,937
|
$21,350
|
$15,895
|
$2
|
Ratio of expenses to average net assets
|
0.65%
|
0.65%
|
0.65%
|
0.65%
|
Ratio of expenses to average net assets prior to fees waived
|
1.04%
|
1.16%
|
1.95%
|
4.32%
|
Ratio of net investment income to average net assets
|
1.52%
|
2.11%
|
2.29%
|
4.33%
|
Ratio of net investment income to average net assets
prior to fees waived
|
1.13%
|
1.60%
|
0.99%
|
0.66%
|
Portfolio turnover
|
517%
|
503%
|
528%
|
346%
5
|
1
|
During the period ended July 31, 2010, the Fund changed its fiscal year end from October to July. Ratios have been annualized and portfolio turnover and total return have not been annualized.
|
2
|
Date of commencement of operations; ratios have been annualized and total return has not been annualized.
|
3
|
The average shares outstanding method has been applied for per share information.
|
4
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect.
|
5
|
Portfolio turnover is representative of the Fund for the entire year.
|
How to read the financial highlights
Net investment income (loss)
Net investment income (loss) includes dividend and interest income earned from a fund's investments; it is calculated after expenses have been deducted.
Net realized and unrealized gain (loss) on investments
A realized gain occurs when we sell an investment at a profit, while a realized loss occurs when we sell an investment at a loss. When an investment increases or decreases in value but we do not sell it, we record an unrealized gain or loss. The amount of realized gain per share, if any, that we pay to shareholders would be listed under "Less dividends and distributions from: Net realized gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an investment in a fund. In calculating this figure for the financial highlights table, we include applicable fee waivers, exclude front-end sales charges and contingent deferred sales charges, and assume the shareholder has reinvested all dividends and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio, less any liabilities, that are attributable to that class of the fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for operating expenses and management fees. These expenses include accounting and administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income (loss) to average net assets
We determine this ratio by dividing net investment income (loss) by average net assets.
Portfolio turnover
This figure tells you the amount of trading activity in a fund's portfolio. A turnover rate of 100% would occur if, for example, a fund bought and sold all of the securities in its portfolio once in the course of a year or frequently traded a single security. A high rate of portfolio turnover in any year may increase brokerage commissions paid and could generate taxes for shareholders on realized investment gains.
Additional information
Contact information
-
Website:
delawareinvestments.com
-
Shareholder Service Center: 800 523-1918 (representatives available weekdays from 8:30 a.m. to 6:00 p.m. Eastern time)
-
For fund information, literature, price, yield, and performance figures.
-
For information on existing regular investment accounts and retirement plan accounts including wire investments, wire redemptions, telephone redemptions, and telephone exchanges.
-
Automated telephone service: 800 523-1918 (seven days a week, 24 hours a day)
-
Written correspondence: P.O. Box 9876, Providence, RI 02940-8076 or 4400 Computer Drive, Westborough, MA 01581-1722.
Additional information about the Fund's investments
is available in its annual and semiannual shareholder reports. In the Fund's annual shareholder report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during the period covered by the report. You can find more information about the Fund in its current SAI, which is filed electronically with the SEC, and which is legally a part of this Prospectus (it is incorporated by reference). To receive a free copy of the SAI, or the annual or semiannual report, or if you have any questions about investing in the Fund, write to us at P.O. Box 9876, Providence, RI 02940-8076 by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 by overnight courier service, or call toll-free 800 523-1918. The SAI and shareholder reports are available, free of charge, through the Fund's website (delawareinvestments.com). You may also obtain additional information about the Fund from your financial advisor.
You can find reports and other information about the Fund on the EDGAR database on the SEC website (sec.gov). You can get copies of this information, after paying a duplication fee, by e-mailing the SEC at publicinfo@sec.gov or by writing to the Public Reference Section of the SEC,
100 F Street, NE, Washington, DC 20549-1520. Information about the Fund, including its SAI, can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. For information on the Public Reference Room, call
the SEC at 202 551-8090.
PR-592 [7/12] PDF 18235 [11/12]
Investment Company Act file number: 811-03363
|
Prospectus
Fixed income
November 28, 2012
Nasdaq ticker symbols
|
Delaware Corporate Bond Fund
|
|
Class A
|
DGCAX
|
Class B
|
DGCBX
|
Class C
|
DGCCX
|
Class R
|
DGCRX
|
Institutional Class
|
DGCIX
|
Delaware Extended Duration Bond Fund
|
|
Class A
|
DEEAX
|
Class B
|
DEEBX
|
Class C
|
DEECX
|
Class R
|
DEERX
|
Institutional Class
|
DEEIX
|
The U.S. Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
Get shareholder reports and prospectuses online instead of in the mail.
Visit delawareinvestments.com/edelivery.
Fund summaries
Delaware Corporate Bond Fund
What is the Fund's investment objective?
Delaware Corporate Bond Fund seeks to provide investors with total return.
What are the Fund's fees and expenses?
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. 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 advisor, in the Fund's prospectus under the section entitled "About your account," and in the Fund's statement of additional information under the section entitled "Purchasing shares."
Shareholder fees (fees paid directly from your investment)
|
Class
|
A
|
B
|
C
|
R
|
Inst.
|
Maximum sales charge (load) imposed on purchases as
a percentageof offering price
|
4.50%
|
none
|
none
|
none
|
none
|
Maximum contingent deferred sales charge (load) as
a percentage of original purchase price or redemption price, whichever is lower
|
none
|
4.00%
1
|
1.00%
1
|
none
|
none
|
Annual fund operating expenses (expenses that you pay each year as a percentage of the value of your investment)
|
Class
|
A
|
B
|
C
|
R
|
Inst.
|
Management fees
|
0.48%
|
0.48%
|
0.48%
|
0.48%
|
0.48%
|
Distribution and service (12b-1) fees
|
0.30%
|
1.00%
|
1.00%
|
0.60%
|
none
|
Other expenses
|
0.23%
|
0.23%
|
0.23%
|
0.23%
|
0.23%
|
Total annual fund operating expenses
|
1.01%
|
1.71%
|
1.71%
|
1.31%
|
0.71%
|
Fee waivers and expense reimbursements
|
(0.07%)
2
|
(0.02%)
2
|
(0.02%)
2
|
(0.12%)
2
|
(0.02%)
2
|
Total annual fund operating expenses after fee waivers and expense reimbursements
|
0.94%
|
1.69%
|
1.69%
|
1.19%
|
0.69%
|
1
|
If you redeem Class B shares during the first year after you buy them, you will pay a contingent deferred sales charge (CDSC) of 4.00%, which declines to 3.00% during the second year, 2.25% during the third year, 1.50% during the fourth and fifth years, 1.00% during the sixth year, and 0% thereafter. Class C shares redeemed within one year of purchase are subject to a 1.00% CDSC.
|
2
|
The Fund's investment manager, Delaware Management Company (Manager), is contractually waiving its investment advisory fees and/or paying expenses (excluding any 12b-1 fees, taxes, interest, inverse floater program expenses, 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) to the extent necessary to prevent total annual fund operating expenses from exceeding 0.69% of the Fund's average daily net assets from November 28, 2012 through November 28, 2013. The Fund's distributor, Delaware Distributors, L.P. (Distributor), has also contracted to limit the Class A and Class R shares' 12b-1 fees from November 28, 2012 through November 28, 2013 to no more than 0.25% and 0.50% of their respective average daily net assets. These waivers and reimbursements may only be terminated by agreement of the Manager and the Distributor, as applicable, and the Fund.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and reflects the applicable waivers and reimbursements for the 1-year contractual period and the total operating expenses without waivers for years 2 through 10. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
|
|
(if not
|
|
(if not
|
|
|
|
|
|
redeemed)
|
|
redeemed)
|
|
|
|
Class
|
A
|
B
|
B
|
C
|
C
|
R
|
Inst.
|
1 year
|
$542
|
$172
|
$572
|
$172
|
$272
|
$121
|
$70
|
3 years
|
$750
|
$537
|
$762
|
$537
|
$537
|
$403
|
$225
|
5 years
|
$976
|
$926
|
$1,076
|
$926
|
$926
|
$707
|
$393
|
10 years
|
$1,625
|
$1,832
|
$1,832
|
$2,018
|
$2,018
|
$1,569
|
$881
|
Portfolio turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 202% of the average value of its portfolio.
What are the Fund's principal investment strategies?
The Fund invests primarily in corporate bonds. Our focus is on corporate bonds that have investment grade credit ratings from a nationally recognized statistical rating organization (NRSRO). The bonds we select for the portfolio are typically rated BBB- and above by Standard & Poor's (S&P), Baa3 and above by Moody's Investors Service, Inc. (Moody's), or similarly rated by another NRSRO. We may also invest in unrated bonds, if we believe their credit quality is comparable to those that have investment grade ratings.
The Fund may also invest up to 20% of its net assets in high yield corporate bonds ("junk bonds"). In addition, the Fund may invest up to 35% of its total assets in foreign securities, but the Fund's total non-U.S.-dollar currency exposure will be limited, in the aggregate, to no more than 25% of net assets.
The average portfolio duration of the Fund will generally vary within two years (plus or minus) of the current average duration of the Barclays U.S. Corporate Investment Grade Index, which as of October 31, 2012, was 7.25 years. Duration measures a bond's sensitivity to interest rates by indicating the approximate change in a bond or bond fund's price given a 1% change in interest rates.
Under normal circumstances, the Fund will invest at least 80% of its net assets in corporate bonds. This policy is not a fundamental investment policy and can be changed without shareholder approval. However, shareholders will be given notice at least 60 days prior to any such change.
What are the principal risks of investing in the Fund?
Investing in any mutual fund involves the risk that you may lose part or all of the money you invest. Over time, the value of your investment in the Fund will increase and decrease according to changes in the value of the securities in the Fund's portfolio. Principal risks include:
Investments not guaranteed by the Manager or its affiliates
— Investments in the Fund are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies, including their subsidiaries or related companies (Macquarie Group), and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Fund, the repayment of capital from the Fund, or any particular rate of return.
Market risk
— The risk that all or a majority of the securities in a certain market — such as the stock or bond market — will decline in value because of factors such as adverse political or economic conditions, future expectations, investor confidence, or heavy institutional selling.
Interest rate risk
— The risk that securities will decrease in value if interest rates rise. This risk is generally associated with bonds.
Credit risk
— The risk that an issuer of a debt security, including a governmental issuer, may be unable to make interest payments and repay principal in a timely manner.
High yield (junk bond) risk
— The risk that high yield securities, commonly known as "junk bonds," are subject to reduced creditworthiness of issuers; increased risk of default and a more limited and less liquid secondary market; and greater price volatility and risk of loss of income and principal than are higher rated securities. High yield bonds are sometimes issued by municipalities with less financial strength and therefore less ability to make projected debt payments on the bonds.
Bank loans and other indebtedness
risk
— The risk that the portfolio will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower and the lending institution.
Foreign risk
— The risk that foreign securities (particularly in emerging markets) may be adversely affected by political instability; changes in currency exchange rates; inefficient markets and higher transaction costs; foreign economic conditions; or inadequate or different regulatory and accounting standards.
Forward foreign currency risk
— The use of forward foreign currency exchange contracts may substantially change a fund's exposure to currency exchange rates and could result in losses to the fund if currencies do not perform as the Manager expects. The use of these investments as a hedging technique to reduce a fund's exposure to currency risks may also reduce its ability to benefit from favorable changes in currency exchange rates.
Liquidity risk
— The possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them.
Derivatives risk
— Derivative contracts, such as options, futures, and swaps, may involve additional expenses (such as the payment of premiums) and are subject to significant loss if a security, or a securities index to which a derivative contract is associated, moves in the opposite direction from what the portfolio manager anticipated. Derivative contracts are also subject to the risk that the counterparty may fail to perform its obligations under the contract due to financial difficulties (such as a bankruptcy or reorganization).
Government and regulatory risk
— The risk that governments or regulatory authorities have, from time to time, taken or considered actions that could adversely affect various sectors of the securities markets.
How has Delaware Corporate Bond Fund performed?
The bar chart and table below provide some indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for the 1-, 5-, and 10-year or lifetime periods compare with those of a broad measure of market performance. The Fund's past performance (before and after taxes) is not necessarily an indication of how it will perform in the future. The returns reflect expense caps in effect during certain of these periods. The returns would be lower without the expense caps. You may obtain the Fund's most recently available month-end performance by calling 800 523-1918 or by visiting our website at delawareinvestments.com/performance.
Year-by-year total return (Class A)*
As of September 30, 2012, Delaware Corporate Bond Fund's Class A shares had a calendar year-to-date return of 12.02%. During the periods illustrated in this bar chart, Class A's highest quarterly return was 14.62% for the quarter ended June 30, 2009 and its lowest quarterly return was -6.83% for the quarter ended September 30, 2008. The maximum Class A sales charge of 4.50%, which is normally deducted when you purchase shares, is not reflected in the highest/lowest quarterly returns or in the bar chart. If this sales charge were included, the returns would be less than those shown. The average annual returns in the table below do include the sales charge.
Average annual total returns for periods ended December 31, 2011*
|
1 year
|
5 years
|
10 years or lifetime
|
Class A return before taxes
|
2.41%
|
6.79%
|
7.27%
|
Class A return after taxes on distributions
|
0.03%
|
4.32%
|
4.88%
|
Class A return after taxes on distributions and sale of Fund shares
|
1.75%
|
4.35%
|
4.82%
|
Class B return before taxes
|
2.70%
|
6.80%
|
7.12%
|
Class C return before taxes
|
5.51%
|
6.98%
|
6.97%
|
Class R return before taxes (lifetime:
6/2/03-12/31/11)
|
7.04%
|
7.52%
|
6.33%
|
Institutional Class return before taxes
|
7.57%
|
8.09%
|
8.04%
|
Barclays U.S. Corporate Investment Grade
Index (reflects no deduction for fees, expenses, or taxes)
|
8.15%
|
6.82%
|
6.36%
|
* Because the Fund has combined its retail and institutional prospectuses, the bar chart and the after tax returns in the average annual total returns table show the performance of the Fund's Class A shares.
After-tax performance is presented only for Class A shares of the Fund. The after-tax returns for other Fund classes may vary. Actual after-tax returns depend on the investor's individual tax situation and may differ from the returns shown. After-tax returns are not relevant for shares held in tax-deferred investment vehicles such as employer-sponsored 401(k) plans and individual retirement accounts (IRAs). The after-tax returns shown are calculated using the highest individual federal marginal income tax rates in effect during the periods presented and do not reflect the impact of state and local taxes.
Who manages the Fund?
Delaware Management Company, a series of Delaware Management Business Trust
Portfolio managers
|
Title with Delaware Management Company
|
Start date on the Fund
|
Thomas H. Chow, CFA
|
Senior Vice President, Senior Portfolio Manager
|
May 2007
|
Roger A. Early, CPA, CFA, CFP
|
Senior Vice President, Co-Chief Investment Officer–Total Return Fixed Income Strategy
|
May 2007
|
Kevin P. Loome, CFA
|
Senior Vice President, Senior Portfolio Manager, Head of High Yield Investments
|
August 2007
|
Purchase and redemption of Fund shares
You may purchase or redeem shares of the Fund on any day that the New York Stock Exchange (NYSE) is open for business (Business Day). Shares may be purchased or redeemed: through your financial advisor; through the Fund's website at delawareinvestments.com; by calling 800 523-1918; by regular mail (c/o Delaware Investments, P.O. Box 9876, Providence, RI 02940-8076); by overnight courier service (c/o Delaware Service Center, 4400 Computer Drive, Westborough, MA 01581-1722); or by wire.
For Class A and Class C shares, the minimum initial investment is generally $1,000 and subsequent investments can be made for as little as $100. The minimum initial investment for IRAs, Uniform Gifts/Transfers to Minors Act accounts, direct deposit purchase plans and automatic investment plans is $250 and through Coverdell Education Savings Accounts is $500, and subsequent investments in these accounts can be made for as little as $25. For Class R and Institutional Class shares, there is no minimum initial purchase requirement, but certain eligibility requirements must be met. The eligibility requirements are described in the prospectus under "Choosing a share class" and on the Fund's website. We may reduce or waive the minimums or eligibility requirements in certain cases. No new or subsequent investments currently are allowed in the Fund's Class B shares, except through a reinvestment of dividends or capital gains or permitted exchanges.
Tax information
The Fund's distributions generally are taxable to you as ordinary income, capital gains, or some combination of both, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an IRA.
Payments to broker/dealers and other
financial intermediaries
If you purchase shares of the Fund through a broker/dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker/dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.
Delaware Extended Duration Bond Fund
What is the Fund's investment objective?
Delaware Extended Duration Bond Fund seeks to provide investors with total return.
What are the Fund's fees and expenses?
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. 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 advisor, in the Fund's prospectus under the section entitled "About your account," and in the Fund's statement of additional information under the section entitled "Purchasing shares."
Shareholder fees (fees paid directly from your investment)
|
Class
|
A
|
B
|
C
|
R
|
Inst.
|
Maximum sales charge (load) imposed on purchases as
a percentageof offering price
|
4.50%
|
none
|
none
|
none
|
none
|
Maximum contingent deferred sales charge (load) as
a percentage of original purchase price or redemption price, whichever is lower
|
none
|
4.00%
1
|
1.00%
1
|
none
|
none
|
Annual fund operating expenses (expenses that you pay each year as a percentage of the value of your investment)
|
Class
|
A
|
B
|
C
|
R
|
Inst.
|
Management fees
|
0.54%
|
0.54%
|
0.54%
|
0.54%
|
0.54%
|
Distribution and service (12b-1) fees
|
0.30%
|
1.00%
|
1.00%
|
0.60%
|
none
|
Other expenses
|
0.22%
|
0.22%
|
0.22%
|
0.22%
|
0.22%
|
Total annual fund operating expenses
|
1.06%
|
1.76%
|
1.76%
|
1.36%
|
0.76%
|
Fee waivers and expense reimbursements
|
(0.11%)
2
|
(0.06%)
2
|
(0.06%)
2
|
(0.16%)
2
|
(0.06%)
2
|
Total annual fund operating expenses after fee waivers and expense reimbursements
|
0.95%
|
1.70%
|
1.70%
|
1.20%
|
0.70%
|
1
|
If you redeem Class B shares during the first year after you buy them, you will pay a contingent deferred sales charge (CDSC) of 4.00%, which declines to 3.00% during the second year, 2.25% during the third year, 1.50% during the fourth and fifth years, 1.00% during the sixth year, and 0% thereafter. Class C shares redeemed within one year of purchase are subject to a 1.00% CDSC.
|
2
|
The Fund's investment manager, Delaware Management Company (Manager), is contractually waiving its investment advisory fees and/or paying expenses (excluding any 12b-1 fees, taxes, interest, inverse floater program expenses, 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) to the extent necessary to prevent total annual fund operating expenses from exceeding 0.70% of the Fund's average daily net assets from November 28, 2012 through November 28, 2013. The Fund's distributor, Delaware Distributors, L.P. (Distributor), has also contracted to limit the Class A and Class R shares' 12b-1 fees from November 28, 2012 through November 28, 2013 to no more than 0.25% and 0.50% of their respective average daily net assets. These waivers and reimbursements may only be terminated by agreement of the Manager and the Distributor, as applicable, and the Fund.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and reflects the applicable waivers and reimbursements for the 1-year contractual period and the total operating expenses without waivers for years 2 through 10. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
|
|
(if not
|
|
(if not
|
|
|
|
|
|
redeemed)
|
|
redeemed)
|
|
|
|
Class
|
A
|
B
|
B
|
C
|
C
|
R
|
Inst.
|
1 year
|
$543
|
$173
|
$573
|
$173
|
$273
|
$122
|
$72
|
3 years
|
$762
|
$548
|
$773
|
$548
|
$548
|
$415
|
$237
|
5 years
|
$998
|
$949
|
$1,099
|
$949
|
$949
|
$729
|
$416
|
10 years
|
$1,676
|
$1,883
|
$1,883
|
$2,068
|
$2,068
|
$1,621
|
$937
|
Portfolio turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 172% of the average value of its portfolio.
What are the Fund's principal investment strategies?
The Fund invests primarily in corporate bonds. Our focus is on corporate bonds that have investment grade credit ratings from a nationally recognized statistical rating organization (NRSRO). The bonds we select for the portfolio are typically rated BBB- and above by Standard & Poor's (S&P), Baa3 and above by Moody's Investors Service, Inc. (Moody's), or similarly rated by another NRSRO. We may also invest in unrated bonds, if we believe their credit quality is comparable to those that have investment grade ratings.
The Fund may also invest up to 20% of its net assets in high yield corporate bonds ("junk bonds"). In addition, the Fund may invest up to 35% of its total assets in foreign securities, but the Fund's total non-U.S.-dollar currency exposure will be limited, in the aggregate, to no more than 25% of net assets.
The average portfolio duration of the Fund will generally vary within two years (plus or minus) of the current average duration of the Barclays Long U.S. Corporate Index, which as of October 31, 2012, was 14 years. Duration measures a bond's sensitivity to interest rates by indicating the approximate change in a bond or bond fund's price given a 1% change in interest rates.
Under normal circumstances, the Fund will invest at least 80% of its net assets in corporate bonds. This policy is not a fundamental investment policy and can be changed without shareholder approval. However, shareholders will be given notice at least 60 days prior to any such change.
What are the principal risks of investing in the Fund?
Investing in any mutual fund involves the risk that you may lose part or all of the money you invest. Over time, the value of your investment in the Fund will increase and decrease according to changes in the value of the securities in the Fund's portfolio. Principal risks include:
Investments not guaranteed by the Manager or its affiliates
— Investments in the Fund are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies, including their subsidiaries or related companies (Macquarie Group), and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Fund, the repayment of capital from the Fund, or any particular rate of return.
Market risk
— The risk that all or a majority of the securities in a certain market — such as the stock or bond market — will decline in value because of factors such as adverse political or economic conditions, future expectations, investor confidence, or heavy institutional selling.
Interest rate risk
— The risk that securities will decrease in value if interest rates rise. This risk is generally associated with bonds.
Credit risk
— The risk that an issuer of a debt security, including a governmental issuer, may be unable to make interest payments and repay principal in a timely manner.
High yield (junk bond) risk
— The risk that high yield securities, commonly known as "junk bonds," are subject to reduced creditworthiness of issuers; increased risk of default and a more limited and less liquid secondary market; and greater price volatility and risk of loss of income and principal than are higher rated securities. High yield bonds are sometimes issued by municipalities with less financial strength and therefore less ability to make projected debt payments on the bonds.
Bank loans and other indebtedness
risk
— The risk that the portfolio will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower and the lending institution.
Foreign risk
— The risk that foreign securities (particularly in emerging markets) may be adversely affected by political instability; changes in currency exchange rates; inefficient markets and higher transaction costs; foreign economic conditions; or inadequate or different regulatory and accounting standards.
Forward foreign currency risk
— The use of forward foreign currency exchange contracts may substantially change a fund's exposure to currency exchange rates and could result in losses to the fund if currencies do not perform as the Manager expects. The use of these investments as a hedging technique to reduce a fund's exposure to currency risks may also reduce its ability to benefit from favorable changes in currency exchange rates.
Liquidity risk
— The possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them.
Derivatives risk
— Derivative contracts, such as options, futures, and swaps, may involve additional expenses (such as the payment of premiums) and are subject to significant loss if a security, or a securities index to which a derivative contract is associated, moves in the opposite direction from what the portfolio manager anticipated. Derivative contracts are also subject to the risk that the counterparty may fail to perform its obligations under the contract due to financial difficulties (such as a bankruptcy or reorganization).
Government and regulatory risk
— The risk that governments or regulatory authorities have, from time to time, taken or considered actions that could adversely affect various sectors of the securities markets.
How has Delaware Extended Duration Bond Fund
performed?
The bar chart and table below provide some indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for the 1-, 5-, and 10-year or lifetime periods compare with those of a broad measure of market performance. The Fund's past performance (before and after taxes) is not necessarily an indication of how it will perform in the future. The returns reflect expense caps in effect during certain of these periods. The returns would be lower without the expense caps. You may obtain the Fund's most recently available month-end performance by calling 800 523-1918 or by visiting our website at delawareinvestments.com/performance.
Year-by-year total return (Class A)*
As of September 30, 2012, the Fund's Class A shares had a calendar year-to-date return of 13.80%. During the periods illustrated in this bar chart, Class A's highest quarterly return was 14.88% for the quarter ended June 30, 2009 and its lowest quarterly return was -8.61% for the quarter ended September 30, 2008. The maximum Class A sales charge of 4.50%, which is normally deducted when you purchase shares, is not reflected in the highest/lowest quarterly returns or in the bar chart. If this fee were included, the returns would be less than those shown. The average annual returns in the table below do include the sales charge.
Average annual total returns for periods ended December 31, 2011*
|
1 year
|
5 years
|
10 years or lifetime
|
Class A return before taxes
|
11.22%
|
9.72%
|
9.44%
|
Class A return after taxes on distributions
|
8.14%
|
7.04%
|
6.81%
|
Class A return after taxes on distributions and sale of Fund shares
|
7.60%
|
6.76%
|
6.59%
|
Class B return before taxes
|
11.66%
|
9.68%
|
9.27%
|
Class C return before taxes
|
14.64%
|
9.92%
|
9.13%
|
Class R return before taxes (lifetime:
10/3/05-12/31/11)
|
16.20%
|
10.45%
|
9.15%
|
Institutional Class return before taxes
|
16.81%
|
10.99%
|
10.21%
|
Barclays Long U.S. Corporate Index (reflects no deduction for fees, expenses, or taxes)
|
15.91%
|
8.51%
|
7.98%
|
* Because the Fund has combined its retail and institutional prospectuses, the bar chart and the after tax returns in the average annual total returns table show the performance of the Fund's Class A shares.
After-tax performance is presented only for Class A shares of the Fund. The after-tax returns for other Fund classes may vary. Actual after-tax returns depend on the investor's individual tax situation and may differ from the returns shown. After-tax returns are not relevant for shares held in tax-deferred investment vehicles such as employer-sponsored 401(k) plans and individual retirement accounts (IRAs). The after-tax returns shown are calculated using the highest individual federal marginal income tax rates in effect during the periods presented and do not reflect the impact of state and local taxes.
Who manages the Fund?
Investment manager
Delaware Management Company, a series of Delaware Management Business Trust
Portfolio managers
|
Title with Delaware Management Company
|
Start date on the Fund
|
Thomas H. Chow, CFA
|
Senior Vice President, Senior Portfolio Manager
|
May 2007
|
Roger A. Early, CPA, CFA, CFP
|
Senior Vice President, Co-Chief Investment Officer–Total Return Fixed Income Strategy
|
May 2007
|
Kevin P. Loome, CFA
|
Senior Vice President, Senior Portfolio Manager, Head of High Yield Investments
|
August 2007
|
Purchase and redemption of Fund shares
You may purchase or redeem shares of the Fund on any day that the New York Stock Exchange (NYSE) is open for business (Business Day). Shares may be purchased or redeemed: through your financial advisor; through the Fund's website at delawareinvestments.com; by calling 800 523-1918; by regular mail (c/o Delaware Investments, P.O. Box 9876, Providence, RI 02940-8076); by overnight courier service (c/o Delaware Service Center, 4400 Computer Drive, Westborough, MA 01581-1722); or by wire.
For Class A and Class C shares, the minimum initial investment is generally $1,000 and subsequent investments can be made for as little as $100. The minimum initial investment for IRAs, Uniform Gifts/Transfers to Minors Act accounts, direct deposit purchase plans and automatic investment plans is $250 and through Coverdell Education Savings Accounts is $500, and subsequent investments in these accounts can be made for as little as $25. For Class R and Institutional Class shares, there is no minimum initial purchase requirement, but certain eligibility requirements must be met. The eligibility requirements are described in the prospectus under "Choosing a share class" and on the Fund's website. We may reduce or waive the minimums or eligibility requirements in certain cases. No new or subsequent investments currently are allowed in the Fund's Class B shares, except through a reinvestment of dividends or capital gains or permitted exchanges.
Tax information
The Fund's distributions generally are taxable to you as ordinary income, capital gains, or some combination of both, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an IRA.
Payments to broker/dealers and other
financial intermediaries
If you purchase shares of the Fund through a broker/dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker/dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.
How we manage the Funds
We take a disciplined approach to investing, combining investment strategies and risk management techniques that we believe can help shareholders meet their goals.
Our investment strategies
The Manager analyzes economic and market conditions, seeking to identify the securities or market sectors that we think are the best investments for the Funds. The following are descriptions of how the portfolio manager pursues the Funds' investment goals.
The Funds strive to provide shareholders with total return through a combination of income and capital appreciation from the bonds in their portfolios. We invest primarily in corporate bonds, with a strong emphasis on those that are rated in the four highest credit categories by an NRSRO. We may also invest in high yielding, lower-quality corporate bonds (also called "junk bonds"). These may involve greater risk because the companies issuing the bonds have lower credit ratings and may have difficulty making interest and principal payments. We may invest up to 35% of each Fund's total assets in foreign securities, but each Fund's total non-U.S.-dollar currency exposure will be limited, in the aggregate, to no more than 25% of net assets. Securities of foreign issuers are also subject to certain risks such as political and economic instability, currency fluctuations, and less stringent regulatory standards.
In selecting bonds, we conduct a careful analysis of economic factors, industry-related information, and the underlying financial stability of the company issuing the bond.
Choosing between Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund
We manage both Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund using the same fundamental strategy. The main difference between the two Funds is in their return potential and the corresponding risk associated with each Fund. Delaware Corporate Bond Fund is the more conservative of the two Funds and might be appropriate for investors who desire less potential for fluctuation of their share price. Delaware Corporate Bond Fund's average portfolio duration generally varies within two years (plus or minus) of the current average duration of the Barclays U.S. Corporate Investment Grade Index. Delaware Extended Duration Bond Fund's average portfolio duration generally varies within two years (plus or minus) of the current average duration of the Barclays Long U.S. Corporate Index. This longer duration gives Delaware Extended Duration Bond Fund greater income potential as well as greater appreciation potential when interest rates decline.
Each Fund's investment objective is nonfundamental. This means that a Fund's Board of Trustees (Board) may change the objective without obtaining shareholder approval. If the objective were changed, a Fund would notify shareholders at least 60 days before the change in the objective became effective.
The securities in which the Funds typically invest
Fixed income securities offer the potential for greater income payments than stocks, and also may provide capital appreciation. Please see the Funds' statement of additional information (SAI) for additional information about certain of the securities described below as well as other securities in which the Funds may invest.
Corporate bonds
Corporate bonds are debt obligations issued by a corporation.
Debt securities within the top three rating categories comprise what are known as high-grade bonds and are regarded as having a strong ability to pay principal and interest. Securities in the fourth rating category are known as medium-grade bonds and are regarded as having an adequate capacity to pay principal and interest but with greater vulnerability to adverse economic conditions and speculative characteristics.
How the Funds use them:
Under normal circumstances, each Fund will invest at least 80% of its net assets in corporate bonds.
High yield corporate bonds (junk bonds)
High yield corporate bonds are debt obligations issued by a corporation and rated lower than BBB- by S&P and Baa3 by Moody's, or similarly rated by another NRSRO. High yield bonds, also known as "junk bonds," are issued by corporations that have lower credit quality and may have difficulty repaying principal and interest.
How the Funds use them:
Each Fund may invest up to 20% of its net assets in high yield corporate bonds.
The Manager carefully evaluates an individual company's financial situation, its management, the prospects for its industry, and the technical factors related to its bond offering. Our goal is to identify those companies that we believe will be able to repay their debt obligations in spite of poor ratings. We may invest in unrated bonds if we believe their credit quality is comparable to the rated bonds we are permitted to invest in. Unrated bonds may be more speculative in nature than rated bonds.
U.S. government securities
Direct U.S. obligations include bills, notes, and bonds, as well as other debt securities, issued by the U.S. Treasury, and securities of U.S. government agencies or instrumentalities. U.S. Treasury securities are backed by the "full faith and credit" of the United States. Securities issued or guaranteed by federal agencies and U.S. government-sponsored instrumentalities may or may not be backed by the "full faith and credit" of the United States. In the case of securities not backed by the "full faith and credit" of the United States, investors in such securities look principally to the agency or instrumentality issuing or guaranteeing the obligation for the ultimate repayment.
How the Funds use them:
Each Fund may invest in direct U.S. government obligations; however, these securities will typically be a smaller percentage of the portfolio because they generally do not offer as high a level of current income as other fixed income securities in which the Funds may invest.
Zero coupon and pay-in-kind bonds
Zero coupon bonds are debt obligations that do not entitle the holder to any periodic payments of interest prior to maturity or a specified date when the securities begin paying current interest, and therefore are issued and traded at a discount from their face amounts or par value. Pay-in-kind (PIK) bonds pay interest through the issuance to holders of additional securities.
How the Funds use them:
Each Fund may invest in zero coupon bonds and PIK bonds, consistent with its investment objective. The Manager expects PIK bonds to be a less significant component of our strategy. The market prices of these bonds are generally more volatile than the market prices of securities that pay interest periodically and are likely to react to changes in interest rates to a greater degree than interest-paying bonds having similar maturities and credit quality. They may have certain tax consequences, which, under certain conditions, could be adverse to the Funds.
Foreign corporate and government securities
Foreign corporate and government securities are debt obligations issued by a foreign corporation and securities issued by foreign governments.
A supranational entity is an entity established or financially supported by the national governments of one or more countries. The International Bank for Reconstruction and Development (more commonly known as the World Bank) is one example of a supranational entity.
How the Funds use them
: Each Fund may invest up to 35% of its total assets in securities of issuers domiciled in foreign countries including both established countries and those with emerging markets, but each Fund's total non-U.S.-dollar currency exposure will be limited, in the aggregate, to no more than 25% of net assets.
Corporate commercial paper
Corporate commercial paper is a short-term debt obligation with maturities ranging from 2 to 270 days, issued by companies.
How the Funds use them:
Each Fund may invest in commercial paper that is rated P-1 or P-2 by Moody's and/or A-1 or A-2 by S&P. They may also invest in unrated commercial paper if the Manager determines its quality is comparable to these quality ratings.
Short-term debt or money market instruments
These instruments include: (1) time deposits, certificates of deposit, and banker's acceptances issued by U.S. banks; (2) time deposits and certificates of deposit issued by foreign banks; (3) commercial paper of the highest quality rating; (4) short-term debt obligations with the highest quality rating; (5) U.S. government securities; and (6) repurchase agreements collateralized by those instruments.
How the Funds use them:
Each Fund may invest in these instruments either as a means to achieve its investment objective or, more commonly, as temporary defensive instruments or as a pending investment in the Funds' principal investment securities. When investing all or a significant portion of a Fund's assets in these instruments, the Fund may not be able to achieve its investment objective.
Repurchase agreements
A repurchase agreement is an agreement between a buyer of securities, such as a fund, and a seller of securities, in which the seller agrees to buy the securities back within a specified time at the same price the buyer paid for them, plus an amount equal to an agreed-upon interest rate. Repurchase agreements are often viewed as equivalent to cash.
How the Funds use them:
Typically, each Fund uses repurchase agreements as a short-term investment for its cash position. In order to enter into these repurchase agreements, a Fund must have collateral of at least 102% of the repurchase price. A Fund will only enter into repurchase agreements in which the collateral comprises U.S. government securities. In the discretion of the Manager, a Fund may invest overnight cash balances in short-term discount notes issued or guaranteed by the U.S. government, its agencies or instrumentalities or government-sponsored enterprises.
Restricted securities
Restricted securities are privately placed securities whose resale is restricted under U.S. securities laws.
How the Funds use them:
Each Fund may invest in privately placed securities, including those that are eligible for resale only among certain institutional buyers without registration, commonly known as "Rule 144A Securities." Restricted securities that are determined to be illiquid may not exceed a Fund's limit on investments in illiquid securities.
Interest rate swap, index swap, and credit default swap agreements
In an interest rate swap, a fund receives payments from another party based on a variable or floating interest rate, in return for making payments based on a fixed interest rate. An interest rate swap can also work in reverse with a fund receiving payments based on a fixed interest rate and making payments based on a variable or floating interest rate.
In an index swap, a fund receives gains or incurs losses based on the total return of a specified index, in exchange for making interest payments to another party. An index swap can also work in reverse with a fund receiving interest payments from another party in exchange for movements in the total return of a specified index.
In a credit default swap, a fund may transfer the financial risk of a credit event occurring (a bond default, bankruptcy, or restructuring, for example) on a particular security or basket of securities to another party by paying that party a periodic premium; likewise, a fund may assume the financial risk of a credit event occurring on a particular security or basket of securities in exchange for receiving premium payments from another party.
Interest rate swaps, index swaps, and credit default swaps may be considered illiquid.
How the Funds use them:
We may use interest rate swaps to adjust the Funds' sensitivity to interest rates or to hedge against changes in interest rates. Index swaps may be used to gain exposure to markets that these Funds invest in, such as the corporate bond market. We may also use index swaps as a substitute for futures or options contracts if such contracts are not directly available to a Fund on favorable terms. The Funds may enter into credit default swaps in order to hedge against a credit event, to enhance total return, or to gain exposure to certain securities or markets. If a Fund has any financial obligation under a swap agreement, it will designate cash and liquid assets sufficient to cover the obligation and will value the designated assets daily as long as the obligation is outstanding.
Options
Options represent a right to buy or sell a security or a group of securities, or a swap agreement or agreements at an agreed upon price at a future date. The purchaser of an option may or may not choose to go through with the transaction. The seller of an option, however, must go through with the transaction if its purchaser exercises the option. Certain options may be considered derivative securities.
How the Funds use them:
At times when we anticipate adverse conditions, we may want to protect gains on securities or swap agreements without actually selling them. We might use options to neutralize the effect of any price declines, without selling a security or swap agreement, or as a hedge against changes in interest rates. We may also sell an option contract (often referred to as "writing" an option) to earn additional income for the Funds. The Funds may write call options and purchase put options on a covered basis only, and will not engage in option writing strategies for speculative purposes.
The Fund has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act (CEA) and, therefore, is not subject to registration or regulation as a commodity pool operator under the CEA.
Bank loans
A bank loan represents an interest in a loan or other direct indebtedness, such as an assignment, that entitles the acquiror of such interest to payments of interest, principal and/or other amounts due under the structure of the loan or other direct indebtedness. In addition to being structured as secured or unsecured loans, such investments could be structured as novations or assignments or represent trade or other claims owed by a company to a supplier.
How the Funds use them:
Each Fund may invest without restriction in bank loans that meet the credit standards established by the Manager. The Manager performs its own independent credit analysis on each borrower and on the collateral securing each loan, considers the nature of the industry in which the borrower operates, the nature of the borrower's assets, and considers the general quality and creditworthiness of the borrower. Each Fund may invest in bank loans in order to enhance total return, to affect diversification, or to earn additional income. Each Fund will not use bank loans for reasons inconsistent with its investment objective.
Foreign currency transactions
A fund may invest in securities of foreign issuers and may hold foreign currency. In addition, a fund may enter into contracts to purchase or sell foreign currencies at a future date (a "forward foreign currency" contract or "forward" contract). A forward contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract, agreed upon by the parties, at a price set at the time of the contract.
How the Funds use them:
Although each Fund values its assets daily in terms of U.S. dollars, it does not intend to convert its holdings of foreign currencies into U.S. dollars on a daily basis. It may, however, from time to time, purchase or sell foreign currencies and/or engage in forward foreign currency transactions in order to expedite settlement of Fund transactions and to minimize currency value fluctuations.
Illiquid securities
Illiquid securities are securities that do not have a ready market and cannot be readily sold within seven days at approximately the price at which a fund has valued them.
How the Funds use them:
Each Fund may invest up to 15% of its net assets in illiquid securities.
Other investment strategies
The Funds may also invest in other types of income-producing securities including common stocks, preferred stocks, warrants, futures, options, and forward contracts.
Borrowing from banks
Each Fund may borrow money from banks as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions. The Funds will be required to pay interest to the lending banks on the amounts borrowed. As a result, borrowing money could result in the Funds being unable to meet their investment objectives.
Lending securities
Each Fund may lend up to 25% of its assets to qualified broker/dealers or institutional investors for their use in securities transactions. Borrowers of a Fund's securities must provide collateral to the Fund and adjust the amount of collateral each day to reflect changes in the value of the loaned securities. These transactions may generate additional income for a Fund.
Purchasing securities on a when-issued or delayed-delivery basis
Each Fund may buy or sell securities on a when-issued or delayed-delivery basis; that is, paying for securities before delivery or taking delivery at a later date. The Funds will designate cash or securities in amounts sufficient to cover their obligations, and will value the designated assets daily.
Temporary defensive positions
In response to unfavorable market conditions, we may make temporary investments in cash or cash equivalents or other high-quality, short-term instruments. These investments may not be consistent with a Fund's investment objective. To the extent that a Fund holds such instruments, it may be unable to achieve its investment objective.
The risks of investing in the Funds
Investing in any mutual fund involves risk, including the risk that you may receive little or no return on your investment, and the risk that you may lose part or all of the money you invest. Before you invest in a Fund, you should carefully evaluate the risks. Because of the nature of the Funds, you should consider your investment to be a long-term investment that typically provides the best results when held for a number of years. The information below describes the principal risks you assume when investing in the Funds. Please see the SAI for a further discussion of these risks and other risks not discussed here.
Market risk
Market risk is the risk that all or a majority of the securities in a certain market — such as the stock or bond market — will decline in value because of economic conditions, future expectations, investor confidence, or heavy institutional selling.
Index swaps are subject to the same market risks as the investment market or sector that the index represents. Depending on the actual movements of the index and how well the portfolio manager forecasts those movements, a fund could experience a higher or lower return than anticipated.
How the Funds strive to manage it:
The Funds maintain a long-term investment approach and focus on individual bonds that the Manager believes can provide a steady stream of income regardless of interim fluctuations in the bond market. The Funds generally do not buy and sell securities for short-term purposes.
In evaluating the use of an index swap, the Manager carefully considers how market changes could affect the swap and how that compares to us investing directly in the market the swap is intended to represent.
Interest rate risk
Interest rate risk is the risk that securities, particularly bonds with longer maturities, will decrease in value if interest rates rise and increase in value if interest rates fall. Investments in equity securities issued by small- and medium-size companies, which often borrow money to finance operations, may also be adversely affected by rising interest rates.
Swaps may be particularly sensitive to interest rate changes. Depending on the actual movements of interest rates and how well the portfolio manager anticipates them, a fund could experience a higher or lower return than anticipated. For example, if a fund holds interest rate swaps and is required to make payments based on variable interest rates, it will have to make interest payments if interest rates rise, which will not necessarily be offset by the fixed-rate payments it is entitled to receive under the swap agreement.
How the Funds strive to manage it:
Interest rate risk is a significant risk for these Funds. In striving to manage this risk, the Manager monitors economic conditions and the interest rate environment and may adjust each Fund's duration or average maturity as a defensive measure against interest rate risk.
Each business day, the Manager will calculate the amount a Fund must pay for any swaps it holds and will designate enough cash or other liquid securities to cover that amount.
High yield corporate bond risk
High yield corporate bonds (commonly known as junk bonds), while generally having higher yields, are subject to reduced creditworthiness of issuers, increased risks of default, and a more limited and less liquid secondary market than higher-rated securities. These securities are subject to greater price volatility and risk of loss of income and principal than are higher rated securities. Lower rated and unrated fixed income securities tend to reflect short-term corporate and market developments to a greater extent than higher rated fixed income securities, which react primarily to fluctuations in the general level of interest rates. Fixed income securities of this type are considered to be of poor standing and primarily speculative. Such securities are subject to a substantial degree of credit risk.
How the Fund strives to manage it:
The Fund limits investments in high yield corporate bonds to 20% of its net assets. The Manager also attempts to reduce the risk associated with investment in high yield debt securities through portfolio diversification, credit analysis, and attention to trends in the economy, industries, and financial markets.
Credit risk
Credit risk is the risk that an issuer of a debt security, including a governmental issuer, or an entity that insures the bond may be unable to make interest payments and repay principal in a timely manner.
How the Funds strive to manage it:
The Funds strive to minimize credit risk by investing primarily in higher quality, investment grade corporate bonds.
Any portion of a portfolio that is invested in high yielding, lower-quality corporate bonds is subject to greater credit risk. The Manager strives to manage that risk through careful bond selection, by limiting the percentage of the portfolio that can be invested in lower quality bonds and by maintaining a diversified portfolio of bonds representing a variety of industries and issuers.
When selecting dealers with whom we would make interest rate or index swap agreements, the Manager focus on those with high quality ratings and do careful credit analysis before investing.
Bank loans and other direct indebtedness risk
Bank loans and other direct indebtedness risk involves the risk that a fund will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower. Loans that are fully secured offer a fund more protection than unsecured loans in the event of nonpayment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower's obligation, or that the collateral can be liquidated. Some loans or claims may be in default at the time of purchase. Certain of the loans and the other direct indebtedness acquired by a fund may involve revolving credit facilities or other standby financing commitments that obligate a fund to pay additional cash on a certain date or on demand. These commitments may require a fund to increase its investment in a company at a time when that fund might not otherwise decide to do so (including at a time when the company's financial condition makes it unlikely that such amounts will be repaid). To the extent that a fund is committed to advance additional funds, it will at all times hold and maintain, in a segregated account, cash or other high-grade debt obligations in an amount sufficient to meet such commitments.
As a fund may be required to rely upon another lending institution to collect and pass on to the fund amounts payable with respect to the loan and to enforce the fund's rights under the loan and other direct indebtedness, an insolvency, bankruptcy or reorganization of the lending institution may delay or prevent the fund from receiving such amounts. The highly leveraged nature of many such loans and other direct indebtedness may make such loans and other direct indebtedness especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other direct indebtedness may involve additional risk to the fund.
How the Funds strive to manage it:
These risks may not be completely eliminated, but the Manager will attempt to reduce these risks through portfolio diversification, credit analysis and attention to trends in the economy, industries and financial markets. Should we determine that any of these securities are illiquid, these would be subject to each Fund's restrictions on illiquid securities.
Foreign risk
Foreign risk is the risk that foreign securities may be adversely affected by political instability, changes in currency exchange rates, foreign economic or government conditions, increased transaction costs, or inadequate regulatory and accounting standards.
How the Funds strive to manage it:
The Manager carefully evaluates the reward and risk associated with each foreign security that we consider.
Each Fund may invest up to 35% of its total assets in securities of foreign issuers, but each Fund's total non-U.S.-dollar currency exposure will be limited, in the aggregate, to no more than 25% of net assets.
Emerging markets risk
Emerging markets risk is the possibility that the risks associated with international investing will be greater in emerging markets than in more developed foreign markets because, among other things, emerging markets may have less stable political and economic environments. In addition, in many emerging markets there is substantially less publicly available information about issuers and the information that is available tends to be of a lesser quality. Economic markets and structures tend to be less mature and diverse and the securities markets, which are subject to less government regulation or supervision, may also be smaller, less liquid, and subject to greater price volatility.
How the Funds strive to manage it:
Each Fund may invest a portion of its assets in securities of issuers located in emerging markets. The Funds cannot eliminate these risks but the Manager will attempt to reduce these risks through portfolio diversification, credit analysis, and attention to trends in the economy, industries and financial markets, and other relevant factors.
Currency risk
Currency risk is the risk that the value of a fund's investments may be negatively affected by changes in foreign currency exchange rates. Adverse changes in exchange rates may reduce or eliminate any gains produced by investments that are denominated in foreign currencies and may increase any losses.
How the Funds strive to manage it:
The Funds, which have exposure to global and international investments, may be affected by changes in currency rates and exchange control regulations and may incur costs in connection with conversions between currencies. To hedge this currency risk associated with investments in non-U.S.-dollar-denominated securities, we may invest in forward foreign currency contracts. These activities pose special risks which do not typically arise in connection with investments in U.S. securities. In addition, we may engage in foreign currency options and futures transactions.
Forward foreign currency risk
The use of forward foreign currency exchange contracts may substantially change a fund's exposure to currency exchange rates and could result in losses to the fund if currencies do not perform as the Manager expects. The use of these investments as a hedging technique to reduce a fund's exposure to currency risks may also reduce its ability to benefit from favorable changes in currency exchange rates.
How the Funds strive to manage it:
The Funds are subject to this risk and may try to hedge currency risk by purchasing foreign currency exchange contracts. By agreeing to purchase or sell foreign securities at a preset price on a future date, the Funds strive to protect the value of the securities it owns from future changes in currency rates.
Liquidity risk
Liquidity risk is the possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them.
How the Funds strive to manage it:
Each Fund limits the percentage of its assets that can be invested in illiquid securities.
Derivatives risk
Derivatives risk is the possibility that a fund may experience a significant loss if it employs a derivatives strategy (including a strategy involving options or swaps such as interest rate swaps, index swaps, and credit default swaps) related to a security or a securities index and that security or index moves in the opposite direction from what the portfolio management team had anticipated. Derivatives also involve additional expenses, which could reduce any benefit or increase any loss to a fund from using the strategy.
How the Funds strive to manage it:
The Funds will use derivatives for defensive purposes, such as to protect gains or hedge against potential losses in the portfolio without actually selling a security, to neutralize the impact of interest rate changes, to affect diversification or to earn additional income. They will not use derivatives for reasons inconsistent with their respective investment objectives. The Manager also research and continually monitor the creditworthiness of current or potential counterparties.
Counterparty risk
If a fund enters into a derivative contract (such as a swap, futures, or options contract) or a repurchase agreement, it will be subject to the risk that the counterparty to such a contract or agreement may fail to perform its obligations under the contract or agreement due to financial difficulties (such as a bankruptcy or reorganization). As a result, the fund may experience significant delays in obtaining any recovery, may obtain only a limited recovery, or may obtain no recovery at all.
How the Funds strive to manage it:
We try to minimize this risk by considering the creditworthiness of all parties before we enter into transactions with them. The Funds will hold collateral from counterparties consistent with applicable regulations.
Government and regulatory risks
Governments or regulatory authorities have, from time to time, taken or considered actions that could adversely affect various sectors of the securities markets. Government involvement in the private sector may, in some cases, include government investment in, or ownership of, companies in certain commercial business sectors; wage and price controls; or imposition of trade barriers and other protectionist measures. For example, an economic or political crisis may lead to price controls, forced mergers of companies, expropriation, the creation of government monopolies, foreign exchange controls, the introduction of new currencies (and the redenomination of financial obligations into those currencies), or other measures that could be detrimental to the investments of a fund.
How the Funds strive to manage it:
We evaluate the economic and political climate in the country or countries in which a Fund may invest before selecting securities. We typically diversify a Fund's assets among a number of different securities in a variety of sectors in order to minimize the impact to the Fund of any legislative or regulatory development affecting particular issuers, or market sectors.
Disclosure of portfolio holdings information
A description of the Funds' policies and procedures with respect to the disclosure of their portfolio securities is available in the SAI.
Who manages the Funds
Investment manager
The Manager is a series of Delaware Management Business Trust, which is a subsidiary of Delaware Management Holdings, Inc. (DMHI). DMHI is a wholly owned subsidiary of Macquarie Group Ltd. The Manager makes investment decisions for the Funds, manages the Funds' business affairs, and provides daily administrative services. For its services to the Funds, the Manager was paid an aggregate fee, net of fee waivers, of 0.46% and 0.48% of the average daily net assets of Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund, respectively, during the last fiscal year.
A discussion of the basis for the Board's approval of the Funds' investment advisory contract is available in the Funds' semiannual report to shareholders for the period ended January 31, 2012.
Portfolio managers
Thomas H. Chow, Roger A. Early, and Kevin P. Loome have primary responsibility for making day-to-day investment decisions for the Funds.
Thomas H. Chow, CFA,
Senior Vice President, Senior Portfolio Manager
Thomas H. Chow is a member of the firm's taxable fixed income portfolio management team, with primary responsibility for portfolio construction and strategic asset allocation in investment grade credit exposures. He is the lead portfolio manager for Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund, as well as several institutional mandates. His experience includes significant exposure to asset liability management strategies and credit risk opportunities. Prior to joining Delaware Investments in 2001 as a portfolio manager working on the Lincoln General Account, he was a trader of high grade and high yield securities, and was involved in the portfolio management of collateralized bond obligations (CBOs) and insurance portfolios at SunAmerica/AIG from 1997 to 2001. Before that, he was an analyst, trader, and portfolio manager at Conseco Capital Management from 1989 to 1997. Chow received a bachelor's degree in business analysis from Indiana University, and he is a Fellow of Life Management Institute.
Roger A. Early, CPA, CFA, CFP,
Senior Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy
Roger A. Early rejoined Delaware Investments in March 2007 as a member of the firm's taxable fixed income portfolio management team, with primary responsibility for portfolio construction and strategic asset allocation. During his previous time at the firm, from 1994 to 2001, he was a senior portfolio manager in the same area, and he left Delaware Investments as head of its U.S. investment grade fixed income group. In recent years, Early was a senior portfolio manager at Chartwell Investment Partners and Rittenhouse Financial and was the chief investment officer for fixed income at Turner Investments. Prior to joining Delaware Investments in 1994, he worked for more than 10 years at Federated Investors where he managed more than $25 billion in mutual fund and institutional portfolios in the short-term and investment grade markets. He left the firm as head of institutional fixed income management. Earlier in his career, he held management positions with the Federal Reserve Bank, PNC Financial, Touche Ross, and Rockwell International. Early earned his bachelor's degree in economics from The Wharton School of the University of Pennsylvania and an MBA with concentrations in finance and accounting from the University of Pittsburgh. He is a member of the CFA Society of Philadelphia.
Kevin P. Loome, CFA,
Senior Vice President, Senior Portfolio Manager, Head of High Yield Investments
Kevin P. Loome is head of the High Yield fixed income team, responsible for portfolio construction and strategic asset allocation of all high yield fixed income assets. Prior to joining Delaware Investments in August 2007 in his current position, Loome spent 11 years at T. Rowe Price, starting as an analyst and leaving the firm as a portfolio manager. He began his career with Morgan Stanley as a corporate finance analyst in the New York and London offices. Loome received his bachelor's degree in commerce from the University of Virginia and earned an MBA from the Tuck School of Business at Dartmouth.
The SAI provides additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio managers' ownership of Fund shares.
Manager of managers structure
The Funds and the Manager have received an exemptive order from the U.S. Securities and Exchange Commission (SEC) to operate under a manager of managers structure that permits the Manager, with the approval of the Board, to appoint and replace sub-advisors, enter into sub-advisory agreements, and materially amend and terminate sub-advisory agreements on behalf of the Funds without shareholder approval (Manager of Managers Structure). Under the Manager of Managers Structure, the Manager has ultimate responsibility, subject to oversight by the Funds' Board, for overseeing the Funds' sub-advisors and recommending to the Board their hiring, termination, or replacement. The SEC order does not apply to any sub-advisor that is affiliated with the Funds or the Manager. While the Manager does not currently expect to use the Manager of Managers Structure with respect to the Funds, the Manager may, in the future, recommend to the Funds' Board the establishment of the Manager of Managers Structure by recommending the hiring of one or more sub-advisors to manage all or a portion of the Funds' portfolios.
The Manager of Managers Structure enables the Funds to operate with greater efficiency and without incurring the expense and delays associated with obtaining shareholder approvals for matters relating to sub-advisors or sub-advisory agreements. The Manager of Managers Structure does not permit an increase in the overall management and advisory fees payable by the Funds without shareholder approval. Shareholders will be notified of any changes made to sub-advisors or sub-advisory agreements within 90 days of the changes.
Who's who
Board of trustees:
A mutual fund is governed by a board of trustees, which has oversight responsibility for the management of the fund's business affairs. Trustees establish procedures and oversee and review the performance of the fund's service providers.
Investment manager:
An investment manager is a company responsible for selecting portfolio investments consistent with the objective and policies stated in the mutual fund's prospectus. A written contract between a mutual fund and its investment manager specifies the services the investment manager performs and the fee the manager is entitled to receive.
Portfolio managers:
Portfolio managers make investment decisions for individual portfolios.
Distributor:
Most mutual funds continuously offer new shares to the public through distributors that are regulated as broker/dealers and are subject to the Financial Industry Regulatory Authority (FINRA) rules governing mutual fund sales practices.
Service agent:
Mutual fund companies employ service agents (sometimes called transfer agents) to maintain records of shareholder accounts, calculate and disburse dividends and capital gains, and prepare and mail shareholder statements and tax information, among other functions. Many service agents also provide customer service to shareholders.
Custodian:
Mutual funds are legally required to protect their portfolio securities, and most funds place them with a qualified bank custodian that segregates fund securities from other bank assets.
Financial advisors:
Financial advisors provide advice to their clients. They are associated with securities broker/dealers who have entered into selling and/or service arrangements with the distributor. Selling broker/dealers and financial advisors are compensated for their services generally through sales commissions, and through 12b-1 fees and/or service fees deducted from a fund's assets.
Shareholders:
Mutual fund shareholders have specific voting rights on matters such as material changes in the terms of a fund's management contract and changes to fundamental investment policies.
About your account
Investing in the Funds
You can choose from a number of share classes for each Fund. Because each share class has a different combination of sales charges, fees, and other features, you should consult your financial advisor to determine which class best suits your investment goals and time frame.
Delaware Management Trust Company will not accept applications to open
new403(b) custodial accounts or accept contributions to existing 403(b) custodial accounts
.
Choosing a share class
Each share class may be eligible for purchase through programs sponsored by financial intermediaries that require the purchase of a specific class of shares.
Class A, Class B, Class C, and Class R shares of the Funds have each adopted a separate 12b-1 plan that allows it to pay distribution fees for the sale and distribution of its shares. Because these fees are paid out of a Fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
Class A
-
Class A shares have an up-front sales charge of up to 4.50% that you pay when you buy the shares.
-
If you invest $100,000 or more, your front-end sales charge will be reduced.
-
You may qualify for other reduced sales charges, and, under certain circumstances, the sales charge may be waived, as described in "How to reduce your sales charge" below.
-
Class A shares are also subject to an annual 12b-1 fee no greater than 0.30% (currently limited to 0.25%) of average daily net assets. See "Dealer compensation" below for further information.
-
Class A shares generally are not subject to a CDSC except in the limited circumstances described in the table below.
-
Class A shares generally are not available for purchase by anyone qualified to purchase Class R shares, except as described below.
Class A sales charges
The table below details your sales charges on purchases of Class A shares. The offering price for Class A shares includes the front-end sales charge. The sales charge as a percentage of the net amount invested is the maximum percentage of the amount invested rounded to the nearest hundredth. The actual sales charge that you pay as a percentage of the offering price and as a percentage of the net amount invested will vary depending on the then-current net asset value (NAV), the percentage rate of the sales charge, and rounding.
Amount of purchase
|
Sales charge as a %
of offering price
|
Sales charge as a %
of net amount invested
|
Less than $100,000
|
|
4.50%
|
|
5.13%
|
$100,000 but less than $250,000
|
|
3.50%
|
|
4.00%
|
$250,000 but less than $500,000
|
|
2.50%
|
|
3.00%
|
$500,000 but less than $1 million
|
|
2.00%
|
|
2.44%
|
$1 million or more
|
|
none*
|
|
none*
|
* There is no front-end sales charge when you purchase $1 million or more of Class A shares. However, if the Distributor paid your financial advisor a commission on your purchase of $1 million or more of Class A shares, you will have to pay a Limited CDSC of 1.00% if you redeem these shares within the first year after your purchase and 0.50% if you redeem them within the second year, unless a specific waiver of the Limited CDSC applies. The Limited CDSC will be paid to the Distributor and will be assessed on an amount equal to the lesser of: (1) the NAV at the time the Class A shares being redeemed were purchased; or (2) the NAV of such Class A shares at the time of redemption. For purposes of this formula, the "NAV at the time of purchase" will be the NAV at purchase of the Class A shares even if those shares are later exchanged for shares of another Delaware Investments
®
Fund and, in the event of an exchange of Class A shares, the "NAV of such shares at the time of redemption" will be the NAV of the shares acquired in the exchange. In determining whether a Limited CDSC is payable, it will be assumed that shares not subject to the Limited CDSC are the first redeemed followed by other shares held for the longest period of time. See "Dealer compensation" below for a description of the dealer commission that is paid.
Class B
As of May 31, 2007, no new or subsequent investments, including investments through automatic investment plans and by qualified retirement plans (such as 401(k) or 457 plans), are allowed in the Funds' Class B shares, except through a reinvestment of dividends or capital gains or permitted exchanges. Existing shareholders of Class B shares may continue to hold their Class B shares, reinvest dividends into Class B shares, and exchange their Class B shares of one Delaware Investments Fund for Class B shares of another Fund, as permitted by existing exchange privileges. Existing Class B shareholders wishing to make subsequent purchases in a Fund's shares will be permitted to invest in other classes of the Fund, subject to that class's pricing structure and eligibility requirements, if any.
For Class B shares outstanding as of May 31, 2007, and Class B shares acquired upon reinvestment of dividends or capital gains, all Class B share attributes, including the CDSC schedules, conversion to Class A schedule, and distribution and service (12b-1) fees, will continue in their current form. In addition, because the Funds' or their Distributor's ability to assess certain sales charges and fees is dependent on the sale of new shares, the termination of new purchases of Class B shares could ultimately lead to the elimination and/or reduction of such sales charges and fees. The Funds may not be able to provide shareholders with advance notice of the reduction in these sales charges and fees. You will be notified via a Prospectus supplement if there are any changes to any attributes, sales charges, or fees.
-
If you redeem Class B shares during the first year after you buy them, the shares will be subject to a CDSC of 4.00%. The CDSC is 3.00% during the second year, 2.25% during the third year, 1.50% during the fourth and fifth years, 1.00% during the sixth year, and 0% thereafter.
-
In determining whether the CDSC applies to a redemption of Class B shares, it will be assumed that shares held for more than six years are redeemed first, followed by shares acquired through the reinvestment of dividends or distributions, and finally by shares held longest during the six-year period. For further information on how the CDSC is determined, please see "Calculation of contingent deferred sales charges — Class B and Class C" below.
-
For approximately eight years after you buy your Class B shares, they are subject to an annual 12b-1 fee no greater than 1.00% of average daily net assets (of which 0.25% is a service fee) paid to the Distributor, dealers, or others for providing services and maintaining shareholder accounts.
-
Approximately eight years after you buy them, Class B shares automatically convert to Class A shares with a 12b-1 fee of no more than 0.25%. Conversion may occur as late as three months after the eighth anniversary of purchase, during which time Class B's higher 12b-1 fee applies.
Class C
-
Class C shares have no up-front sales charge, so the full amount of your purchase is invested in a Fund. However, you will pay a CDSC of 1.00% if you redeem your shares within 12 months after you buy them.
-
In determining whether the CDSC applies to a redemption of Class C shares, it will be assumed that shares held for more than 12 months are redeemed first followed by shares acquired through the reinvestment of dividends or distributions, and finally by shares held for 12 months or less. For further information on how the CDSC is determined, please see "Calculation of contingent deferred sales charges — Class B and Class C" below.
-
Under certain circumstances, the CDSC may be waived; please see "Waivers of contingent deferred sales charges" below for further information.
-
Class C shares are subject to an annual 12b-1 fee no greater than 1.00% of average daily net assets (of which 0.25% is a service fee) paid to the Distributor, dealers, or others for providing services and maintaining shareholder accounts.
-
Class C shares do not automatically convert to another class.
-
You may purchase only up to $1 million of Class C shares at any one time. Orders that exceed $1 million will be rejected. The limitation on maximum purchases varies for retirement plans.
Class R
-
Class R shares have no up-front sales charge, so the full amount of your purchase is invested in a Fund. Class R shares are not subject to a CDSC.
-
Class R shares are subject to an annual 12b-1 fee no greater than 0.60% (currently limited to 0.50%) of average daily net assets.
-
Class R shares do not automatically convert to another class.
-
Class R shares generally are available only to: (i) qualified and nonqualified plan shareholders covering multiple employees (including 401(k), 401(a), 457, and noncustodial 403(b) plans, as well as other nonqualified deferred compensation plans) with assets (at the time shares are considered for purchase) of $10 million or less; and (ii) individual retirement account (IRA) rollovers from plans that were previously maintained on the Delaware Investments® retirement recordkeeping system or BISYS's retirement recordkeeping system that are offering Class R shares to participants.
-
Except as noted above, no other IRAs are eligible for Class R shares (for example, no traditional IRAs, Roth IRAs, SIMPLE IRAs, SEPs, SARSEPs). For purposes of determining plan asset levels, affiliated plans may be combined at the request of the plan sponsor.
-
Any account holding Class A shares as of the date Class R shares were made available continues to be eligible to purchase Class A shares after that date. Any account holding Class R shares is not eligible to purchase Class A shares.
Institutional Class
-
Institutional Class shares have no up-front sales charge, so the full amount of your purchase is invested in a Fund.
-
Institutional Class shares do not assess a CDSC or a 12b-1 fee;
-
Institutional Class shares are available for purchase only by the following:
-
rollover IRAs from retirement plans and retirement plans introduced by persons not associated with brokers or dealers that are primarily engaged in the retail securities business;
-
tax-exempt employee benefit plans of the Manager, its affiliates, and securities dealers that have a selling agreement with the Distributor;
-
institutional advisory clients (including mutual funds) of the Manager or its affiliates, as well as those clients' affiliates, and their corporate sponsors, subsidiaries, related employee benefit plans, and rollover IRAs of, or from, such institutional advisory clients;
-
a bank, trust company, or similar financial institution investing for its own account or for the account of its trust customers for whom the financial institution is exercising investment discretion in purchasing Institutional Class shares, except where the investment is part of a program that requires payment to the financial institution of a Rule 12b-1 Plan fee;
-
RIAs investing on behalf of clients that consist solely of institutions and high net worth individuals having at least $1 million entrusted to an RIA for investment purposes (use of the Institutional Class shares is restricted to RIAs who are not affiliated or associated with a broker or dealer and who derive compensation for their services exclusively from their advisory clients);
-
certain plans qualified under Section 529 of the Internal Revenue Code, for which the Manager, Distributor, or Delaware Service Company, Inc. (DSC), or one or more of their affiliates, provide record keeping, administrative, investment management, marketing, distribution, or similar services;
-
programs sponsored by and/or controlled by financial intermediaries where: (1) such programs allow or require the purchase of Institutional Class shares; (2) the financial intermediary has entered into an agreement covering the arrangement with the Distributor and/or DSC; and (3) the financial intermediary (i) charges clients an ongoing fee for advisory, investment consulting or similar services, or (ii) offers the Institutional Class shares through a no-commission network or platform; or
-
private investment vehicles, including, but not limited to, foundations and endowments.
Calculation of contingent deferred sales charges — Class B and Class C
CDSCs are charged as a percentage of the dollar amount subject to the CDSC. The charge will be assessed on an amount equal to the lesser of the NAV at the time the shares being redeemed were purchased or the NAV of those shares at the time of redemption. No CDSC will be imposed on increases in NAV above the initial purchase price, nor will a CDSC be assessed on redemptions of shares acquired through reinvestment of dividends or capital gains distributions. For purposes of this formula, the "NAV at the time of purchase" will be the NAV at purchase of Class B shares or Class C shares of a Fund, even if those shares are later exchanged for shares of another Delaware Investments
®
Fund. In the event of an exchange of the shares, the "NAV of such shares at the time of redemption" will be the NAV of the shares that were acquired in the exchange.
Dealer compensation
The financial advisor that sells you shares of the Funds may be eligible to receive the following amounts as compensation for your investment in the Funds. These amounts are paid by the Distributor to the securities dealer with whom your financial advisor is associated. Institutional Class shares do not have a 12b-1 fee or sales charge so they are not included in the chart below.
|
Class A
1
|
Class B
2
|
Class C
3
|
Class R
4
|
Commission (%)
|
—
|
4.00%
|
1.00%
|
—
|
Investment less than $100,000
|
4.00%
|
—
|
—
|
—
|
$100,000 but less than $250,000
|
3.00%
|
—
|
—
|
—
|
$250,000 but less than $500,000
|
2.00%
|
—
|
—
|
—
|
$500,000 but less than $1 million
|
1.60%
|
—
|
—
|
—
|
$1 million but less than $5 million
|
1.00%
|
—
|
—
|
—
|
$5 million but less than $25 million
|
0.50%
|
—
|
—
|
—
|
$25 million or more
|
0.25%
|
—
|
—
|
—
|
12b-1 fee to dealer
|
0.30%
|
0.25%
|
1.00%
|
0.60%
|
1
On sales of Class A shares, the Distributor reallows to your securities dealer a portion of the front-end sales charge depending upon the amount you invested. Your securities dealer may be eligible to receive up to 0.30% of the 12b-1 fee applicable to Class A shares. The maximum 12b-1 fee applicable to Class A shares is up to 0.30%. However, the Distributor has contracted to limit this amount to 0.25% from November 28, 2012 through November 28, 2013.
2
On sales of Class B shares, the Distributor may pay your securities dealer an up-front commission of 4.00%. Your securities dealer may be eligible to receive a 12b-1 service fee of up to 0.25% from the date of purchase. After approximately eight years, Class B shares automatically convert to Class A shares and dealers may then be eligible to receive the 12b-1 fee applicable to Class A shares.
3
On sales of Class C shares, the Distributor may pay your securities dealer an up-front commission of 1.00%. The up-front commission includes an advance of the first year's 12b-1 service fee of up to 0.25%. During the first 12 months, the Distributor retains the full 1.00% 12b-1 fee to partially offset the up-front commission and the prepaid 0.25% service fee advanced at the time of purchase. Starting in the 13th month, your securities dealer may be eligible to receive the full 1.00% 12b-1 fee applicable to Class C. Alternatively, certain intermediaries may not be eligible to receive the up-front commission of 1.00%, but may receive the 12b-1 fee for sales of Class C shares from the date of purchase.
4
On sales of Class R shares, the Distributor does not pay your securities dealer an up-front commission. Your securities dealer may be eligible to receive a 12b-1 fee of up to 0.60% from the date of purchase. The maximum 12b-1 fee applicable to Class R shares is 0.60% of average daily net assets. However, the Distributor has contracted to limit this amount to 0.50% from November 28, 2012 through November 28, 2013.
Payments to intermediaries
The Distributor and its affiliates may pay additional compensation at their own expense and not as an expense of a Fund to certain affiliated or unaffiliated brokers, dealers, or other financial intermediaries (Financial Intermediaries) in connection with the sale or retention of Fund shares and/or shareholder servicing, including providing the Fund with "shelf space" or a higher profile with the Financial Intermediaries' consultants, salespersons, and customers (distribution assistance). For example, the Distributor or its affiliates may pay additional compensation to financial intermediaries for various purposes, including, but not limited to, promoting the sale of Fund shares, maintaining share balances and/or for sub-accounting, administrative, or shareholder processing services, marketing, educational support, and ticket charges. Such payments are in addition to any distribution fees, service fees, and/or transfer agency fees that may be payable by a Fund. The additional payments may be based on factors, including level of sales (based on gross or net sales or some specified minimum sales or some other similar criteria related to sales of a Fund and/or some or all other Delaware Investments® Funds), amount of assets invested by the Financial Intermediary's customers (which could include current or aged assets of a Fund and/or some or all other Delaware Investments® Funds), a Fund's advisory fees, some other agreed upon amount, or other measures as determined from time to time by the Distributor. The level of payments made to a qualifying Financial Intermediary in any given year may vary. To the extent permitted by SEC and FINRA rules and other applicable laws and regulations, the Distributor may pay, or allow its affiliates to pay, other promotional incentives or payments to Financial Intermediaries.
If a mutual fund sponsor or distributor makes greater payments for distribution assistance to your Financial Intermediary with respect to distribution of shares of that particular mutual fund than sponsors or distributors of other mutual funds make to your Financial Intermediary with respect to the distribution of the shares of their mutual funds, your Financial Intermediary and its salespersons may have a financial incentive to favor sales of shares of the mutual fund making the higher payments over shares of other mutual funds or over other investment options. In addition, depending on the arrangements in place at any particular time, a Financial Intermediary may also have a financial incentive for recommending a particular share class over other share classes. You should consult with your Financial Intermediary and review carefully any disclosure provided by such Financial Intermediary as to compensation it receives in connection with investment products it recommends or sells to you. A significant purpose of these payments is to increase sales of a Fund's shares. The Manager or its affiliates may benefit from the Distributor's or its affiliate's payment of compensation to financial intermediaries through increased fees resulting from additional assets acquired through the sale of Fund shares through financial intermediaries. In certain instances, the payments could be significant and may cause a conflict of interest for your Financial Intermediary. Any such payments will not change the net asset value (NAV) or the price of a Fund's shares.
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares. Please refer to the SAI for detailed information and eligibility requirements. You can also get additional information from your financial advisor. You or your financial advisor must notify us at the time you purchase shares if you are eligible for any of these programs. You may also need to provide information to your financial advisor or the Funds in order to qualify for a reduction in sales charges. Such information may include your Delaware Investments
®
Funds holdings in any other accounts, including retirement accounts, held indirectly or through an intermediary, and the names of qualifying family members and their holdings. We reserve the right to determine whether any purchase is entitled, by virtue of the foregoing, to the reduced sales charge. Class R and Institutional Class shares have no up-front sales charge or CDSC so they are not included in the chart below.
Letter of intent
Through a letter of intent you agree to invest a certain amount in Delaware Investments® Funds (except money market funds with no sales charge) over a 13-month period to qualify for reduced front-end sales charges.
Class A
|
Class B
|
Class C
|
Available
|
Not available
|
Although the letter of intent does not apply to the purchase of Class C shares, you can combine the value of your Class A shares with your purchase of Class C shares to fulfill your letter of intent.
|
Rights of accumulation
You can combine your holdings or purchases of all Delaware Investments® Funds (except money market funds with no sales charge), as well as the holdings and purchases of your spouse and children under 21 to qualify for reduced front-end sales charges.
Class A
|
Class B
|
Class C
|
Available
|
Although the rights of accumulation do not apply to the purchase of Class B shares acquired upon reinvestment of dividends or capital gains, you can combine the value of your Class B shares purchased on or before May 31, 2007 with your purchase of Class A shares to qualify for rights of accumulation.
|
Although the rights of accumulation do not apply to the purchase of Class C shares, you can combine your purchase of Class A shares with your purchase of Class C shares to fulfill your rights of accumulation.
|
Reinvestment of redeemed shares
Up to 12 months after you redeem shares, you can reinvest the proceeds without paying a sales charge.
Class A
|
Class B and Class C
|
You will not have to pay an additional front-end sales charge.
|
Not available
|
SIMPLE IRA, SEP, SARSEP, 401(k), SIMPLE 401(k), Profit Sharing, Money Purchase,
403(b)(7), and 457 Retirement Plans
These investment plans may qualify for reduced sales charges by combining the purchases of all members of the group. Members of these groups may also qualify to purchase shares without a front-end sales charge and may qualify for a waiver of any CDSCs on Class A shares.
Class A
|
Class B and Class C
|
You may not have to pay an additional front-end sales charge.
|
Not available.
|
Buying Class A shares at net asset value
Class A shares of a Fund may be purchased at NAV under the following circumstances, provided that you notify the Fund in advance that the trade qualifies for this privilege. The Funds reserve the right to modify or terminate these arrangements at any time.
-
Shares purchased under the Delaware Investments® dividend reinvestment plan and, under certain circumstances, the exchange privilege and the 12-month reinvestment privilege.
-
Purchases by: (i) current and former officers, Trustees/Directors, and employees of any Delaware Investments® Fund, the Manager, or any of the Manager's current affiliates and those that may in the future be created; (ii) legal counsel to the Delaware Investments® Funds; and (iii) registered representatives and employees of broker/dealers who have entered into dealer's agreements with the Distributor. At the direction of such persons, their family members (regardless of age) and any employee benefit plan established by any of the foregoing entities, counsel, or broker/dealers may also purchase shares at NAV.
-
Shareholders who own Class A shares of Delaware Cash Reserve
®
Fund as a result of a liquidation of a Delaware Investments® Fund may exchange into Class A shares of another Delaware Investments® Fund at NAV.
-
Purchases by bank employees who provide services in connection with agreements between the bank and unaffiliated brokers or dealers concerning sales of shares of the Delaware Investments® Funds.
-
Purchases by certain officers, trustees, and key employees of institutional clients of the Manager or any of its affiliates.
-
Purchases for the benefit of the clients of brokers, dealers, and registered investment advisors if such brokers, dealers, or investment advisors have entered into an agreement with the Distributor providing specifically for the purchase of Class A shares in connection with special investment products, such as wrap accounts or similar fee-based programs. Investors may be charged a fee when effecting transactions in Class A shares through a broker or agent that offers these special investment products.
-
Purchases by financial institutions investing for the accounts of their trust customers if they are not eligible to purchase shares of the Fund's Institutional Class, if applicable.
-
Purchases by retirement plans that are maintained on retirement platforms sponsored by financial intermediary firms, provided the financial intermediary firms or their trust companies (or entities performing similar trading/clearing functions) have entered into an agreement with respect to such retirement platforms.
-
Purchases by certain legacy bank sponsored retirement plans that meet requirements set forth in the SAI.
-
Purchases by certain legacy retirement assets that meet requirements set forth in the SAI.
-
Investments made by plan level and/or participant retirement accounts that are for the purpose of repaying a loan taken from such accounts.
-
Purchases by certain participants in defined contribution plans and members of their households whose plan assets will be rolled over into IRA accounts (IRA Program) where the financial intermediary has entered into an agreement specifically relating to such IRA Program with the Distributor and/or the Funds' transfer agent.
-
Purchases by certain participants of particular group retirement plans as described in the SAI.
-
Loan repayments made to a Fund account in connection with loans originated from accounts previously maintained by another investment firm.
Waivers of contingent deferred sales charges
Certain sales charges may be based on historical cost. Therefore, you should maintain any records that substantiate these costs because the Funds, their transfer agent, and financial intermediaries may not maintain this information. Information about existing sales charges and sales charge reductions and waivers is available free of charge on the Delaware Investments
®
Funds' website at www.delawareinvestments.com. Additional information on sales charges can be found in the SAI, which is available upon request. Class R and Institutional Class shares have no up-front sales charge or CDSC so they are not included in the chart below.
The Funds' applicable CDSCs may be waived under the following circumstances:
Redemptions in accordance with a systematic withdrawal plan
Redemptions in accordance with a systematic withdrawal plan, provided the annual amount selected to be withdrawn under the plan does not exceed 12% of the value of the account on the date that the systematic withdrawal plan was established or modified.
Classes A
1
, B, and C
|
Available
|
Redemptions that result from the right to liquidate a shareholder's account
Redemptions that result from the right to liquidate a shareholder's account if the aggregate NAV of the shares held in the account is less than the then-effective minimum account size.
Classes A
1
, B, and C
|
Available
|
Section 401(a) qualified retirement plan distributions
Distributions to participants or beneficiaries from a retirement plan qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (Internal Revenue Code).
Class A
1
|
Classes B and C
|
Available
|
Not available
|
Section 401(a) qualified retirement plan redemptions
Redemptions pursuant to the direction of a participant or beneficiary of a retirement plan qualified under Section 401(a) of the Internal Revenue Code with respect to that retirement plan.
Class A
1
|
Classes B and C
|
Available
|
Not available
|
Periodic distributions from an individual retirement account
Periodic distributions from an individual retirement account (traditional IRA, Roth IRA, SIMPLE IRA, SEP, SARSEP, Coverdell ESA) or a qualified plan
2
(401(k), SIMPLE 401(k), Profit Sharing, Money Purchase, 403(b)(7), and 457 Retirement Plans) not subject to a penalty under Section 72(t)(2)(A) of the Internal Revenue Code or a hardship or unforeseen emergency provision in the qualified plan as described in Treas. Reg. §1.401(k)-1(d)(3) and Section 457(d)(1)(A)(iii) of the Internal Revenue Code.
Classes A
1
, B, and C
|
Available
|
Returns of excess contributions due to any regulatory limit
Returns of excess contributions due to any regulatory limit from an individual retirement account (traditional IRA, Roth IRA, SIMPLE IRA, SEP, SARSEP, Coverdell ESA) or a qualified plan
2
(401(k), SIMPLE 401(k), Profit Sharing, Money Purchase, 403(b)(7), and 457 Retirement Plans).
Classes A
1
, B, and C
|
Available
|
Distributions by other employee benefit plans
Distributions by other employee benefit plans to pay benefits.
Class A
1
|
Classes B and C
|
Available
|
Not available
|
Systematic withdrawals from a retirement account or qualified plan
Systematic withdrawals from a retirement account or qualified plan that are not subject to a penalty pursuant to Section 72(t)(2)(A) of the Internal Revenue Code or a hardship or unforeseen emergency provision in the qualified plan
2
as described in Treas. Reg. §1.401(k)-1(d)(3) and Section 457(d)(1)(A)(iii) of the Internal Revenue Code. The systematic withdrawal may be pursuant to the systematic withdrawal plan for the Delaware Investments® Funds or a systematic withdrawal permitted by the Internal Revenue Code.
Classes A
1
, B, and C
|
Available
|
Distributions from an account of a redemption resulting from death or disability
Distributions from an account of a redemption resulting from the death or disability (as defined in Section 72(t)(2)(A) of the Internal Revenue Code) of a registered owner or a registered joint owner occurring after the purchase of the shares being redeemed. In the case of accounts established under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act or trust accounts, the waiver applies upon the death of all beneficial owners.
Classes A
1
, B, and C
|
Available
|
Redemptions by certain legacy retirement assets
Redemptions by certain legacy retirement assets that meet the requirements set forth in the SAI.
Class A
1
|
Class B
|
Class C
|
Available
|
Not available
|
Available
|
Redemptions by the classes of shareholders who are permitted to purchase shares at NAV
Redemptions by the classes of shareholders who are permitted to purchase shares at NAV, regardless of the size of the purchase.
Class A
1
|
Classes B and C
|
Available
|
Not available
|
1
The waiver of Class A shares relates to a waiver of the Limited CDSC. Please note that you or your financial advisor will have to notify us at the time of purchase that the trade qualifies for such waiver.
2
Qualified plans that are fully redeemed at the direction of the plan's fiduciary are subject to any applicable CDSC or Limited CDSC, unless the redemption is due to the termination of the plan.
How to buy shares
Through your financial advisor
Your financial advisor can handle all the details of purchasing shares, including opening an account. Your financial advisor may charge a separate fee for this service.
By mail
Complete an investment slip and mail it with your check, made payable to the fund and class of shares you wish to purchase, to Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 or 4400 Computer Drive, Westborough, MA 01581-1722 for investments by overnight courier service. If you are making an initial purchase by mail, you must include a completed investment application (or an appropriate retirement plan application if you are opening a retirement account) with your check.
Please note that purchase orders submitted by mail will not be accepted until such purchase orders are received by Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 for investments by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 for investments by overnight courier service. Please do not send purchase orders to 2005 Market Street, Philadelphia, PA.
By wire
Ask your bank to wire the amount you want to invest to The Bank of New York Mellon, ABA #011001234, bank account #000073-6910. Include your account number and the name of the fund and class of shares in which you want to invest. If you are making an initial purchase by wire, you must first call us at 800 523-1918 so we can assign you an account number.
By exchange
You may exchange all or part of your investment in one or more Delaware Investments® Funds for shares of other Delaware Investments® Funds. Please keep in mind, however, that under most circumstances you are allowed to exchange only between like classes of shares. To open an account by exchange, call the Shareholder Service Center at 800 523-1918.
Through automated shareholder services
For Class A, Class B, and Class C shares only, you may purchase or exchange shares through our automated telephone service, or through our website, delawareinvestments.com. For more information about how to sign up for these services, call our Shareholder Service Center at 800 523-1918.
Calculating share price
The price you pay for shares will depend on when we receive your purchase order. If your order is received by an authorized agent or us before the close of regular trading on the NYSE, which is normally 4:00 p.m. Eastern time, you will pay that day's closing share price, which is based on a fund's NAV. If your order is received after the close of regular trading on the NYSE, you will pay the next Business Day's price. We reserve the right to reject any purchase order.
We determine the NAV per share for each class of a Delaware Investments® Fund at the close of regular trading on the NYSE on each Business Day. The NAV per share for each class of a fund is calculated by subtracting the liabilities of each class from its total assets and dividing the resulting number by the number of shares outstanding for that class. We generally price securities and other assets for which market quotations are readily available at their market value. For a fund that invests primarily in foreign securities, the NAV may change on days when a shareholder will not be able to purchase or redeem fund shares because foreign markets are open at times and on days when U.S. markets are not. We price fixed income securities on the basis of valuations provided to us by an independent pricing service that uses methods approved by the Board. For all other securities, we use methods approved by the Board that are designed to price securities at their fair market values.
Fair valuation
When the Funds use fair value pricing, they may take into account any factors they deem appropriate. The Funds may determine fair value based upon developments related to a specific security, current valuations of foreign stock indices (as reflected in U.S. futures markets), and/or U.S. sector or broad stock market indices. The prices of securities used by the Funds to calculate their NAV may differ from quoted or published prices for the same securities. Fair value pricing may involve subjective judgments and it is possible that the fair value determined for a security is materially different than the value that could be realized upon the sale of that security.
The Funds anticipate using fair value pricing for securities primarily traded on U.S. exchanges only under very limited circumstances, such as the early closing of the exchange on which a security is traded or suspension of trading in the security. The Funds may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Funds value their securities at 4:00 p.m. Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. To account for this, the Funds may frequently value many foreign equity securities using fair value prices based on third-party vendor modeling tools to the extent available.
The Boards have delegated responsibility for valuing the Funds' assets to a Pricing Committee of the Manager, which operates under the policies and procedures approved by the Boards and which is subject to the Boards' oversight.
Retirement plans
In addition to being an appropriate investment for your IRA, Roth IRA, and Coverdell Education Savings Account, the Funds may be suitable for group retirement plans. You may establish your IRA account even if you are already a participant in an employer-sponsored retirement plan. For more information on how the Funds can play an important role in your retirement planning or for details about group plans, please consult your financial advisor, or call our Shareholder Service Center at 800 523-1918.
Document delivery
To reduce fund expenses, we try to identify related shareholders in a household and send only one copy of a fund's financial reports and prospectus. This process, called "householding," will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call our Shareholder Service Center at 800 523-1918. At any time you may view current prospectuses and financial reports on our website.
Inactive accounts
Please note that your account may be transferred to the appropriate state if no activity occurs in the account within the time period specified by state law.
How to redeem shares
When you send us a properly completed request to redeem or exchange shares and the request is received by an authorized agent or us before the close of regular trading on the NYSE (normally 4:00 p.m. Eastern time), you will receive the NAV next determined after we receive your request. If we receive your request after the close of regular trading on the NYSE, you will receive the NAV next determined on the next Business Day. We will deduct any applicable CDSCs. You may also have to pay taxes on the proceeds from your sale of shares. We will send you a check, normally the next Business Day, but no later than seven days after we receive your request to sell your shares. If you purchased your shares by check and sell them before your check has cleared, which can take up to 15 days, we will wait until your check has cleared before we send you your redemption proceeds.
If you are required to pay a CDSC when you redeem your shares, the amount subject to the fee will be based on the shares' NAV when you purchased them or their NAV when you redeem them, whichever is less. This arrangement ensures that you will not pay a CDSC on any increase in the value of your shares. You also will not pay the charge on any shares acquired by reinvesting dividends or capital gains. If you exchange shares of one fund for shares of another, you do not pay a CDSC at the time of the exchange. If you later redeem those shares, the purchase price for purposes of the CDSC formula will be the price you paid for the original shares, not the exchange price. The redemption price for purposes of this formula will be the NAV of the shares you are actually redeeming.
If you hold your shares in certificates, you must submit the certificates with your request to sell the shares. We recommend that you send your certificates by certified mail.
Through your financial advisor
Your financial advisor can handle all the details of redeeming your shares (selling them back to a Fund). Your financial advisor may charge a separate fee for this service.
By mail
You may redeem your shares by mail by writing to: Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 or 4400 Computer Drive, Westborough, MA 01581-1722 for redemptions by overnight courier service. All owners of the account must sign the request. For redemptions of more than $100,000, you must include a signature guarantee for each owner. Signature guarantees are also required when redemption proceeds are going to an address other than the address of record on the account.
Please note that redemption orders submitted by mail will not be considered accepted until such orders are received by Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 for redemptions by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 for redemptions by overnight courier service. Please do not send redemption requests to 2005 Market Street, Philadelphia, PA.
By telephone
You may redeem up to $100,000 of your shares by telephone. You may have the proceeds sent to you by check or, if you redeem at least $1,000 of shares, you may have the proceeds sent directly to your bank by wire. If you request a wire deposit, a bank wire fee may be deducted from your proceeds. Bank information must be on file before you request a wire redemption.
By wire
You may redeem $1,000 or more of your shares and have the proceeds deposited directly to your bank account, normally the next Business Day after we receive your request. If you request a wire deposit, a bank wire fee may be deducted from your proceeds. Bank information must be on file before you request a wire redemption.
Through automated shareholder services
For Class A, Class B, Class C, and Class R shares only, you may redeem shares through our automated telephone service or through our website, delawareinvestments.com. For more information about how to sign up for these services, call our Shareholder Service Center at 800 523-1918.
Redemptions-in-kind
The Funds have reserved the right to pay for redemptions with portfolio securities under certain conditions. See the SAI for more information on redemptions-in-kind.
Account minimums
For Class A, Class B, Class C, and Class R shares, if you redeem shares and your account balance falls below the required account minimum of $1,000 ($250 for IRAs, Roth IRAs, Uniform Gifts to Minors Act and Uniform Transfers to Minors Act accounts, or accounts with automatic investing plans, and $500 for Coverdell Education Savings Accounts) for three or more consecutive months, you will have until the end of the current calendar quarter to raise the balance to the minimum. If your account is not at the minimum by the required time, you may be charged a $9 fee for that quarter and each quarter after that until your account reaches the minimum balance. If your account does not reach the minimum balance, we may redeem your account after 60 days' written notice to you. Any CDSC that would otherwise be applicable will not apply to such a redemption.
For Institutional Class shares, if you redeem shares and your account balance falls below $250, the Fund may redeem your shares after 60 days' written notice to you.
Investor services
To help make investing with us as easy as possible, and to help you build your investments, we offer the following investor services.
Automatic investment plan
The automatic investment plan allows you to make regular monthly or quarterly investments directly from your checking account.
Direct deposit
With direct deposit, you can make additional investments through payroll deductions, recurring government or private payments such as Social Security, or direct transfers from your bank account.
Electronic delivery
With Delaware eDelivery, you can receive your fund documents electronically instead of via U.S. mail. When you sign up for eDelivery, you can access your account statements, shareholder reports, and other fund materials online, in a secure internet environment at any time, from anywhere.
Online account access
Online account access is a password-protected area of the Delaware Investments
®
Funds' website that gives you access to your account information and allows you to perform transactions in a secure internet environment.
Systematic exchange option
With the systematic exchange option, you can arrange automatic monthly exchanges between your shares in one or more Delaware Investments® Funds. These exchanges are subject to the same rules as regular exchanges (see below) and require a minimum monthly exchange of $100 per fund.
Dividend reinvestment plan
Through the dividend reinvestment plan, you can have your distributions reinvested in your account or the same share class in another Delaware Investments® Fund. The shares that you purchase through the dividend reinvestment plan are not subject to a front-end sales charge or to a CDSC. Under most circumstances, you may reinvest dividends only into like classes of shares.
Exchanges
You may generally exchange all or part of your shares for shares of the same class of another Delaware Investments® Fund without paying a front-end sales charge or a CDSC at the time of the exchange. However, if you exchange shares from a money market fund that does not have a sales charge, you will pay any applicable sales charge on your new shares. When exchanging Class B and Class C shares of one fund for the same class of shares in other funds, your new shares will be subject to the same CDSC as the shares you originally purchased. The holding period for the CDSC will also remain the same, with the amount of time you held your original shares being credited toward the holding period of your new shares. In certain other circumstances, you may also be permitted to exchange your shares for shares of a different class of the Fund, but such exchange may be subject to a sales charge for the new shares. (Please refer to the SAI for more details.) You do not pay sales charges on shares that you acquired through the reinvestment of dividends. You may have to pay taxes on your exchange. When you exchange shares, you are purchasing shares in another fund, so you should be sure to get a copy of the fund's prospectus and read it carefully before buying shares through an exchange. We may refuse the purchase side of any exchange request if, in the Manager's judgment, a fund would be unable to invest effectively in accordance with its investment objective and policies or would otherwise potentially be adversely affected.
On demand service
Through the on demand service, you or your financial advisor may transfer money between your Fund account and your predesignated bank account by telephone request. There is a minimum transfer of $25 and a maximum transfer of $100,000. Delaware Investments does not charge a fee for this service; however, your bank may assess one.
Direct deposit service
Through the direct deposit service, you can have $25 or more in dividends and distributions deposited directly into your bank account. Delaware Investments does not charge a fee for this service; however, your bank may assess one. This service is not available for retirement plans.
Systematic withdrawal plan
For Class A, Class B, and Class C shares, you can arrange a regular monthly or quarterly payment from your account made to you or someone you designate. If the value of your account is $5,000 or more, you can make withdrawals of at least $25 monthly, or $75 quarterly. You may also have your withdrawals deposited directly to your bank account through the direct deposit service.
The applicable Limited CDSC for Class A shares and the CDSC for Class B and C shares redeemed via a systematic withdrawal plan will be waived if the annual amount withdrawn in each year is less than 12% of the account balance on the date that the plan is established. If the annual amount withdrawn in any year exceeds 12% of the account balance on the date that the systematic withdrawal plan is established, all redemptions under the plan will be subject to the applicable CDSC, including an assessment for previously redeemed amounts under the plan.
Frequent trading of Fund shares
The Funds discourage purchases by market timers and purchase orders (including the purchase side of exchange orders) by shareholders identified as market timers may be rejected. The Funds' Board has adopted policies and procedures designed to detect, deter and prevent trading activity detrimental to the Funds and their shareholders, such as market timing. The Funds will consider anyone who follows a pattern of market timing in any Delaware Investments® Fund or the Optimum Fund Trust to be a market timer and may consider anyone who has followed a similar pattern of market timing at an unaffiliated fund family to be a market timer.
Market timing of a fund occurs when investors make consecutive rapid short-term "roundtrips," that is, purchases into a fund followed quickly by redemptions out of that fund. A short-term roundtrip is any redemption of fund shares within 20 Business Days of a purchase of that fund's shares. If you make a second such short-term roundtrip in a fund within 90 rolling calendar days of a previous short-term roundtrip in that fund, you may be considered a market timer. In determining whether market timing has occurred, the Funds will consider short-term roundtrips to include rapid purchases and sales of Fund shares through the exchange privilege. The Funds also reserve the right to consider other trading patterns to be market timing.
Your ability to use the Funds' exchange privilege may be limited if you are identified as a market timer. If you are identified as a market timer, we will execute the redemption side of your exchange order but may refuse the purchase side of your exchange order. The Funds reserve the right to restrict or reject, without prior notice, any purchase order or exchange order for any reason, including any purchase order or exchange order accepted by any shareholder's financial intermediary or in any omnibus-type account. Transactions placed in violation of the Funds' market timing policy are not necessarily deemed accepted by the Funds and may be rejected by a Fund on the next Business Day following receipt by a Fund.
Redemptions will continue to be permitted in accordance with the Funds' current Prospectus. A redemption of shares under these circumstances could be costly to a shareholder if, for example, the shares have declined in value, the shareholder recently paid a front-end sales charge, the shares are subject to a CDSC, or the sale results in adverse tax consequences. To avoid this risk, a shareholder should carefully monitor the purchases, sales, and exchanges of Fund shares and avoid frequent trading in Fund shares.
Each Fund reserves the right to modify this policy at any time without notice, including modifications to a Fund's monitoring procedures and the procedures to close accounts to new purchases. Although the implementation of this policy involves judgments that are inherently subjective and may be selectively applied, we seek to make judgments and applications that are consistent with the interests of each Fund's shareholders. While we will take actions designed to detect and prevent market timing, there can be no assurance that such trading activity will be completely eliminated. Moreover, a Fund's market timing policy does not require it to take action in response to frequent trading activity. If a Fund elects not to take any action in response to frequent trading, such frequent trading activity could continue.
Risks of market timing
By realizing profits through short-term trading, shareholders that engage in rapid purchases and sales or exchanges of the Funds' shares dilute the value of shares held by long-term shareholders. Volatility resulting from excessive purchases and sales or exchanges of Fund shares, especially involving large dollar amounts, may disrupt efficient portfolio management. In particular, a Fund may have difficulty implementing its long-term investment strategies if it is forced to maintain a higher level of its assets in cash to accommodate significant short-term trading activity. Excessive purchases and sales or exchanges of a Fund's shares may also force a Fund to sell portfolio securities at inopportune times to raise cash to accommodate short-term trading activity. This could adversely affect a Fund's performance if, for example, a Fund incurs increased brokerage costs and realization of taxable capital gains without attaining any investment advantage.
A fund that invests significantly in foreign securities may be particularly susceptible to short-term trading strategies. This is because foreign securities are typically traded on markets that close well before the time a fund calculates its NAV (normally 4:00 p.m. Eastern time). Developments that occur between the closing of the foreign market and the fund's NAV calculation may affect the value of these foreign securities. The time zone differences among international stock markets can allow a shareholder engaging in a short-term trading strategy to exploit differences in fund share prices that are based on closing prices of foreign securities established some time before a fund calculates its own share price.
Any fund that invests in securities that are thinly traded, traded infrequently, or relatively illiquid has the risk that the securities prices used to calculate the fund's NAV may not accurately reflect current market values. A shareholder may seek to engage in short-term trading to take advantage of these pricing differences. Funds that may be adversely affected by such arbitrage include, in particular, funds that significantly invest in small-cap securities, technology and other specific industry sector securities, and in certain fixed income securities, such as high yield bonds, asset-backed securities, or municipal bonds.
Transaction monitoring procedures
Each Fund, through its transfer agent, maintains surveillance procedures designed to detect excessive or short-term trading in Fund shares. This monitoring process involves several factors, which include scrutinizing transactions in Fund shares for violations of the Funds' market timing policy or other patterns of short-term or excessive trading. For purposes of these transaction monitoring procedures, the Funds may consider trading activity by multiple accounts under common ownership, control or influence to be trading by a single entity. Trading activity identified by these factors, or as a result of any other available information, will be evaluated to determine whether such activity might constitute market timing. These procedures may be modified from time to time to improve the detection of excessive or short-term trading or to address other concerns. Such changes may be necessary or appropriate, for example, to deal with issues specific to certain retirement plans, plan exchange limits, U.S. Department of Labor regulations, certain automated or pre-established exchange, asset allocation or dollar cost averaging programs, or omnibus account arrangements.
Omnibus account arrangements are common forms of holding shares of a Fund, particularly among certain broker/dealers and other financial intermediaries, including sponsors of retirement plans and variable insurance products. The Funds will attempt to have financial intermediaries apply the Funds' monitoring procedures to these omnibus accounts and to the individual participants in such accounts. However, to the extent that a financial intermediary is not able or willing to monitor or enforce the Funds' frequent trading policy with respect to an omnibus account, the Funds or their agents may require the financial intermediary to impose its frequent trading policy, rather than the Funds' policy, to shareholders investing in the Fund through the financial intermediary. In addition, a Fund or its transfer agent may enter into shareholder information agreements with such financial intermediaries under which a Fund may receive information (such as taxpayer identification numbers and Fund transaction activity) in order to identify frequent trading activity.
A financial intermediary may impose different requirements or have additional restrictions on the frequency of trading than the Funds. Such restrictions may include without limitation, requiring the trades to be placed by U.S. mail, prohibiting purchases for a designated period of time (typically 30 to 90 days) by investors who have recently purchased or redeemed Fund shares and similar restrictions. The Funds' ability to impose such restrictions with respect to accounts traded through particular financial intermediaries may vary depending on systems capabilities, applicable contractual and legal restrictions, and cooperation of those financial intermediaries.
You should consult your financial intermediary regarding the application of such restrictions and to determine whether your financial intermediary imposes any additional or different limitations. In an effort to discourage market timers in such accounts, the Funds may consider enforcement against market timers at the participant level and at the omnibus level, up to and including termination of the omnibus account's authorization to purchase Fund shares.
Limitations on ability to detect and curtail market timing
Shareholders seeking to engage in market timing may employ a variety of strategies to avoid detection and, despite the efforts of the Funds and their agents to detect market timing in Fund shares, there is no guarantee that the Funds will be able to identify these shareholders or curtail their trading practices. In particular, the Funds may not be able to detect market timing attributable to a particular investor who effects purchase, redemption and/or exchange activity in Fund shares through omnibus accounts. The difficulty of detecting market timing may be further compounded if these entities utilize multiple tiers or omnibus accounts.
Dividends, distributions, and taxes
Dividends and distributions
Each Fund intends to qualify each year as a regulated investment company under the Code. As a regulated investment company, a Fund generally pays no federal income tax on the income and gains it distributes to you. Each Fund expects to declare dividends daily and distribute all of its net investment income, if any, to shareholders as dividends monthly. Each Fund will distribute net realized capital gains, if any, at least annually, usually in December. A Fund may distribute such income dividends and capital gains more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Fund. The amount of any distribution will vary, and there is no guarantee a Fund will pay either an income dividend or a capital gains distribution. We automatically reinvest all dividends and any capital gains, unless you direct us to do otherwise.
Annual statements
Each year, the Fund will send you an annual statement (Form 1099) of your account activity to assist you in completing your federal, state and local tax returns. Distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December. Prior to issuing your statement, the Fund makes every effort to reduce the number of corrected forms mailed to you. However, if the Fund finds it necessary to reclassify its distributions or adjust the cost basis of any covered shares sold or exchanged after you receive your tax statement, the Fund will send you a corrected Form 1099.
Avoid "buying a dividend"
At the time you purchase your Fund shares, a Fund's net asset value may reflect undistributed income, undistributed capital gains, or net unrealized appreciation in value of portfolio securities held by it. For taxable investors, a subsequent distribution to you of such amounts, although constituting a return of your investment, would be taxable. Buying shares in a Fund just before it declares an income dividend or capital gains distribution is sometimes known as "buying a dividend."
Tax considerations
Fund distributions.
Each Fund expects, based on its investment objective and strategies, that its distributions, if any, will be taxable as ordinary income, capital gains, or some combination of both. This is true whether you reinvest your distributions in additional Fund shares or receive them in cash.
For federal income tax purposes, Fund distributions of short-term capital gains are taxable to you as ordinary income. Fund distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your shares. With respect to income dividends paid on or before December 31, 2012 (unless such provision is extended, possibly retroactively to January 1, 2013, or made permanent), a portion of income dividends reported by a Fund may be qualified dividend income eligible for taxation by individual shareholders at long-term capital gain rates provided certain holding period requirements are met. Because the income of a Fund is primarily derived from investments earning interest rather than dividend income, generally none or only a small portion of the income dividends paid to you by the Fund is anticipated to be qualified dividend income eligible for taxation by individuals at long-term capital gain tax rates.
Sale or redemption of Fund shares
. A sale or redemption of Fund shares is a taxable event and, accordingly, a capital gain or loss may be recognized. For tax purposes, an exchange of your Fund shares for shares of a different Delaware Investments
®
Fund is the same as a sale. Beginning with the 2012 calendar year, the Fund will be required to report to you and the Internal Revenue Service annually on Form 1099-B not only the gross proceeds of Fund shares you sell or redeem but also the cost basis for shares purchased or acquired on or after January 1, 2012 ("covered shares"). Cost basis will be calculated using a Fund's default method, unless you instruct the Fund to use a different calculation method. Shareholders should carefully review the cost basis information provided by a Fund and make any additional basis, holding period, or other adjustments that are required when reporting these amounts on their federal income tax returns. If your account is held by your investment representative (financial advisor or other broker), please contact that representative with respect to reporting of cost basis and available elections for your account. Tax-advantaged retirement accounts will not be affected. Additional information and updates regarding cost basis reporting and available shareholder elections will be on Delaware Investments
®
website at delawareinvestments.com as the information becomes available.
Medicare tax.
For taxable years beginning after December 31, 2012, an additional 3.8% Medicare tax will be imposed on certain net investment income (including ordinary dividends and capital gain distributions received from a Fund and net gains from redemptions or other taxable dispositions of Fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.
Backup withholding.
By law, if you do not provide a Fund with your proper taxpayer identification number and certain required certifications, you may be subject to backup withholding on any distributions of income, capital gains, or proceeds from the sale of your shares. Each Fund also must withhold if the Internal Revenue Service instructs it to do so. When withholding is required, the amount will be 28% of any distributions or proceeds paid (for distributions and proceeds paid after December 31, 2012, the rate is scheduled to rise to 31% unless the 28% rate is extended, possibly retroactively to January 1, 2013, or made permanent).
State and local taxes.
Fund distributions and gains from the sale or exchange of your Fund shares generally are subject to state and local taxes.
Non-U.S. investors. Non-U.S. investors may be subject to U.S. withholding tax at a 30% or lower treaty rate and U.S. estate tax and are subject to special U.S. tax certification requirements to avoid backup withholding and claim any treaty benefits. An exemption from U.S. withholding tax is provided for capital gain dividends paid by a Fund from long-term capital gains, if any. However, notwithstanding such exemption from U.S. withholding at the source, any such dividends and distributions of income and capital gains will be subject to backup withholding at a rate of 28% (or the then applicable rate) if you fail to properly certify that you are not a U.S. person.
Other Reporting and Withholding Requirements.
The Foreign Account Tax Compliance Act ("FATCA") requires the reporting to the Internal Revenue Service of certain direct and indirect ownership of foreign financial accounts by U.S. persons. Failure to provide this required information can result in a generally nonrefundable 30% tax on: (a) income dividends paid by a Fund after December 31, 2013 and (b) certain capital gain distributions (including proceeds arising from the sale Fund shares) paid by a Fund after December 31, 2016 to certain "foreign financial institutions" and "non-financial foreign entities."
This discussion of "Dividends, distributions, and taxes" is not intended or written to be used as tax advice. Because everyone's tax situation is unique, you should consult your tax professional about federal, state, local, or foreign tax consequences before making an investment in a Fund.
Certain management considerations
Investments by funds of funds and similar investment vehicles
The Funds may accept investments from funds of funds, as well as from similar investment vehicles, such as 529 Plans. A "529 Plan" is a college savings program that operates under Section 529 of the Internal Revenue Code. From time to time, a Fund may experience large investments or redemptions due to allocations or rebalancings by these funds of funds and/or similar investment vehicles. While it is impossible to predict the overall impact of these transactions over time, there could be adverse effects on portfolio management. For example, a Fund may be required to sell securities or invest cash at times when it would not otherwise do so. These transactions could also have tax consequences if sales of securities result in gains, and could also increase transaction costs or portfolio turnover.
Financial highlights
The financial highlights table is intended to help you understand each Fund's financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in each Fund (assuming reinvestment of all dividends and distributions). The information for the 2012, 2011, and 2010 fiscal years has been audited by PricewaterhouseCoopers LLP, independent registered public accounting firm, whose report, along with the Funds' financial statements, are included in the annual report, which is available upon request by calling 800 523-1918. For the fiscal years prior to 2010, the Funds' prior independent registered public accounting firm audited the Funds' financial statements.
Delaware Corporate Bond Fund Class A shares
Class A Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$6.050
|
$6.080
|
$5.460
|
$5.240
|
$5.520
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
1
|
0.246
|
0.268
|
0.309
|
0.314
|
0.279
|
Net realized and unrealized gain (loss)
|
0.384
|
0.278
|
0.647
|
0.216
|
(0.272)
|
Total from investment operations
|
0.630
|
0.546
|
0.956
|
0.530
|
0.007
|
|
|
|
|
|
|
Less dividends and distributions from:
|
|
|
|
|
|
Net investment income
|
(0.284)
|
(0.305)
|
(0.336)
|
(0.310)
|
(0.287)
|
Net realized gain
|
(0.136)
|
(0.271)
|
—
|
—
|
—
|
Total dividends and distributions
|
(0.420)
|
(0.576)
|
(0.336)
|
(0.310)
|
(0.287)
|
|
|
|
|
|
|
Net asset value, end of period
|
$6.260
|
$6.050
|
$6.080
|
$5.460
|
$5.240
|
|
|
|
|
|
|
Total return
2
|
11.04%
|
9.44%
|
17.91%
|
11.04%
|
0.04%
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$638,481
|
$392,313
|
$409,671
|
$459,892
|
$268,659
|
Ratio of expenses to average net assets
|
0.94%
|
0.95%
|
0.94%
|
0.90%
|
0.90%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
1.01%
|
1.09%
|
1.10%
|
1.11%
|
1.08%
|
Ratio of net investment income to average net assets
|
4.11%
|
4.45%
|
5.31%
|
6.45%
|
5.10%
|
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly
|
4.04%
|
4.31%
|
5.15%
|
6.24%
|
4.92%
|
Portfolio turnover
|
202%
|
204%
|
219%
|
271%
|
355%
|
1
|
The average shares outstanding method has been applied for per share information.
|
2
|
Total investment return during the period shown is based on the change in net asset value of a share and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect.
|
Delaware Corporate Bond Fund Class B shares
Class B Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$6.050
|
$6.080
|
$5.460
|
$5.230
|
$5.520
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
1
|
0.200
|
0.223
|
0.265
|
0.278
|
0.238
|
Net realized and unrealized gain (loss)
|
0.385
|
0.278
|
0.647
|
0.225
|
(0.283)
|
Total from investment operations
|
0.585
|
0.501
|
0.912
|
0.503
|
(0.045)
|
|
|
|
|
|
|
Less dividends and distributions from:
|
|
|
|
|
|
Net investment income
|
(0.239)
|
(0.260)
|
(0.292)
|
(0.273)
|
(0.245)
|
Net realized gain
|
(0.136)
|
(0.271)
|
—
|
—
|
—
|
Total dividends and distributions
|
(0.375)
|
(0.531)
|
(0.292)
|
(0.273)
|
(0.245)
|
|
|
|
|
|
|
Net asset value, end of period
|
$6.260
|
$6.050
|
$6.080
|
$5.460
|
$5.230
|
|
|
|
|
|
|
Total return
2
|
10.22%
|
8.62%
|
17.04%
|
10.43%
|
(0.90%)
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$4,739
|
$6,705
|
$9,807
|
$11,938
|
$15,525
|
Ratio of expenses to average net assets
|
1.69%
|
1.70%
|
1.69%
|
1.65%
|
1.65%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
1.71%
|
1.79%
|
1.80%
|
1.81%
|
1.78%
|
Ratio of net investment income to average net assets
|
3.36%
|
3.70%
|
4.56%
|
5.70%
|
4.35%
|
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly
|
3.34%
|
3.61%
|
4.45%
|
5.54%
|
4.22%
|
Portfolio turnover
|
202%
|
204%
|
219%
|
271%
|
355%
|
1
|
The average shares outstanding method has been applied for per share information.
|
2
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver(s) not been in effect.
|
Delaware Corporate Bond Fund Class C shares
Class C Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$6.050
|
$6.090
|
$5.470
|
$5.240
|
$5.520
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
1
|
0.202
|
0.223
|
0.266
|
0.278
|
0.238
|
Net realized and unrealized gain (loss)
|
0.383
|
0.268
|
0.646
|
0.225
|
(0.273)
|
Total from investment operations
|
0.585
|
0.491
|
0.912
|
0.503
|
(0.035)
|
|
|
|
|
|
|
Less dividends and distributions from:
|
|
|
|
|
|
Net investment income
|
(0.239)
|
(0.260)
|
(0.292)
|
(0.273)
|
(0.245)
|
Net realized gain
|
(0.136)
|
(0.271)
|
—
|
—
|
—
|
Total dividends and distributions
|
(0.375)
|
(0.531)
|
(0.292)
|
(0.273)
|
(0.245)
|
|
|
|
|
|
|
Net asset value, end of period
|
$6.260
|
$6.050
|
$6.090
|
$5.470
|
$5.240
|
|
|
|
|
|
|
Total return
2
|
10.21%
|
8.44%
|
17.01%
|
10.41%
|
(0.71%)
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$249,029
|
$135,912
|
$141,328
|
$121,901
|
$62,211
|
Ratio of expenses to average net assets
|
1.69%
|
1.70%
|
1.69%
|
1.65%
|
1.65%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
1.71%
|
1.79%
|
1.80%
|
1.81%
|
1.78%
|
Ratio of net investment income to average net assets
|
3.36%
|
3.70%
|
4.56%
|
5.70%
|
4.35%
|
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly
|
3.34%
|
3.61%
|
4.45%
|
5.54%
|
4.22%
|
Portfolio turnover
|
202%
|
204%
|
219%
|
271%
|
355%
|
1
|
The average shares outstanding method has been applied for per share information.
|
2
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver(s) not been in effect.
|
Delaware Corporate Bond Fund Class R shares
Class R Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$6.050
|
$6.090
|
$5.470
|
$5.240
|
$5.520
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
1
|
0.231
|
0.253
|
0.295
|
0.302
|
0.265
|
Net realized and unrealized gain (loss)
|
0.394
|
0.268
|
0.646
|
0.226
|
(0.272)
|
Total from investment operations
|
0.625
|
0.521
|
0.941
|
0.528
|
(0.007)
|
|
|
|
|
|
|
Less dividends and distributions from:
|
|
|
|
|
|
Net investment income
|
(0.269)
|
(0.290)
|
(0.321)
|
(0.298)
|
(0.273)
|
Net realized gain
|
(0.136)
|
(0.271)
|
—
|
—
|
—
|
Total dividends and distributions
|
(0.405)
|
(0.561)
|
(0.321)
|
(0.298)
|
(0.273)
|
|
|
|
|
|
|
Net asset value, end of period
|
$6.270
|
$6.050
|
$6.090
|
$5.470
|
$5.240
|
|
|
|
|
|
|
Total return
2
|
10.94%
|
8.98%
|
17.60%
|
10.97%
|
(0.21%)
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$22,661
|
$11,981
|
$10,209
|
$11,229
|
$11,973
|
Ratio of expenses to average net assets
|
1.19%
|
1.20%
|
1.19%
|
1.15%
|
1.15%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
1.31%
|
1.39%
|
1.40%
|
1.41%
|
1.38%
|
Ratio of net investment income to average net assets
|
3.86%
|
4.20%
|
5.06%
|
6.20%
|
4.85%
|
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly
|
3.74%
|
4.01%
|
4.85%
|
5.94%
|
4.62%
|
Portfolio turnover
|
202%
|
204%
|
219%
|
271%
|
355%
|
1
|
The average shares outstanding method has been applied for per share information.
|
2
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect.
|
Delaware Corporate Bond Fund Institutional Class shares
Institutional Class Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$6.050
|
$6.090
|
$5.470
|
$5.240
|
$5.520
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
1
|
0.261
|
0.283
|
0.329
|
0.327
|
0.293
|
Net realized and unrealized gain (loss)
|
0.384
|
0.268
|
0.641
|
0.225
|
(0.273)
|
Total from investment operations
|
0.645
|
0.551
|
0.970
|
0.552
|
0.020
|
|
|
|
|
|
|
Less dividends and distributions from:
|
|
|
|
|
|
Net investment income
|
(0.299)
|
(0.320)
|
(0.350)
|
(0.322)
|
(0.300)
|
Net realized gain
|
(0.136)
|
(0.271)
|
—
|
—
|
—
|
Total dividends and distributions
|
(0.435)
|
(0.591)
|
(0.350)
|
(0.322)
|
(0.300)
|
|
|
|
|
|
|
Net asset value, end of period
|
$6.260
|
$6.050
|
$6.090
|
$5.470
|
$5.240
|
|
|
|
|
|
|
Total return
2
|
11.32%
|
9.52%
|
18.40%
|
11.53%
|
0.10%
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$507,190
|
$466,660
|
$357,801
|
$50,235
|
$205,197
|
Ratio of expenses to average net assets
|
0.69%
|
0.70%
|
0.69%
|
0.65%
|
0.65%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
0.71%
|
0.79%
|
0.80%
|
0.81%
|
0.78%
|
Ratio of net investment income to average net assets
|
4.36%
|
4.70%
|
5.56%
|
6.70%
|
5.35%
|
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly
|
4.34%
|
4.61%
|
5.45%
|
6.54%
|
5.22%
|
Portfolio turnover
|
202%
|
204%
|
219%
|
271%
|
355%
|
1
|
The average shares outstanding method has been applied for per share information.
|
2
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect.
|
Delaware Extended Duration Bond Fund Class A shares
Class A Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$6.380
|
$6.440
|
$5.600
|
$5.210
|
$5.460
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
1
|
0.300
|
0.318
|
0.348
|
0.344
|
0.296
|
Net realized and unrealized gain (loss)
|
1.055
|
0.268
|
0.850
|
0.385
|
(0.245)
|
Total from investment operations
|
1.355
|
0.586
|
1.198
|
0.729
|
0.051
|
|
|
|
|
|
|
Less dividends and distributions from:
|
|
|
|
|
|
Net investment income
|
(0.319)
|
(0.329)
|
(0.358)
|
(0.339)
|
(0.301)
|
Net realized gain
|
(0.266)
|
(0.317)
|
—
|
—
|
—
|
Total dividends and distributions
|
(0.585)
|
(0.646)
|
(0.358)
|
(0.339)
|
(0.301)
|
|
|
|
|
|
|
Net asset value, end of period
|
$7.150
|
$6.380
|
$6.440
|
$5.600
|
$5.210
|
|
|
|
|
|
|
Total return
2
|
22.48%
|
9.74%
|
22.00%
|
15.17%
|
0.83%
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$402,639
|
$352,060
|
$275,312
|
$184,538
|
$163,372
|
Ratio of expenses to average net assets
|
0.95%
|
0.95%
|
0.94%
|
0.90%
|
0.90%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
1.06%
|
1.12%
|
1.18%
|
1.29%
|
1.23%
|
Ratio of net investment income to average net assets
|
4.53%
|
5.07%
|
5.77%
|
7.03%
|
5.42%
|
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly
|
4.42%
|
4.90%
|
5.53%
|
6.64%
|
5.09%
|
Portfolio turnover
|
172%
|
147%
|
149%
|
234%
|
443%
|
1
|
The average shares outstanding method has been applied for per share information.
|
2
|
Total investment return during the period shown is based on the change in net asset value of a share and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect.
|
Delaware Extended Duration Bond Fund Class B shares
Class B Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$6.370
|
$6.430
|
$5.590
|
$5.200
|
$5.450
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
1
|
0.249
|
0.271
|
0.301
|
0.307
|
0.254
|
Net realized and unrealized gain (loss)
|
1.057
|
0.268
|
0.852
|
0.384
|
(0.244)
|
Total from investment operations
|
1.306
|
0.539
|
1.153
|
0.691
|
0.010
|
|
|
|
|
|
|
Less dividends and distributions from:
|
|
|
|
|
|
Net investment income
|
(0.270)
|
(0.282)
|
(0.313)
|
(0.301)
|
(0.260)
|
Net realized gain
|
(0.266)
|
(0.317)
|
—
|
—
|
—
|
Total dividends and distributions
|
(0.536)
|
(0.599)
|
(0.313)
|
(0.301)
|
(0.260)
|
|
|
|
|
|
|
Net asset value, end of period
|
$7.140
|
$6.370
|
$6.430
|
$5.590
|
$5.200
|
|
|
|
|
|
|
Total return
2
|
21.61%
|
8.93%
|
21.13%
|
14.33%
|
0.08%
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$1,887
|
$2,219
|
$3,464
|
$3,992
|
$4,718
|
Ratio of expenses to average net assets
|
1.70%
|
1.70%
|
1.69%
|
1.65%
|
1.65%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
1.76%
|
1.82%
|
1.88%
|
1.99%
|
1.93%
|
Ratio of net investment income to average net assets
|
3.78%
|
4.32%
|
5.02%
|
6.28%
|
4.67%
|
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly
|
3.72%
|
4.20%
|
4.83%
|
5.94%
|
4.39%
|
Portfolio turnover
|
172%
|
147%
|
149%
|
234%
|
443%
|
1
|
The average shares outstanding method has been applied for per share information.
|
2
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver(s) not been in effect.
|
Delaware Extended Duration Bond Fund Class C shares
Class C Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$6.380
|
$6.430
|
$5.600
|
$5.210
|
$5.460
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
1
|
0.251
|
0.272
|
0.302
|
0.307
|
0.254
|
Net realized and unrealized gain (loss)
|
1.055
|
0.277
|
0.841
|
0.385
|
(0.244)
|
Total from investment operations
|
1.306
|
0.549
|
1.143
|
0.692
|
0.010
|
|
|
|
|
|
|
Less dividends and distributions from:
|
|
|
|
|
|
Net investment income
|
(0.270)
|
(0.282)
|
(0.313)
|
(0.302)
|
(0.260)
|
Net realized gain
|
(0.266)
|
(0.317)
|
—
|
—
|
—
|
Total dividends and distributions
|
(0.536)
|
(0.599)
|
(0.313)
|
(0.302)
|
(0.260)
|
|
|
|
|
|
|
Net asset value, end of period
|
$7.150
|
$6.380
|
$6.430
|
$5.600
|
$5.210
|
|
|
|
|
|
|
Total return
2
|
21.57%
|
9.09%
|
20.91%
|
14.32%
|
0.08%
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$62,275
|
$24,532
|
$23,115
|
$19,120
|
$17,976
|
Ratio of expenses to average net assets
|
1.70%
|
1.70%
|
1.69%
|
1.65%
|
1.65%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
1.76%
|
1.82%
|
1.88%
|
1.99%
|
1.93%
|
Ratio of net investment income to average net assets
|
3.78%
|
4.32%
|
5.02%
|
6.28%
|
4.67%
|
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly
|
3.72%
|
4.20%
|
4.83%
|
5.94%
|
4.39%
|
Portfolio turnover
|
172%
|
147%
|
149%
|
234%
|
443%
|
1
|
The average shares outstanding method has been applied for per share information.
|
2
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver(s) not been in effect.
|
Delaware Extended Duration Bond Fund Class R shares
Class R Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$6.390
|
$6.440
|
$5.600
|
$5.210
|
$5.460
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
1
|
0.284
|
0.303
|
0.339
|
0.332
|
0.282
|
Net realized and unrealized gain (loss)
|
1.055
|
0.278
|
0.845
|
0.385
|
(0.245)
|
Total from investment operations
|
1.339
|
0.581
|
1.184
|
0.717
|
0.037
|
|
|
|
|
|
|
Less dividends and distributions from:
|
|
|
|
|
|
Net investment income
|
(0.303)
|
(0.314)
|
(0.344)
|
(0.327)
|
(0.287)
|
Net realized gain
|
(0.266)
|
(0.317)
|
—
|
—
|
—
|
Total dividends and distributions
|
(0.569)
|
(0.631)
|
(0.344)
|
(0.327)
|
(0.287)
|
|
|
|
|
|
|
Net asset value, end of period
|
$7.160
|
$6.390
|
$6.440
|
$5.600
|
$5.210
|
|
|
|
|
|
|
Total return
2
|
22.15%
|
9.63%
|
21.48%
|
15.08%
|
0.39%
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$20,080
|
$10,800
|
$14,131
|
$665
|
$377
|
Ratio of expenses to average net assets
|
1.20%
|
1.20%
|
1.19%
|
1.15%
|
1.15%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
1.36%
|
1.42%
|
1.48%
|
1.59%
|
1.53%
|
Ratio of net investment income to average net assets
|
4.28%
|
4.82%
|
5.52%
|
6.78%
|
5.17%
|
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly
|
4.12%
|
4.60%
|
5.23%
|
6.34%
|
4.79%
|
Portfolio turnover
|
172%
|
147%
|
149%
|
234%
|
443%
|
1
|
The average shares outstanding method has been applied for per share information.
|
2
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect.
|
Delaware Extended Duration Bond Fund Institutional Class shares
Institutional Class Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$6.370
|
$6.430
|
$5.590
|
$5.200
|
$5.450
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
1
|
0.317
|
0.332
|
0.364
|
0.356
|
0.309
|
Net realized and unrealized gain (loss)
|
1.055
|
0.269
|
0.849
|
0.385
|
(0.244)
|
Total from investment operations
|
1.372
|
0.601
|
1.213
|
0.741
|
0.065
|
Less dividends and distributions from:
|
|
|
|
|
|
Net investment income
|
(0.336)
|
(0.344)
|
(0.373)
|
(0.351)
|
(0.315)
|
Net realized gain
|
(0.266)
|
(0.317)
|
—
|
—
|
—
|
Total dividends and distributions
|
(0.602)
|
(0.661)
|
(0.373)
|
(0.351)
|
(0.315)
|
|
|
|
|
|
|
Net asset value, end of period
|
$7.140
|
$6.370
|
$6.430
|
$5.590
|
$5.200
|
|
|
|
|
|
|
Total return
2
|
22.82%
|
10.01%
|
22.33%
|
15.48%
|
1.09%
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$344,628
|
$124,076
|
$49,310
|
$26,223
|
$36,494
|
Ratio of expenses to average net assets
|
0.70%
|
0.70%
|
0.69%
|
0.65%
|
0.65%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
0.76%
|
0.82%
|
0.88%
|
0.99%
|
0.93%
|
Ratio of net investment income to average net assets
|
4.78%
|
5.32%
|
6.02%
|
7.28%
|
5.67%
|
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly
|
4.72%
|
5.20%
|
5.83%
|
6.94%
|
5.39%
|
Portfolio turnover
|
172%
|
147%
|
149%
|
234%
|
443%
|
1
|
The average shares outstanding method has been applied for per share information.
|
2
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect.
|
How to read the financial highlights
Net investment income (loss)
Net investment income (loss) includes dividend and interest income earned from a fund's investments; it is calculated after expenses have been deducted.
Net realized and unrealized gain (loss) on investments
A realized gain occurs when we sell an investment at a profit, while a realized loss occurs when we sell an investment at a loss. When an investment increases or decreases in value but we do not sell it, we record an unrealized gain or loss. The amount of realized gain per share, if any, that we pay to shareholders would be listed under "Less dividends and distributions from: Net realized gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an investment in a fund. In calculating this figure for the financial highlights table, we include applicable fee waivers, exclude front-end sales charges and contingent deferred sales charges, and assume the shareholder has reinvested all dividends and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio, less any liabilities, that are attributable to that class of the fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for operating expenses and management fees. These expenses include accounting and administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income (loss) to average net assets
We determine this ratio by dividing net investment income (loss) by average net assets.
Portfolio turnover
This figure tells you the amount of trading activity in a fund's portfolio. A turnover rate of 100% would occur if, for example, a fund bought and sold all of the securities in its portfolio once in the course of a year or frequently traded a single security. A high rate of portfolio turnover in any year may increase brokerage commissions paid and could generate taxes for shareholders on realized investment gains.
Additional information
Contact information
-
Website:
delawareinvestments.com
-
Shareholder Service Center: 800 523-1918 (representatives available weekdays from 8:30 a.m. to 6:00 p.m. Eastern time)
-
For fund information, literature, price, yield, and performance figures.
-
For information on existing regular investment accounts and retirement plan accounts including wire investments, wire redemptions, telephone redemptions, and telephone exchanges.
-
Automated telephone service: 800 523-1918 (seven days a week, 24 hours a day)
-
Written correspondence: P.O. Box 9876, Providence, RI 02940-8076 or 4400 Computer Drive, Westborough, MA 01581-1722.
Additional information about the Funds' investments
is available in their annual and semiannual shareholder reports. In the Funds' annual shareholder report, you will find a discussion of the market conditions and investment strategies that significantly affected the Funds' performance during the period covered by the report. You can find more information about the Funds in their current SAI, which is filed electronically with the SEC, and which is legally a part of this Prospectus (it is incorporated by reference). To receive a free copy of the SAI, or the annual or semiannual report, or if you have any questions about investing in the Funds, write to us at P.O. Box 9876, Providence, RI 02940-8076 by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 by overnight courier service, or call toll-free 800 523-1918. The SAI and shareholder reports are available, free of charge, through the Funds' website (delawareinvestments.com). You may also obtain additional information about the Funds from your financial advisor.
You can find reports and other information about the Funds on the EDGAR database on the SEC website (sec.gov). You can get copies of this information, after paying a duplication fee, by e-mailing the SEC at publicinfo@sec.gov or by writing to the Public Reference Section of the SEC,
100 F Street, NE, Washington, DC 20549-1520. Information about the Funds, including their SAI, can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. For information on the Public Reference Room, call the
SEC at 202 551-8090.
PR-460 [7/12] PDF 18231 [11/12]
Investment Company Act number: 811-02071
|
Prospectus
Fixed income
Delaware High-Yield Opportunities Fund
November 28, 2012
Nasdaq ticker symbols
|
Class A
|
DHOAX
|
Class B
|
DHOBX
|
Class C
|
DHOCX
|
Class R
|
DHIRX
|
Institutional Class
|
DHOIX
|
The U.S. Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
Get shareholder reports and prospectuses online instead of in the mail.
Visit delawareinvestments.com/edelivery.
Fund summary
Delaware High-Yield Opportunities Fund
What are the Fund's investment objectives?
Delaware High-Yield Opportunities Fund seeks total return and, as a secondary objective, high current income.
What are the Fund's fees and expenses?
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. 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 advisor, in the Fund's prospectus under the section entitled "About your account," and in the Fund's statement of additional information under the section entitled "Purchasing shares."
Shareholder fees (fees paid directly from your investment)
|
|
|
|
|
Class
|
A
|
B
|
C
|
R
|
Inst.
|
Maximum sales charge (load) imposed on purchases as a percentageof offering price
|
4.50%
|
none
|
none
|
none
|
none
|
Maximum contingent deferred sales charge (load) as
a percentage of original purchase price or
redemption price, whichever is lower
|
none
|
4.00%
1
|
1.00%
1
|
none
|
none
|
Annual fund operating expenses (expenses that you pay each year as a percentage of the value of your investment)
|
|
|
Class
|
A
|
B
|
C
|
R
|
Inst.
|
Management fees
|
0.65%
|
0.65%
|
0.65%
|
0.65%
|
0.65%
|
Distribution and service (12b-1) fees
|
0.30%
|
1.00%
|
1.00%
|
0.60%
|
none
|
Other expenses
|
0.23%
|
0.23%
|
0.23%
|
0.23%
|
0.23%
|
Total annual fund operating expenses
|
1.18%
|
1.88%
|
1.88%
|
1.48%
|
0.88%
|
Fee waivers and expense reimbursements
|
(0.07%)
2
|
(0.07%)
2
|
(0.07%)
2
|
(0.17%)
2
|
(0.07%)
2
|
Total annual fund operating expenses after fee waivers and expense reimbursements
|
1.11%
|
1.81%
|
1.81%
|
1.31%
|
0.81%
|
1
|
If you redeem Class B shares during the first year after you buy them, you will pay a contingent deferred sales charge (CDSC) of 4.00%, which declines to 3.00% during the second year, 2.25% during the third year, 1.50% during the fourth and fifth years, 1.00% during the sixth year, and 0% thereafter. Class C shares redeemed within one year of purchase are subject to a 1.00% CDSC.
|
2
|
The Fund's investment manager, Delaware Management Company (Manager), is contractually waiving its investment advisory fees and/or paying expenses (excluding any 12b-1 plan, taxes, interest, inverse floater program expenses, 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) to the extent necessary to prevent total annual fund operating expenses from exceeding 0.81% of the Fund's average daily net assets from November 28, 2012 through November 28, 2013. The Fund's distributor, Delaware Distributors, L.P. (Distributor), has also contracted to limit the Class R shares' 12b-1 fees to no more than 0.50% of its average daily net assets from November 28, 2012 through November 28, 2013. These waivers and reimbursements may only be terminated by agreement of the Manager and the Distributor, as applicable, 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 0.30% 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.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and reflects the applicable waivers and reimbursements for the 1-year contractual period and the total operating expenses without waivers for years 2 through 10. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
|
|
(if not
|
|
(if not
|
|
|
|
|
|
redeemed)
|
|
redeemed)
|
|
|
|
Class
|
A
|
B
|
B
|
C
|
C
|
R
|
Inst.
|
1 year
|
$558
|
$184
|
$584
|
$184
|
$284
|
$133
|
$83
|
3 years
|
$801
|
$584
|
$809
|
$584
|
$584
|
$451
|
$274
|
5 years
|
$1,063
|
$1,010
|
$1,160
|
$1,010
|
$1,010
|
$792
|
$481
|
10 years
|
$1,811
|
$2,013
|
$2,013
|
$2,195
|
$2,195
|
$1,754
|
$1,078
|
Portfolio turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 61% of the average value of its portfolio.
What are the Fund's principal investment strategies?
The Fund will invest primarily in corporate bonds rated BBB- or lower by Standard & Poor's (S&P), Baa3 or lower by Moody's Investors Services, Inc. (Moody's), or similarly rated by another nationally recognized statistical rating organization (NRSRO). These are commonly known as high yield bonds or junk bonds and involve greater risks than investment grade bonds. The Fund will also invest in unrated bonds we judge to be of comparable quality. Unrated bonds may be more speculative in nature than rated bonds. The Fund may also invest in U.S. and foreign government securities and corporate bonds of foreign issuers. The Fund may invest up to 25% of its total assets in foreign securities. In selecting bonds for the portfolio, we evaluate the income provided by the bond and the bond's appreciation potential as well as the issuer's ability to make income and principal payments.
Under normal circumstances, the Fund will invest at least 80% of its net assets in fixed income securities rated at the time of purchase BBB- or lower by S&P, Baa3 or lower by Moody's, or similarly rated by another NRSRO or, if unrated, judged to be of comparable quality. This policy is not a fundamental investment policy and can be changed without shareholder approval. However, shareholders will be given notice at least 60 days prior to any such change.
What are the principal risks of investing in the Fund?
Investing in any mutual fund involves the risk that you may lose part or all of the money you invest. Over time, the value of your investment in the Fund will increase and decrease according to changes in the value of the securities in the Fund's portfolio. Principal risks include:
Investments not guaranteed by the Manager or its affiliates
— Investments in the Fund are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies, including their subsidiaries or related companies (Macquarie Group), and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Fund, the repayment of capital from the Fund, or any particular rate of return.
Market risk
— The risk that all or a majority of the securities in a certain market — such as the stock or bond market — will decline in value because of factors such as adverse political or economic conditions, future expectations, investor confidence, or heavy institutional selling.
High yield (junk bond) risk
— The risk that high yield securities, commonly known as "junk bonds," are subject to reduced creditworthiness of issuers; increased risk of default and a more limited and less liquid secondary market; and greater price volatility and risk of loss of income and principal than are higher rated securities. High yield bonds are sometimes issued by municipalities with less financial strength and therefore less ability to make projected debt payments on the bonds.
Interest rate risk
— The risk that securities will decrease in value if interest rates rise. This risk is generally associated with bonds.
Credit risk
— The risk that an issuer of a debt security, including a governmental issuer, may be unable to make interest payments and repay principal in a timely manner.
Derivatives risk
— Derivative contracts, such as options, futures and swaps, may involve additional expenses (such as the payment of premiums) and are subject to significant loss if a security, or a securities index to which a derivative contract is associated, moves in the opposite direction from what the portfolio manager anticipated.
Foreign risk
— The risk that foreign securities (particularly in emerging markets) may be adversely affected by political instability; changes in currency exchange rates; inefficient markets and higher transaction costs; foreign economic conditions; or inadequate or different regulatory and accounting standards.
Bank loans and other indebtedness
risk
— The risk that the portfolio will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower and the lending institution.
Liquidity risk
— The possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them.
Valuation risk
— The risk that a less liquid secondary market may make it more difficult for a fund to obtain precise valuations of certain securities in its portfolio.
Redemption risk
— If investors redeem more shares of a fund than are purchased for an extended period of time, a fund may be required to sell securities without regard to the investment merits of such actions. This could decrease a fund's asset base, potentially resulting in a higher expense ratio.
Counterparty risk
— The risk that a counterparty to a derivative contract (such as a swap, futures, or options contract) or a repurchase agreement may fail to perform its obligations under the contract or agreement due to financial difficulties (such as a bankruptcy or reorganization).
Government and regulatory risk
— The risk that governments or regulatory authorities have, from time to time, taken or considered actions that could adversely affect various sectors of the securities markets.
How has Delaware High-Yield OpportunitiesFund performed?
The bar chart and table below provide some indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for the 1-, 5-, and 10-year or lifetime periods compare with those of a broad measure of market performance. The Fund's past performance (before and after taxes) is not necessarily an indication of how it will perform in the future. The returns reflect expense caps in effect during certain of these periods. The returns would be lower without the expense caps. You may obtain the Fund's most recently available month-end performance by calling 800 523-1918 or by visiting our website at delawareinvestments.com/performance.
Year-by-year total return (Class A)*
As of September 30, 2012, the Fund's Class A shares had a calendar year-to-date return of 13.52%. During the periods illustrated in this bar chart, Class A's highest quarterly return was 19.45% for the quarter ended June 30, 2009 and its lowest quarterly return was -18.08% for the quarter ended December 31, 2008. The maximum Class A sales charge of 4.50%, which is normally assessed when you purchase shares, is not reflected in the highest/lowest quarterly returns or in the bar chart. If this fee were included, the returns would be less than those shown. The average annual returns in the table below do include the sales charge.
Average annual total returns for periods ended December 31, 2011*
|
1 year
|
5 years
|
10 years or lifetime
|
Class A return before taxes
|
-2.79%
|
5.00%
|
8.31%
|
Class A return after taxes on distributions
|
-5.42%
|
2.00%
|
5.17%
|
Class A return after taxes on distributions and sale of Fund shares
|
-1.81%
|
2.43%
|
5.21%
|
Class B return before taxes
|
-2.34%
|
5.03%
|
8.18%
|
Class C return before taxes
|
0.25%
|
5.19%
|
8.03%
|
Class R return before taxes (lifetime: 6/2/03-12/31/11)
|
1.71%
|
5.76%
|
7.98%
|
Institutional Class return before taxes
|
2.20%
|
6.29%
|
9.14%
|
BofA Merrill Lynch U.S. High Yield ConstrainedIndex (reflects no deduction
for fees, expenses, or taxes)
|
4.37%
|
7.55%
|
8.74%
|
* Because the Fund has combined its retail and institutional prospectuses, the bar chart and the after tax returns in the average annual total returns table show the performance of the Fund's Class A shares.
After-tax performance is presented only for Class A shares of the Fund. The after-tax returns for other Fund classes may vary. Actual after-tax returns depend on the investor's individual tax situation and may differ from the returns shown. After-tax returns are not relevant for shares held in tax-deferred investment vehicles such as employer-sponsored 401(k) plans and individual retirement accounts (IRAs). The after-tax returns shown are calculated using the highest individual federal marginal income tax rates in effect during the periods presented and do not reflect the impact of state and local taxes.
Who manages the Fund?
Investment manager
Delaware Management Company, a series of Delaware Management Business Trust
Portfolio manager
|
Title with Delaware Management Company
|
Start date on the Fund
|
Kevin P. Loome, CFA
|
Senior Vice President, Senior Portfolio Manager, Head of High Yield Investments
|
August 2007
|
Purchase and redemption of Fund shares
You may purchase or redeem shares of the Fund on any day that the New York Stock Exchange (NYSE) is open for business (Business Day). Shares may be purchased or redeemed: through your financial advisor; through the Fund's website at delawareinvestments.com; by calling 800 523-1918; by regular mail (c/o Delaware Investments, P.O. Box 9876, Providence, RI 02940-8076); by overnight courier service (c/o Delaware Service Center, 4400 Computer Drive, Westborough, MA 01581-1722); or by wire.
For Class A and Class C shares, the minimum initial investment is generally $1,000 and subsequent investments can be made for as little as $100. The minimum initial investment for IRAs, Uniform Gifts/Transfers to Minors Act accounts, direct deposit purchase plans and automatic investment plans is $250 and through Coverdell Education Savings Accounts is $500, and subsequent investments in these accounts can be made for as little as $25. For Class R and Institutional Class shares, there is no minimum initial purchase requirement, but certain eligibility requirements must be met. The eligibility requirements are described in the prospectus under "Choosing a share class" and on the Fund's website. We may reduce or waive the minimums or eligibility requirements in certain cases. No new or subsequent investments currently are allowed in the Fund's Class B shares, except through a reinvestment of dividends or capital gains or permitted exchanges.
Tax information
The Fund's distributions generally are taxable to you as ordinary income, unless you are investing through a tax-deferred arrangement, such as a
401(k) plan or an IRA.
Payments to broker/dealers and other
financial intermediaries
If you purchase shares of the Fund through a broker/dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker/dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.
How we manage the Fund
We take a disciplined approach to investing, combining investment strategies and risk management techniques that we believe can help shareholders meet their goals.
Our investment strategies
The Manager analyzes economic and market conditions, seeking to identify the securities or market sectors that we think are the best investments the Fund.
We invest primarily in fixed income securities that we believe will have a liberal and consistent yield and will tend to reduce the risk of market fluctuations. We expect to invest the majority of the Fund's assets primarily in high yield bonds or junk bonds, which involve greater risks than investment grade bonds. The Fund may also invest in unrated bonds that we consider to have comparable credit characteristics. Unrated bonds may be more speculative in nature than rated bonds. The Fund may invest up to 25% of total assets in foreign securities. Securities of foreign issuers are also subject to certain risks such as political and economic instability, currency fluctuations and less stringent regulatory standards.
Before selecting high yield corporate bonds, we carefully evaluate each individual bond, including its income potential and the size of the bond issuance. The size of the issuance helps us evaluate how easily we may be able to buy and sell the bond.
We also do a thorough credit analysis of the issuer to determine whether that company has the financial ability to meet the bond's payments.
We maintain a well-diversified portfolio of high yield bonds that represents many different sectors and industries. Through diversification we can help to reduce the impact that any individual bond might have on the portfolio should the issuer have difficulty making payments.
The Fund strives to provide total return, with high current income as a secondary objective. Before purchasing a bond, we evaluate both the income level and its potential for price appreciation. Under normal circumstances, the Fund will invest at least 80% of its net assets in fixed income securities rated at the time of purchase BBB- or lower by S&P, Baa3 or lower by Moody's, or similarly rated by another NRSRO or, if unrated, judged to be of comparable quality. This policy is not a fundamental investment policy and can be changed without shareholder approval. However, shareholders will be given notice at least 60 days prior to any such change. The Fund also may invest in bonds of foreign issuers in pursuit of its objective.
The Fund's investment objective is nonfundamental. This means that the Fund's Board of Trustees (Board) may change the objective without obtaining shareholder approval. If the objective were changed, the Fund would notify shareholders at least 60 days before the change in the objective became effective.
The securities in which the Fund typically invests
Fixed income securities offer the potential for greater income payments than stocks, and also may provide capital appreciation. Please see the Fund's statement of additional information (SAI) for additional information about certain of the securities described below as well as other securities in which the Fund may invest.
High yield corporate bonds (junk bonds)
High yield corporate bonds are debt obligations issued by a corporation and rated lower than BBB- by S&P and Baa3 by Moody's, or similarly rated by another NRSRO. High yield bonds, also known as "junk bonds," are issued by corporations that have lower credit quality and may have difficulty repaying principal and interest.
How the Fund uses them:
The Fund may invest without limit in high yield corporate bonds.
U.S. government securities
U.S. government securities are direct U.S. obligations that include bills, notes, and bonds, as well as other debt securities, issued by the U.S. Treasury, and securities of U.S. government agencies or instrumentalities. U.S. Treasury securities are backed by the "full faith and credit" of the United States. Securities issued or guaranteed by federal agencies and U.S. government-sponsored instrumentalities may or may not be backed by the "full faith and credit" of the United States. In the case of securities not backed by the "full faith and credit" of the United States, investors in such securities look principally to the agency or instrumentality issuing or guaranteeing the obligation for ultimate repayment.
How the Fund uses them:
The Fund may invest without limit in U.S. government securities. However, they will typically represent a small percentage of the Fund's portfolio because they generally do not offer as high a level of current income as high yield corporate bonds.
Foreign corporate and government securities
Foreign corporate and government securities are debt obligations issued by a foreign corporation and securities issued by foreign governments.
A supranational entity is an entity established or financially supported by the national governments of one or more countries. The International Bank for Reconstruction and Development (more commonly known as the World Bank) is one example of a supranational entity.
How the Fund uses them:
The Fund may invest up to 25% of its total assets in securities of issuers domiciled in foreign countries, including both established countries and those with emerging markets.
Zero coupon and pay-in-kind bonds
Zero coupon bonds are debt obligations that do not entitle the holder to any periodic payments of interest prior to maturity or a specified date when the securities begin paying current interest, and therefore are issued and traded at a discount from their face amounts or par value. Pay-in-kind (PIK) bonds pay interest through the issuance to holders of additional securities.
How the Fund uses them:
The Fund may purchase fixed income securities, including zero coupon bonds and PIK bonds consistent with its investment objective. The market prices of these bonds are generally more volatile than the market prices of securities that pay interest periodically and are likely to react to changes in interest rates to a greater degree than interest-paying bonds having similar maturities and credit quality. They may have certain tax consequences, which, under certain conditions, could be adverse to the Fund.
Equity securities
Equity securities represent ownership interests in a company and consist of common stocks, preferred stocks, warrants to acquire common stock and securities convertible into common stock.
How the Fund uses them:
The Fund may invest in equity securities. Generally, the Manager will invest less than 5% of the Fund's total assets in these securities.
Credit default swaps agreements
In a credit default swap, a fund may transfer the financial risk of a credit event occurring (a bond default, bankruptcy, restructuring, etc.) on a particular security or basket of securities to another party by paying that party a periodic premium; likewise, a fund may assume the financial risk of a credit event occurring on a particular security or basket of securities in exchange for receiving premium payments from another party. Credit default swaps may be considered to be illiquid.
How the Fund uses them:
The Fund may enter into credit default swaps in order to hedge against a credit event, to enhance total return or to gain exposure to certain securities or markets.
Repurchase agreements
A repurchase agreement is an agreement between a buyer of securities, such as a fund, and a seller of securities, in which the seller agrees to buy the securities back within a specified time at the same price the buyer paid for them, plus an amount equal to an agreed-upon interest rate. Repurchase agreements are often viewed as equivalent to cash.
How the Fund uses them:
Typically, the Fund may use repurchase agreements as short-term investments for the Fund's cash position. In order to enter into these repurchase agreements, the Fund must have collateral of at least 102% of the repurchase price. The Fund will only enter into repurchase agreements in which the collateral is U.S. government securities. In the Manager's discretion, the Fund may invest overnight cash balances in short-term discount notes issued or guaranteed by the U.S. government, its agencies or instrumentalities, or government-sponsored enterprises.
Bank loans
A bank loan represents an interest in a loan or other direct indebtedness, such as an assignment, that entitles the acquiror of such interest to payments of interest, principal and/or other amounts due under the structure of the loan or other direct indebtedness. In addition to being structured as secured or unsecured loans, such investments could be structured as novations or assignments or represent trade or other claims owed by a company to a supplier.
How the Fund uses them:
The Fund may invest without restriction in bank loans that meet the credit standards established by the Manager. The Manager performs its own independent credit analysis on each borrower and on the collateral securing each loan, considers the nature of the industry in which the borrower operates, the nature of the borrower's assets, and the general quality and creditworthiness of the borrower. The Fund may invest in bank loans in order to enhance total return, to affect diversification, or to earn additional income. The Fund will not use bank loans for reasons inconsistent with its investment objective.
Options
Options represent a right to buy or sell a security or a group of securities, or a swap agreement or agreements at an agreed upon price at a future date. The purchaser of an option may or may not choose to go through with the transaction. The seller of an option, however, must go through with the transaction if its purchaser exercises the option. Certain options may be considered derivative securities.
How the Funds use them:
At times when we anticipate adverse conditions, we may want to protect gains on securities or swap agreements without actually selling them. We might use options to neutralize the effect of any price declines, without selling a security or swap agreement, or as a hedge against changes in interest rates. We may also sell an option contract (often referred to as "writing" an option) to earn additional income for the Funds. The Funds may write call options and purchase put options on a covered basis only, and will not engage in option writing strategies for speculative purposes.
The Fund has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act (CEA) and, therefore, is not subject to registration or regulation as a commodity pool operator under the CEA.
Restricted securities
Restricted securities are privately placed securities whose resale is restricted under U.S. securities laws.
How the Fund uses them:
The Fund may invest in privately placed securities, including those that are eligible for resale only among certain institutional buyers without registration, which are commonly known as "Rule 144A Securities." Restricted securities that are determined to be illiquid may not exceed the Fund's limit on investments in illiquid securities.
Illiquid securities
Illiquid securities are securities that do not have a ready market and cannot be readily sold within seven days at approximately the price at which a fund has valued them. Illiquid securities include repurchase agreements maturing in more than seven days.
How the Fund uses them:
The Fund may invest up to 15% of its net assets in illiquid securities.
Other investment strategies
The Fund may also invest in other income producing and non-income producing securities, including common stocks and preferred stocks, some of which may have convertible features or attached warrants.
Borrowing from banks
The Fund may borrow money from banks as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions. The Fund will be required to pay interest to the lending banks on the amounts borrowed. As a result, borrowing money could result in the Fund being unable to meet its investment objective.
Lending securities
The Fund may lend up to 25% of its assets to qualified broker/dealers or institutional investors for their use in securities transactions. Borrowers of the Fund's securities must provide collateral to the Fund and adjust the amount of collateral each day to reflect changes in the value of the loaned securities. These transactions may generate additional income for the Fund.
Purchasing securities on a when-issued or delayed-delivery basis
The Fund may buy or sell securities on a when-issued or delayed-delivery basis; that is, paying for securities before delivery or taking delivery at a later date. The Fund will designate cash or securities in amounts sufficient to cover its obligations, and will value the designated assets daily.
Temporary defensive positions
In response to unfavorable market conditions, the Fund may make temporary investments in cash or cash equivalents or other high-quality, short-term instruments. These investments may not be consistent with the Fund's investment objective. To the extent that the Fund holds such instruments, it may be unable to achieve its investment objective.
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may receive little or no return on your investment, and the risk that you may lose part or all of the money you invest. Before you invest in the Fund, you should carefully evaluate the risks. Because of the nature of the Fund, you should consider your investment to be a long-term investment that typically provides the best results when held for a number of years. The information below describes the principal risks you assume when investing in the Fund. Please see the SAI for a further discussion of certain of these risks and other risks not discussed here.
Market risk
Market risk is the risk that securities or industries in a certain market — such as the stock or bond market — will decline in value because of economic conditions, future expectations, investor confidence, or heavy institutional selling.
How the Fund strives to manage it:
We maintain a long-term investment approach and focus on securities that we believe can appreciate over an extended period of time regardless of interim market fluctuations. We do not try to predict overall stock market movements and though we may hold securities for any amount of time, we generally do not trade for short-term purposes.
Industry and security risks
Industry risk is the risk that the value of securities in a particular industry (such as financial services or manufacturing) will decline because of changing expectations for the performance of that industry.
Security risk is the risk that the value of an individual stock or bond will decline because of changing expectations for the performance of the individual company issuing the stock or bond (due to situations that could range from decreased sales to events such as a pending merger or actual or threatened bankruptcy).
How the Fund strives to manage them:
We limit the amount of the Fund's assets invested in any one industry and in any individual security or issuer. We also follow a rigorous selection process when choosing securities for the portfolio.
High yield fixed income securities (junk bonds)
High yield fixed income securities are debt obligations issued by a corporation and rated lower-than-investment-grade by an NRSRO such as S&P or Moody's. High yield fixed income securities are issued by corporations that have lower credit quality and may have difficulty repaying principal and interest.
How the Fund uses them:
The Manager carefully evaluates an individual company's financial situation, its management, the prospects for its industry and the technical factors related to its bond offering. Our goal is to identify those companies that it believes will be able to repay their debt obligations in spite of poor ratings. The Fund invests in unrated bonds if the Manager believes their credit quality is comparable to the rated bonds we are permitted to invest in. Unrated bonds may be more speculative in nature than rated bonds. The Fund may not invest more than 20% of its net assets in high yield bonds.
Interest rate risk
Interest rate risk is the risk that securities will decrease in value if interest rates rise. The risk is greater for bonds with longer maturities than for those with shorter maturities. Investments in equity securities issued by small- and medium-size companies, which often borrow money to finance operations, may also be adversely affected by rising interest rates.
Swaps may be particularly sensitive to interest rate changes. Depending on the actual movements of interest rates and how well the portfolio manager anticipates them, a fund could experience a higher or lower return than anticipated.
How the Fund strives to manage it:
The Fund is subject to various interest rate risks based upon its investment objectives and policies. The Manager cannot eliminate this risk, but we do try to address it by monitoring economic conditions.
Credit risk
Credit risk is the risk that an issuer of a debt security, including a governmental issuer, may be unable to make interest payments and repay principal in a timely manner. Changes in an issuer's financial strength or in a security's credit rating may affect a security's value, which would impact a fund's performance.
Investing in so-called "junk" or "high yield" bonds entails the risk of principal loss, which may be greater than the risk involved in investment grade bonds. High yield bonds are sometimes issued by companies whose earnings at the time of issuance are less than the projected debt service on the junk bonds.
Investment by a fund in defaulted securities poses additional risk of loss should nonpayment of principal and interest continue in respect of such securities. Even if such securities are held to maturity, recovery by a fund of its initial investment and any anticipated income or appreciation will be uncertain. A fund also may incur additional expenses in seeking recovery on defaulted securities. Defaulted securities may be considered illiquid.
How the Fund strives to manage it:
The Manager employs a careful, credit-oriented bond selection approach. The Fund also holds a diversified selection of high yield bonds that is designed to manage this risk.
It is likely that protracted periods of economic uncertainty would cause increased volatility in the market prices of high yield bonds, an increase in the number of high yield bond defaults and corresponding volatility in a Fund's net asset value (NAV).
Derivatives risk
Derivatives risk is the possibility that a fund may experience a significant loss if it employs a derivatives strategy (including a strategy involving futures, options, and swaps) related to a security or a securities index and that security or index moves in the opposite direction from what the portfolio management team had anticipated. Derivatives also involve additional expenses, which could reduce any benefit or increase any loss to a fund from using the strategy.
How the Fund strives to manage it:
We will use derivatives for defensive purposes, such as to protect gains or hedge against potential losses in the portfolio without actually selling a security, to neutralize the impact of interest rate changes, to increase diversification, or to earn additional income.
Recession risk
Although the market for high yield bonds existed through periods of economic downturns, the high yield market grew rapidly during the long economic expansion which took place in the United States during the 1980s. During that economic expansion, the use of high yield debt securities to finance highly leveraged corporate acquisitions and restructurings increased dramatically. As a result, the high yield market grew substantially. Some analysts believe a protracted economic downturn would severely disrupt the market for high yield bonds, adversely affect the value of outstanding bonds and adversely affect the ability of high yield issuers to repay principal and interest.
How the Fund strives to manage it:
It is likely that protracted periods of economic uncertainty would cause increased volatility in the market prices of high yield bonds, an increase in the number of high yield bond defaults and corresponding volatility in the Fund's NAV. In the past, uncertainty and volatility in the high yield market have resulted in volatility in the Fund's NAV.
In striving to manage this risk, the Manager allocates assets across a wide range of industry sectors. We may emphasize industries that have been less susceptible to economic cycles in the past, particularly if we believe that the economy may be entering into a period of slower growth.
Foreign risk
Foreign risk is the risk that foreign securities may be adversely affected by political instability, changes in currency exchange rates, foreign economic or government conditions, increased transaction costs, or inadequate regulatory and accounting standards.
How the Fund strives to manage it:
The Manager carefully evaluates the reward and risk associated with each foreign security that we consider.
The Fund may invest up to 25% of its total assets in securities of foreign issuers.
Emerging markets risk
Emerging markets risk is the possibility that the risks associated with international investing will be greater in emerging markets than in more developed foreign markets because, among other things, emerging markets may have less stable political and economic environments. In addition, in many emerging markets there is substantially less publicly available information about issuers and the information that is available tends to be of a lesser quality. Economic markets and structures tend to be less mature and diverse and the securities markets, which are subject to less government regulation or supervision, may also be smaller, less liquid, and subject to greater price volatility.
How the Fund strives to manage it:
The Fund may invest a portion of its assets in securities of issuers located in emerging markets. The Fund cannot eliminate these risks but the Manager will attempt to reduce these risks through portfolio diversification, credit analysis, and attention to trends in the economy, industries and financial markets, and other relevant factors. The Fund will limit its investments in emerging markets, in the aggregate, to no more than 5% of its net assets.
Bank loans and other direct indebtedness risk
Bank loans and other direct indebtedness risk involves the risk that a fund will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower. Loans that are fully secured offer a fund more protection than unsecured loans in the event of nonpayment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower's obligation, or that the collateral can be liquidated. Some loans or claims may be in default at the time of purchase. Certain of the loans and the other direct indebtedness acquired by a fund may involve revolving credit facilities or other standby financing commitments that obligate a fund to pay additional cash on a certain date or on demand. These commitments may require a fund to increase its investment in a company at a time when that fund might not otherwise decide to do so (including at a time when the company's financial condition makes it unlikely that such amounts will be repaid). To the extent that a fund is committed to advance additional funds, it will at all times hold and maintain, in a segregated account, cash or other high-grade debt obligations in an amount sufficient to meet such commitments.
As a fund may be required to rely upon another lending institution to collect and pass on to the fund amounts payable with respect to the loan and to enforce the fund's rights under the loan and other direct indebtedness, an insolvency, bankruptcy or reorganization of the lending institution may delay or prevent the fund from receiving such amounts. The highly leveraged nature of many such loans and other direct indebtedness may make such loans and other direct indebtedness especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other direct indebtedness may involve additional risk to the fund.
How the Fund strives to manage it:
These risks may not be completely eliminated, but we will attempt to reduce them through portfolio diversification, credit analysis, and attention to trends in the economy, industries, and financial markets. Should we determine that any of these securities may be illiquid, they would be subject to the Fund's restriction on illiquid securities.
Liquidity risk
Liquidity risk is the possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them. Illiquid securities may trade at a discount from comparable, more liquid investments, and may be subject to wide fluctuations in market value. A fund also may not be able to dispose of illiquid securities at a favorable time or price during periods of infrequent trading of an illiquid security.
There is generally no established retail secondary market for high yield securities. As a result, the secondary market for high yield securities is more limited and less liquid than other secondary securities markets. The high yield secondary market is particularly susceptible to liquidity problems when the institutions, such as mutual funds and certain financial institutions, which dominate it temporarily stop buying bonds for regulatory, financial or other reasons.
Adverse publicity and investor perceptions may also disrupt the secondary market for high yield securities.
How the Fund strives to manage it:
A less liquid secondary market may have an adverse effect on the Fund's ability to dispose of particular issues, when necessary, to meet its liquidity needs or in response to a specific economic event, such as the deterioration in the creditworthiness of the issuer. In striving to manage this risk, the Manager evaluates the size of a bond issuance as a way to anticipate its likely liquidity level.
The Fund may invest only 15% of net assets in illiquid securities.
Valuation risk
A less liquid secondary market as described above can make it more difficult to obtain precise valuations of the high yield securities in its portfolio. During periods of reduced liquidity, judgment plays a greater role in valuing high yield securities.
How the Fund strives to manage it:
The Fund's privately-placed high yield securities are particularly susceptible to liquidity and valuation risks. The Manager will strive to manage this risk by carefully evaluating individual bonds and by limiting the amount of the portfolio that can be allocated to privately-placed high yield securities.
Government and regulatory risks
Governments or regulatory authorities have, from time to time, taken or considered actions that could adversely affect various sectors of the securities markets. Government involvement in the private sector may, in some cases, include government investment in, or ownership of, companies in certain commercial business sectors; wage and price controls; or imposition of trade barriers and other protectionist measures. For example, an economic or political crisis may lead to price controls, forced mergers of companies, expropriation, the creation of government monopolies, foreign exchange controls, the introduction of new currencies (and the redenomination of financial obligations into those currencies), or other measures that could be detrimental to the investments of a fund.
How the Fund strives to manage it:
We evaluate the economic and political climate in the U.S. and abroad before selecting securities for the Fund. We typically diversify the Fund's assets among a number of different securities in a variety of sectors in order to minimize the impact to the Fund of any legislative or regulatory development affecting particular countries, issuers, or market sectors.
Counterparty risk
If a fund enters into a derivative contract (such as a swap, futures, or options contract) or a repurchase agreement, it will be subject to the risk that the counterparty to such a contract or agreement may fail to perform its obligations under the contract or agreement due to financial difficulties (such as a bankruptcy or reorganization). As a result, the fund may experience significant delays in obtaining any recovery, may obtain only a limited recovery, or may obtain no recovery at all.
How the Fund strives to manage it:
The Fund tries to minimize this risk by considering the creditworthiness of all parties before it enters into transactions with them. The Fund may hold collateral from counterparties consistent with applicable regulations.
Disclosure of portfolio holdings information
A description of the Fund's policies and procedures with respect to the disclosure of its portfolio securities is available in the SAI.
Who manages the Fund
Investment manager
The Manager is a series of Delaware Management Business Trust, which is a subsidiary of Delaware Management Holdings, Inc. (DMHI). DMHI is a wholly owned subsidiary of Macquarie Group Ltd. The Manager makes investment decisions for the Fund, manages the Fund's business affairs, and provides daily administrative services. For its services to the Fund, the Manager was paid an aggregate fee, net of fee waivers, of 0.58% of average daily net assets during the last fiscal year.
A discussion of the basis for the Board's approval of the Fund's investment advisory contract is available in the Fund's semiannual report to shareholders for the period ended January 31, 2012.
Portfolio manager
Kevin P. Loome has primary responsibility for making day-to-day investment decisions forthe Funds.
Kevin P. Loome, CFA,
Senior Vice President, Senior Portfolio Manager, Head of High Yield Investments
Kevin P. Loome is head of the High Yield fixed income team, responsible for portfolio construction and strategic asset allocation of all high yield fixed income assets. Prior to joining Delaware Investments in August 2007 in his current position, Loome spent 11 years at T. Rowe Price, starting as an analyst and leaving the firm as a portfolio manager. He began his career with Morgan Stanley as a corporate finance analyst in the New York and London offices. Loome received his bachelor's degree in commerce from the University of Virginia and earned an MBA from the Tuck School of Business at Dartmouth.
The SAI provides additional information about the portfolio manager's compensation, other accounts managed by the portfolio manager, and the portfolio manager's ownership of Fund shares.
Manager of managers structure
The Fund and the Manager have received an exemptive order from the U.S. Securities and Exchange Commission (SEC) to operate under a manager of managers structure that permits the Manager, with the approval of the Board, to appoint and replace sub-advisors, enter into sub-advisory agreements, and materially amend and terminate sub-advisory agreements on behalf of the Fund without shareholder approval (Manager of Managers Structure). Under the Manager of Managers Structure, the Manager has ultimate responsibility, subject to oversight by the Board, for overseeing the Fund's sub-advisors and recommending to the Board their hiring, termination, or replacement. The SEC order does not apply to any sub-advisor that is affiliated with the Fund or the Manager. While the Manager does not currently expect to use the Manager of Managers Structure with respect to the Fund, the Manager may, in the future, recommend to the Board the establishment of the Manager of Managers Structure by recommending the hiring of one or more sub-advisors to manage all or a portion of the Fund's portfolio.
The Manager of Managers Structure enables the Fund to operate with greater efficiency and without incurring the expense and delays associated with obtaining shareholder approvals for matters relating to sub-advisors or sub-advisory agreements. The Manager of Managers Structure does not permit an increase in the overall management and advisory fees payable by the Fund without shareholder approval. Shareholders will be notified of any changes made to sub-advisors or sub-advisory agreements within 90 days of the changes.
Who's who
Board of trustees:
A mutual fund is governed by a board of trustees, which has oversight responsibility for the management of the fund's business affairs. Trustees establish procedures and oversee and review the performance of the fund's service providers.
Investment manager:
An investment manager is a company responsible for selecting portfolio investments consistent with the objective and policies stated in the mutual fund's prospectus. A written contract between a mutual fund and its investment manager specifies the services the investment manager performs and the fee the manager is entitled to receive.
Portfolio managers:
Portfolio managers make investment decisions for individual portfolios.
Distributor:
Most mutual funds continuously offer new shares to the public through distributors that are regulated as broker/dealers and are subject to the Financial Industry Regulatory Authority (FINRA) rules governing mutual fund sales practices.
Service agent:
Mutual fund companies employ service agents (sometimes called transfer agents) to maintain records of shareholder accounts, calculate and disburse dividends and capital gains, and prepare and mail shareholder statements and tax information, among other functions. Many service agents also provide customer service to shareholders.
Custodian:
Mutual funds are legally required to protect their portfolio securities, and most funds place them with a qualified bank custodian that segregates fund securities from other bank assets.
Financial advisors:
Financial advisors provide advice to their clients. They are associated with securities broker/dealers who have entered into selling and/or service arrangements with the distributor. Selling broker/dealers and financial advisors are compensated for their services generally through sales commissions, and through 12b-1 fees and/or service fees deducted from a fund's assets.
Shareholders:
Mutual fund shareholders have specific voting rights on matters such as material changes in the terms of a fund's management contract and changes to fundamental investment policies.
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share class has a different combination of sales charges, fees, and other features, you should consult your financial advisor to determine which class best suits your investment goals and time frame.
Delaware Management Trust Company will not accept applications to open new 403(b) custodial accounts or accept contributions to existing 403(b) custodial accounts.
Choosing a share class
Each share class may be eligible for purchase through programs sponsored by financial intermediaries that require the purchase of a specific class of shares.
Class A, Class B, Class C, and Class R shares of the Fund have each adopted a separate 12b-1 plan that allows it to pay distribution fees for the sale and distribution of its shares. Because these fees are paid out of the Fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
Class A
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Class A shares have an up-front sales charge of up to 4.50% that you pay when you buy the shares.
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If you invest $100,000 or more, your front-end sales charge will be reduced.
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You may qualify for other reduced sales charges, and, under certain circumstances, the sales charge may be waived, as described in "How to reduce your sales charge" below.
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Class A shares are also subject to an annual 12b-1 fee no greater than 0.30% of average daily net assets. See "Dealer compensation" below for further information.
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Class A shares generally are not subject to a CDSC except in the limited circumstances described in the table below.
-
Class A shares generally are not available for purchase by anyone qualified to purchase Class R shares, except as described below.
Class A sales charges
The table below details your sales charges on purchases of Class A shares. The offering price for Class A shares includes the front-end sales charge. The sales charge as a percentage of the net amount invested is the maximum percentage of the amount invested rounded to the nearest hundredth. The actual sales charge that you pay as a percentage of the offering price and as a percentage of the net amount invested will vary depending on the then-current net asset value (NAV), the percentage rate of the sales charge, and rounding.
Amount of purchase
|
Sales charge as a %
of offering price
|
Sales charge as a %
of net amount invested
|
Less than $100,000
|
|
4.50%
|
|
5.13%
|
$100,000 but less than $250,000
|
|
3.50%
|
|
4.00%
|
$250,000 but less than $500,000
|
|
2.50%
|
|
3.00%
|
$500,000 but less than $1 million
|
|
2.00%
|
|
2.44%
|
$1 million or more
|
|
none*
|
|
none*
|
* There is no front-end sales charge when you purchase $1 million or more of Class A shares. However, if the Distributor paid your financial advisor a commission on your purchase of $1 million or more of Class A shares, you will have to pay a Limited CDSC of 1.00% if you redeem these shares within the first year after your purchase and 0.50% if you redeem them within the second year, unless a specific waiver of the Limited CDSC applies. The Limited CDSC will be paid to the Distributor and will be assessed on an amount equal to the lesser of: (1) the NAV at the time the Class A shares being redeemed were purchased; or (2) the NAV of such Class A shares at the time of redemption. For purposes of this formula, the "NAV at the time of purchase" will be the NAV at purchase of the Class A shares even if those shares are later exchanged for shares of another Delaware Investments
®
Fund and, in the event of an exchange of Class A shares, the "NAV of such shares at the time of redemption" will be the NAV of the shares acquired in the exchange. In determining whether a Limited CDSC is payable, it will be assumed that shares not subject to the Limited CDSC are the first redeemed followed by other shares held for the longest period of time. See "Dealer compensation" below for a description of the dealer commission that is paid.
Class B
No new or subsequent investments, including investments through automatic investment plans and by qualified retirement plans (such as 401(k) or 457 plans), are allowed in the Fund's Class B shares, except through a reinvestment of dividends or capital gains or permitted exchanges. Existing shareholders of Class B shares may continue to hold their Class B shares, reinvest dividends into Class B shares, and exchange their Class B shares of one Delaware Investments® Fund for Class B shares of another Fund, as permitted by existing exchange privileges. Existing Class B shareholders wishing to make subsequent purchases in the Fund's shares will be permitted to invest in other classes of the Fund, subject to that class's pricing structure and eligibility requirements, if any.
For Class B shares outstanding as of May 31, 2007, and Class B shares acquired upon reinvestment of dividends or capital gains, all Class B share attributes, including the CDSC schedules, conversion to Class A schedule, and distribution and service (12b-1) fees, will continue in their current form. In addition, because the Fund's or its Distributor's ability to assess certain sales charges and fees is dependent on the sale of new shares, the termination of new purchases of Class B shares could ultimately lead to the elimination and/or reduction of such sales charges and fees. The Fund may not be able to provide shareholders with advance notice of the reduction in these sales charges and fees. You will be notified via a Prospectus supplement if there are any changes to any attributes, sales charges, or fees.
-
Class B shares have no up-front sales charge, so the full amount of your purchase is invested. However, you will pay a CDSC if you redeem your shares within six years after you buy them.
-
If you redeem Class B shares during the first year after you buy them, the shares will be subject to a CDSC of 4.00%. The CDSC is 3.00% during the second year, 2.25% during the third year, 1.50% during the fourth and fifth years, 1.00% during the sixth year, and 0% thereafter.
-
In determining whether the CDSC applies to a redemption of Class B shares, it will be assumed that shares held for more than six years are redeemed first, followed by shares acquired through the reinvestment of dividends or distributions, and finally by shares held longest during the six-year period. For further information on how the CDSC is determined, please see "Calculation of contingent deferred sales charges — Class B and Class C" below.
-
Under certain circumstances, the CDSC may be waived; please see "Waivers of contingent deferred sales charges" below for further information.
-
For approximately eight years after you buy your Class B shares, they are subject to an annual 12b-1 fee no greater than 1.00% of average daily net assets (of which 0.25% is a service fee) paid to the Distributor, dealers, or others for providing services and maintaining shareholder accounts.
-
Approximately eight years after you buy them, Class B shares automatically convert to Class A shares with a 12b-1 fee of no more than 0.25%. Conversion may occur as late as three months after the eighth anniversary of purchase, during which time Class B's higher 12b-1 fee applies.
Class C
-
Class C shares have no up-front sales charge, so the full amount of your purchase is invested in the Fund. However, you will pay a CDSC of 1.00% if you redeem your shares within 12 months after you buy them.
-
In determining whether the CDSC applies to a redemption of Class C shares, it will be assumed that shares held for more than 12 months are redeemed first, followed by shares acquired through the reinvestment of dividends or distributions, and finally by shares held for 12 months or less. For further information on how the CDSC is determined, please see "Calculation of contingent deferred sales charges — Class B and Class C" below.
-
Under certain circumstances, the CDSC may be waived; please see "Waivers of contingent deferred sales charges" below for further information.
-
Class C shares are subject to an annual 12b-1 fee no greater than 1.00% of average daily net assets (of which 0.25% is a service fee) paid to the Distributor, dealers, or others for providing services and maintaining shareholder accounts.
-
Class C shares do not automatically convert to another class.
-
You may purchase only up to $1 million of Class C shares at any one time. Orders that exceed $1 million will be rejected. The limitation on maximum purchases varies for retirement plans.
Class R
-
Class R shares have no up-front sales charge, so the full amount of your purchase is invested in the Fund. Class R shares are not subject to a CDSC.
-
Class R shares are subject to an annual 12b-1 fee no greater than 0.60% (currently limited to 0.50%) of average daily net assets.
-
Class R shares do not automatically convert to another class.
-
Class R shares generally are available only to: (i) qualified and nonqualified plan shareholders covering multiple employees (including 401(k), 401(a), 457, and noncustodial 403(b) plans, as well as other nonqualified deferred compensation plans) with assets (at the time shares are considered for purchase) of $10 million or less; and (ii) individual retirement account (IRA) rollovers from plans that were previously maintained on the Delaware Investments® retirement recordkeeping system or BISYS's retirement recordkeeping system that are offering Class R shares to participants.
-
Except as noted above, no other IRAs are eligible for Class R shares (for example, no traditional IRAs, Roth IRAs, SIMPLE IRAs, SEPs, SARSEPs). For purposes of determining plan asset levels, affiliated plans may be combined at the request of the plan sponsor.
-
Any account holding Class A shares as of the date Class R shares were made available continues to be eligible to purchase Class A shares after that date. Any account holding Class R shares is not eligible to purchase Class A shares.
Institutional Class
-
Institutional Class shares have no up-front sales charge, so the full amount of your purchase is invested in the Fund.
-
Institutional Class shares do not assess a CDSC or a 12b-1 fee;
-
Institutional Class shares are available for purchase only by the following:
-
rollover IRAs from retirement plans and retirement plans introduced by persons not associated with brokers or dealers that are primarily engaged in the retail securities business;
-
tax-exempt employee benefit plans of the Manager, its affiliates, and securities dealers that have a selling agreement with the Distributor;
-
institutional advisory clients (including mutual funds) of the Manager or its affiliates, as well as those clients' affiliates, and their corporate sponsors, subsidiaries, related employee benefit plans, and rollover IRAs of, or from, such institutional advisory clients;
-
a bank, trust company, or similar financial institution investing for its own account or for the account of its trust customers for whom the financial institution is exercising investment discretion in purchasing Institutional Class shares, except where the investment is part of a program that requires payment to the financial institution of a Rule 12b-1 Plan fee;
-
RIAs investing on behalf of clients that consist solely of institutions and high net worth individuals having at least $1 million entrusted to an RIA for investment purposes (use of the Institutional Class shares is restricted to RIAs who are not affiliated or associated with a broker or dealer and who derive compensation for their services exclusively from their advisory clients);
-
certain plans qualified under Section 529 of the Internal Revenue Code, for which the Manager, Distributor, or Delaware Service Company, Inc. (DSC), or one or more of their affiliates, provide record keeping, administrative, investment management, marketing, distribution, or similar services;
-
programs sponsored by and/or controlled by financial intermediaries where: (1) such programs allow or require the purchase of Institutional Class shares; (2) the financial intermediary has entered into an agreement covering the arrangement with the Distributor and/or DSC; and (3) the financial intermediary (i) charges clients an ongoing fee for advisory, investment consulting or similar services, or (ii) offers the Institutional Class shares through a no-commission network or platform; or
-
private investment vehicles, including, but not limited to, foundations and endowments.
Calculation of contingent deferred sales charges — Class B and Class C.
CDSCs are charged as a percentage of the dollar amount subject to the CDSC. The charge will be assessed on an amount equal to the lesser of the NAV at the time the shares being redeemed were purchased or the NAV of those shares at the time of redemption. No CDSC will be imposed on increases in NAV above the initial purchase price, nor will a CDSC be assessed on redemptions of shares acquired through reinvestment of dividends or capital gains distributions. For purposes of this formula, the "NAV at the time of purchase" will be the NAV at purchase of Class B shares or Class C shares of the Fund, even if those shares are later exchanged for shares of another Delaware Investments® Fund. In the event of an exchange of the shares, the "NAV of such shares at the time of redemption" will be the NAV of the shares that were acquired in the exchange.
Dealer compensation
The financial advisor that sells you shares of the Fund may be eligible to receive the following amounts as compensation for your investment in the Fund. These amounts are paid by the Distributor to the securities dealer with whom your financial advisor is associated. Institutional Class shares do not have a 12b-1 fee or sales charge so they are not included in the chart below.
|
Class A
1
|
Class B
2
|
Class C
3
|
Class R
4
|
Commission (%)
|
—
|
4.00%
|
1.00%
|
—
|
Investment less than $100,000
|
4.00%
|
—
|
—
|
—
|
$100,000 but less than $250,000
|
3.00%
|
—
|
—
|
—
|
$250,000 but less than $500,000
|
2.00%
|
—
|
—
|
—
|
$500,000 but less than $1 million
|
1.60%
|
—
|
—
|
—
|
$1 million but less than $5 million
|
1.00%
|
—
|
—
|
—
|
$5 million but less than $25 million
|
0.50%
|
—
|
—
|
—
|
$25 million or more
|
0.25%
|
—
|
—
|
—
|
12b-1 fee to dealer
|
0.30%
|
0.25%
|
1.00%
|
0.60%
|
1
On sales of Class A shares, the Distributor reallows to your securities dealer a portion of the front-end sales charge depending upon the amount you invested. Your securities dealer may be eligible to receive up to 0.30% of the 12b-1 fee applicable to Class A shares, although under the plan adopted by the Board described herein, a lesser amount may be paid.
2
On sales of Class B shares, the Distributor may pay your securities dealer an up-front commission of 4.00%. Your securities dealer may be eligible to receive a 12b-1 service fee of up to 0.25% from the date of purchase. After approximately eight years, Class B shares automatically convert to Class A shares and dealers may then be eligible to receive the 12b-1 fee applicable to Class A shares.
3
On sales of Class C shares, the Distributor may pay your securities dealer an up-front commission of 1.00%. The up-front commission includes an advance of the first year's 12b-1 service fee of up to 0.25%. During the first 12 months, the Distributor retains the full 1.00% 12b-1 fee to partially offset the up-front commission and the prepaid 0.25% service fee advanced at the time of purchase. Starting in the 13th month, your securities dealer may be eligible to receive the full 1.00% 12b-1 fee applicable to Class C. Alternatively, certain intermediaries may not be eligible to receive the up-front commission of 1.00%, but may receive the 12b-1 fee for sales of Class C shares from the date of purchase.
4
On sales of Class R shares, the Distributor does not pay your securities dealer an up-front commission. Your securities dealer may be eligible to receive a 12b-1 fee of up to 0.60% from the date of purchase. The maximum 12b-1 fee applicable to Class R shares is 0.60% of average daily net assets. However, the Distributor has contracted to limit this amount to 0.50% from November 28, 2012 through November 28, 2013.
Payments to intermediaries
The Distributor and its affiliates may pay additional compensation at their own expense and not as an expense of the Fund to certain affiliated or unaffiliated brokers, dealers, or other financial intermediaries (Financial Intermediaries) in connection with the sale or retention of Fund shares and/or shareholder servicing, including providing the Fund with "shelf space" or a higher profile with the Financial Intermediaries' consultants, salespersons, and customers (distribution assistance). For example, the Distributor or its affiliates may pay additional compensation to financial intermediaries for various purposes, including, but not limited to, promoting the sale of Fund shares, maintaining share balances and/or for sub-accounting, administrative, or shareholder processing services, marketing, educational support, and ticket charges. Such payments are in addition to any distribution fees, service fees, and/or transfer agency fees that may be payable by the Fund. The additional payments may be based on factors, including level of sales (based on gross or net sales or some specified minimum sales or some other similar criteria related to sales of the Fund and/or some or all other Delaware Investments
®
Funds), amount of assets invested by the Financial Intermediary's customers (which could include current or aged assets of the Fund and/or some or all other Delaware Investments
®
Funds), the Fund's advisory fees, some other agreed upon amount, or other measures as determined from time to time by the Distributor. The level of payments made to a qualifying Financial Intermediary in any given year may vary. To the extent permitted by SEC and FINRA rules and other applicable laws and regulations, the Distributor may pay, or allow its affiliates to pay, other promotional incentives or payments to Financial Intermediaries.
If a mutual fund sponsor or distributor makes greater payments for distribution assistance to your Financial Intermediary with respect to distribution of shares of that particular mutual fund than sponsors or distributors of other mutual funds make to your Financial Intermediary with respect to the distribution of the shares of their mutual funds, your Financial Intermediary and its salespersons may have a financial incentive to favor sales of shares of the mutual fund making the higher payments over shares of other mutual funds or over other investment options. In addition, depending on the arrangements in place at any particular time, a Financial Intermediary may also have a financial incentive for recommending a particular share class over other share classes. You should consult with your Financial Intermediary and review carefully any disclosure provided by such Financial Intermediary as to compensation it receives in connection with investment products it recommends or sells to you. A significant purpose of these payments is to increase sales of the Fund's shares. The Manager or its affiliates may benefit from the Distributor's or its affiliate's payment of compensation to financial intermediaries through increased fees resulting from additional assets acquired through the sale of Fund shares through financial intermediaries. In certain instances, the payments could be significant and may cause a conflict of interest for your Financial Intermediary. Any such payments will not change the net asset value (NAV) or the price of the Fund's shares.
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares. Please refer to the SAI for detailed information and eligibility requirements. You can also get additional information from your financial advisor. You or your financial advisor must notify us at the time you purchase shares if you are eligible for any of these programs. You may also need to provide information to your financial advisor or the Fund in order to qualify for a reduction in sales charges. Such information may include your Delaware Investments
®
Funds holdings in any other accounts, including retirement accounts, held indirectly or through an intermediary, and the names of qualifying family members and their holdings. We reserve the right to determine whether any purchase is entitled, by virtue of the foregoing, to the reduced sales charge. Class R and Institutional Class shares have no upfront sales charge or CDSC so they are not included in the chart below.
Letter of intent
Through a letter of intent you agree to invest a certain amount in Delaware Investments® Funds (except money market funds with no sales charge) over a 13-month period to qualify for reduced front-end sales charges.
Class A
|
Class B
|
Class C
|
Available
|
Not available
|
Although the letter of intent does not apply to the purchase of Class C shares, you can combine the value of your Class A shares with your purchase of Class C shares to fulfill your letter of intent.
|
Rights of accumulation
You can combine your holdings or purchases of all Delaware Investments® Funds (except money market funds with no sales charge), as well as the holdings and purchases of your spouse and children under 21 to qualify for reduced front-end sales charges.
Class A
|
Class B
|
Class C
|
Available
|
Although the rights of accumulation do not apply to the purchase of Class B shares acquired upon reinvestment of dividends or capital gains, you can combine the value of your Class B shares purchased on or before May 31, 2007 with your purchase of Class A shares to qualify for rights of accumulation.
|
Although the rights of accumulation do not apply to the purchase of Class C shares, you can combine your purchase of Class A shares with your purchase of Class C shares to fulfill your rights of accumulation.
|
Reinvestment of redeemed shares
Up to 12 months after you redeem shares, you can reinvest the proceeds without paying a sales charge.
Class A
|
Class B and Class C
|
You will not have to pay an additional front-end sales charge.
|
Not available
|
SIMPLE IRA, SEP, SARSEP, 401(k), SIMPLE 401(k), Profit Sharing, Money Purchase,
403(b)(7), and 457 Retirement Plans
These investment plans may qualify for reduced sales charges by combining the purchases of all members of the group. Members of these groups may also qualify to purchase shares without a front-end sales charge and may qualify for a waiver of any CDSCs on Class A shares.
Class A
|
Class B and Class C
|
You may not have to pay an additional front-end sales charge.
|
Not available.
|
Buying Class A shares at net asset value
Class A shares of the Fund may be purchased at NAV under the following circumstances, provided that you notify the Fund in advance that the trade qualifies for this privilege. The Fund reserves the right to modify or terminate these arrangements at any time.
-
Shares purchased under the Delaware Investments® dividend reinvestment plan and, under certain circumstances, the exchange privilege and the 12-month reinvestment privilege.
-
Purchases by: (i) current and former officers, Trustees/Directors, and employees of any Delaware Investments® Fund, the Manager, or any of the Manager's current affiliates and those that may in the future be created; (ii) legal counsel to the Delaware Investments® Funds; and (iii) registered representatives and employees of broker/dealers who have entered into dealer's agreements with the Distributor. At the direction of such persons, their family members (regardless of age) and any employee benefit plan established by any of the foregoing entities, counsel, or broker/dealers may also purchase shares at NAV.
-
Shareholders who own Class A shares of Delaware Cash Reserve
®
Fund as a result of a liquidation of a Delaware Investments
®
Fund may exchange into Class A shares of another Delaware Investments® Fund at NAV.
-
Purchases by bank employees who provide services in connection with agreements between the bank and unaffiliated brokers or dealers concerning sales of shares of the Delaware Investments® Funds.
-
Purchases by certain officers, trustees, and key employees of institutional clients of the Manager or any of its affiliates.
-
Purchases for the benefit of the clients of brokers, dealers, and registered investment advisors if such brokers, dealers, or investment advisors have entered into an agreement with the Distributor providing specifically for the purchase of Class A shares in connection with special investment products, such as wrap accounts or similar fee-based programs. Investors may be charged a fee when effecting transactions in Class A shares through a broker or agent that offers these special investment products.
-
Purchases by financial institutions investing for the accounts of their trust customers if they are not eligible to purchase shares of the Fund's Institutional Class, if applicable.
-
Purchases by retirement plans that are maintained on retirement platforms sponsored by financial intermediary firms, provided the financial intermediary firms or their trust companies (or entities performing similar trading/clearing functions) have entered into an agreement with respect to such retirement platforms.
-
Purchases by certain legacy bank sponsored retirement plans that meet requirements set forth in the SAI.
-
Purchases by certain legacy retirement assets that meet requirements set forth in the SAI.
-
Investments made by plan level and/or participant retirement accounts that are for the purpose of repaying a loan taken from such accounts.
-
Purchases by certain participants in defined contribution plans and members of their households whose plan assets will be rolled over into IRA accounts (IRA Program) where the financial intermediary has entered into an agreement specifically relating to such IRA Program with the Distributor and/or the Fund's transfer agent.
-
Purchases by certain participants of particular group retirement plans as described in the SAI.
-
Loan repayments made to a Fund account in connection with loans originated from accounts previously maintained by another investment firm.
Waivers of contingent deferred sales charges
Certain sales charges may be based on historical cost. Therefore, you should maintain any records that substantiate these costs because the Fund, its transfer agent, and financial intermediaries may not maintain this information. Information about existing sales charges and sales charge reductions and waivers is available free of charge on the Delaware Investments® Funds' website at delawareinvestments.com. Additional information on sales charges can be found in the SAI, which is available upon request. Class R and Institutional Class shares have no upfront sales charge or CDSC so they are not included in the chart below.
The Fund's applicable CDSCs may be waived under the following circumstances:
Redemptions in accordance with a systematic withdrawal plan
Redemptions in accordance with a systematic withdrawal plan, provided the annual amount selected to be withdrawn under the plan does not exceed 12% of the value of the account on the date that the systematic withdrawal plan was established or modified.
Classes A
1
, B, and C
|
Available
|
Redemptions that result from the right to liquidate a shareholder's account
Redemptions that result from the right to liquidate a shareholder's account if the aggregate NAV of the shares held in the account is less than the then-effective minimum account size.
Classes A
1
, B, and C
|
Available
|
Section 401(a) qualified retirement plan distributions
Distributions to participants or beneficiaries from a retirement plan qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (Internal Revenue Code).
Class A
1
|
Classes B and C
|
Available
|
Not available
|
Section 401(a) qualified retirement plan redemptions
Redemptions pursuant to the direction of a participant or beneficiary of a retirement plan qualified under Section 401(a) of the Internal Revenue Code with respect to that retirement plan.
Class A
1
|
Classes B and C
|
Available
|
Not available
|
Periodic distributions from an individual retirement account
Periodic distributions from an individual retirement account (traditional IRA, Roth IRA, SIMPLE IRA, SEP, SARSEP, Coverdell ESA) or a qualified plan
2
(401(k), SIMPLE 401(k), Profit Sharing, Money Purchase, 403(b)(7), and 457 Retirement Plans) not subject to a penalty under Section 72(t)(2)(A) of the Internal Revenue Code or a hardship or unforeseen emergency provision in the qualified plan as described in Treas. Reg. §1.401(k)-1(d)(3) and Section 457(d)(1)(A)(iii) of the Internal Revenue Code.
Classes A
1
, B, and C
|
Available
|
Returns of excess contributions due to any regulatory limit
Returns of excess contributions due to any regulatory limit from an individual retirement account (traditional IRA, Roth IRA, SIMPLE IRA, SEP, SARSEP, Coverdell ESA) or a qualified plan
2
(401(k), SIMPLE 401(k), Profit Sharing, Money Purchase, 403(b)(7), and 457 Retirement Plans).
Classes A
1
, B, and C
|
Available
|
Distributions by other employee benefit plans
Distributions by other employee benefit plans to pay benefits.
Class A
1
|
Classes B and C
|
Available
|
Not available
|
Systematic withdrawals from a retirement account or qualified plan
Systematic withdrawals from a retirement account or qualified plan that are not subject to a penalty pursuant to Section 72(t)(2)(A) of the Internal Revenue Code or a hardship or unforeseen emergency provision in the qualified plan
2
as described in Treas. Reg. §1.401(k)-1(d)(3) and Section 457(d)(1)(A)(iii) of the Internal Revenue Code. The systematic withdrawal may be pursuant to the systematic withdrawal plan for the Delaware Investments® Funds or a systematic withdrawal permitted by the Internal Revenue Code.
Classes A
1
, B, and C
|
Available
|
Distributions from an account of a redemption resulting from death or disability
Distributions from an account of a redemption resulting from the death or disability (as defined in Section 72(t)(2)(A) of the Internal Revenue Code) of a registered owner or a registered joint owner occurring after the purchase of the shares being redeemed. In the case of accounts established under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act or trust accounts, the waiver applies upon the death of all beneficial owners.
Classes A
1
, B, and C
|
Available
|
Redemptions by certain legacy retirement assets
Redemptions by certain legacy retirement assets that meet the requirements set forth in the SAI.
Class A
1
|
Class B
|
Class C
|
Available
|
Not available
|
Available
|
Redemptions by the classes of shareholders who are permitted to purchase shares at NAV
Redemptions by the classes of shareholders who are permitted to purchase shares at NAV, regardless of the size of the purchase.
Class A
1
|
Classes B and C
|
Available
|
Not available
|
1
The waiver of Class A shares relates to a waiver of the Limited CDSC. Please note that you or your financial advisor will have to notify us at the time of purchase that the trade qualifies for such waiver.
2
Qualified plans that are fully redeemed at the direction of the plan's fiduciary are subject to any applicable CDSC or Limited CDSC, unless the redemption is due to the termination of the plan.
How to buy shares
Through your financial advisor
Your financial advisor can handle all the details of purchasing shares, including opening an account. Your financial advisor may charge a separate fee for this service.
By mail
Complete an investment slip and mail it with your check, made payable to the fund and class of shares you wish to purchase, to Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 or 4400 Computer Drive, Westborough, MA 01581-1722 for investments by overnight courier service. If you are making an initial purchase by mail, you must include a completed investment application (or an appropriate retirement plan application if you are opening a retirement account) with your check.
Please note that purchase orders submitted by mail will not be accepted until such purchase orders are received by Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 for investments by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 for investments by overnight courier service. Please do not send purchase orders to 2005 Market Street, Philadelphia, PA.
By wire
Ask your bank to wire the amount you want to invest to The Bank of New York Mellon, ABA #011001234, bank account #000073-6910. Include your account number and the name of the fund and class of shares in which you want to invest. If you are making an initial purchase by wire, you must first call us at 800 523-1918 so we can assign you an account number.
By exchange
You may exchange all or part of your investment in one or more Delaware Investments® Funds for shares of other Delaware Investments® Funds. Please keep in mind, however, that under most circumstances you are allowed to exchange only between like classes of shares. To open an account by exchange, call the Shareholder Service Center at 800 523-1918.
Through automated shareholder services
For Class A, Class B, and Class C shares only, you may purchase or exchange shares through our automated telephone service, or through our website, delawareinvestments.com. For more information about how to sign up for these services, call our Shareholder Service Center at 800 523-1918.
Calculating share price
The price you pay for shares will depend on when we receive your purchase order. If your order is received by an authorized agent or us before the close of regular trading on the NYSE, which is normally 4:00 p.m. Eastern time, you will pay that day's closing share price, which is based on a fund's NAV. If your order is received after the close of regular trading on the NYSE, you will pay the next Business Day's price. We reserve the right to reject any purchase order.
We determine the NAV per share for each class of a Delaware Investments® Fund at the close of regular trading on the NYSE on each Business Day. The NAV per share for each class of a fund is calculated by subtracting the liabilities of each class from its total assets and dividing the resulting number by the number of shares outstanding for that class. We generally price securities and other assets for which market quotations are readily available at their market value. For a fund that invests primarily in foreign securities, the NAV may change on days when a shareholder will not be able to purchase or redeem fund shares because foreign markets are open at times and on days when U.S. markets are not. We price fixed income securities on the basis of valuations provided to us by an independent pricing service that uses methods approved by the Board. For all other securities, we use methods approved by the Board that are designed to price securities at their fair market values.
Fair valuation
When the Fund uses fair value pricing, it may take into account any factors it deems appropriate. The Fund may determine fair value based upon developments related to a specific security, current valuations of foreign stock indices (as reflected in U.S. futures markets), and/or U.S. sector or broad stock market indices. The prices of securities used by the Fund to calculate its NAV may differ from quoted or published prices for the same securities. Fair value pricing may involve subjective judgments and it is possible that the fair value determined for a security is materially different than the value that could be realized upon the sale of that security.
The Fund anticipates using fair value pricing for securities primarily traded on U.S. exchanges only under very limited circumstances, such as the early closing of the exchange on which a security is traded or suspension of trading in the security. The Fund may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Fund values its securities at 4:00 p.m. Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. To account for this, the Fund may frequently value many foreign equity securities using fair value prices based on third-party vendor modeling tools to the extent available.
The Board has delegated responsibility for valuing the Fund's assets to a Pricing Committee of the Manager, which operates under the policies and procedures approved by the Board and which is subject to the Board's oversight.
Retirement plans
In addition to being an appropriate investment for your IRA, Roth IRA, and Coverdell Education Savings Account, the Fund may be suitable for group retirement plans. You may establish your IRA account even if you are already a participant in an employer-sponsored retirement plan. For more information on how the Fund can play an important role in your retirement planning or for details about group plans, please consult your financial advisor, or call our Shareholder Service Center at 800 523-1918.
Document delivery
To reduce fund expenses, we try to identify related shareholders in a household and send only one copy of a fund's financial reports and prospectus. This process, called "householding," will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call our Shareholder Service Center at 800 523-1918. At any time you may view current prospectuses and financial reports on our website.
Inactive accounts
Please note that your account may be transferred to the appropriate state if no activity occurs in the account within the time period specified by state law.
How to redeem shares
When you send us a properly completed request to redeem or exchange shares and the request is received by an authorized agent or us before the close of regular trading on the NYSE (normally 4:00 p.m. Eastern time), you will receive the NAV next determined after we receive your request. If we receive your request after the close of regular trading on the NYSE, you will receive the NAV next determined on the next Business Day. We will deduct any applicable CDSCs. You may also have to pay taxes on the proceeds from your sale of shares. We will send you a check, normally the next Business Day, but no later than seven days after we receive your request to sell your shares. If you purchased your shares by check and sell them before your check has cleared, which can take up to 15 days, we will wait until your check has cleared before we send you your redemption proceeds.
If you are required to pay a CDSC when you redeem your shares, the amount subject to the fee will be based on the shares' NAV when you purchased them or their NAV when you redeem them, whichever is less. This arrangement ensures that you will not pay a CDSC on any increase in the value of your shares. You also will not pay the charge on any shares acquired by reinvesting dividends or capital gains. If you exchange shares of one fund for shares of another, you do not pay a CDSC at the time of the exchange. If you later redeem those shares, the purchase price for purposes of the CDSC formula will be the price you paid for the original shares, not the exchange price. The redemption price for purposes of this formula will be the NAV of the shares you are actually redeeming.
If you hold your shares in certificates, you must submit the certificates with your request to sell the shares. We recommend that you send your certificates by certified mail.
Through your financial advisor
Your financial advisor can handle all the details of redeeming your shares. Your financial advisor may charge a separate fee for this service.
By mail
You may redeem your shares by mail by writing to: Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 or 4400 Computer Drive, Westborough, MA 01581-1722 for redemptions by overnight courier service. All owners of the account must sign the request. For redemptions of more than $100,000, you must include a signature guarantee for each owner. Signature guarantees are also required when redemption proceeds are going to an address other than the address of record on the account.
Please note that redemption orders submitted by mail will not be considered accepted until such orders are received by Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 for redemptions by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 for redemptions by overnight courier service. Please do not send redemption requests to 2005 Market Street, Philadelphia, PA.
By telephone
You may redeem up to $100,000 of your shares by telephone. You may have the proceeds sent to you by check or, if you redeem at least $1,000 of shares, you may have the proceeds sent directly to your bank by wire. If you request a wire deposit, a bank wire fee may be deducted from your proceeds. Bank information must be on file before you request a wire redemption.
By wire
You may redeem $1,000 or more of your shares and have the proceeds deposited directly to your bank account, normally the next Business Day after we receive your request. If you request a wire deposit, a bank wire fee may be deducted from your proceeds. Bank information must be on file before you request a wire redemption.
Through automated shareholder services
For Class A, Class B, Class C, and Class R shares only, you may redeem shares through our automated telephone service or through our website, delawareinvestments.com. For more information about how to sign up for these services, call our Shareholder Service Center at 800 523-1918.
Redemptions-in-kind
The Fund has reserved the right to pay for redemptions with portfolio securities under certain conditions. See the SAI for more information on redemptions-in-kind.
Account minimums
For Class A, Class B, Class C, and Class R shares, if you redeem shares and your account balance falls below the required account minimum of $1,000 ($250 for IRAs, Roth IRAs, Uniform Gifts to Minors Act and Uniform Transfers to Minors Act accounts, or accounts with automatic investing plans, and $500 for Coverdell Education Savings Accounts) for three or more consecutive months, you will have until the end of the current calendar quarter to raise the balance to the minimum. If your account is not at the minimum by the required time, you may be charged a $9 fee for that quarter and each quarter after that until your account reaches the minimum balance. If your account does not reach the minimum balance, we may redeem your account after 60 days' written notice to you. Any CDSC that would otherwise be applicable will not apply to such a redemption.
For Institutional Class shares, if you redeem shares and your account balance falls below $250, the Fund may redeem your shares after 60 days' written notice to you.
Investor services
To help make investing with us as easy as possible, and to help you build your investments, we offer the following investor services.
Automatic investment plan
The automatic investment plan allows you to make regular monthly or quarterly investments directly from your checking account.
Direct deposit
With direct deposit, you can make additional investments through payroll deductions, recurring government or private payments such as Social Security, or direct transfers from your bank account.
Electronic delivery
With Delaware eDelivery, you can receive your fund documents electronically instead of via U.S. mail. When you sign up for eDelivery, you can access your account statements, shareholder reports, and other fund materials online, in a secure internet environment at any time, from anywhere.
Online account access
Online account access is a password-protected area of the Delaware Investments
®
Funds' website that gives you access to your account information and allows you to perform transactions in a secure internet environment.
Systematic exchange option
With the systematic exchange option, you can arrange automatic monthly exchanges between your shares in one or more Delaware Investments® Funds. These exchanges are subject to the same rules as regular exchanges (see below) and require a minimum monthly exchange of $100 per fund.
Dividend reinvestment plan
Through the dividend reinvestment plan, you can have your distributions reinvested in your account or the same share class in another Delaware Investments® Fund. The shares that you purchase through the dividend reinvestment plan are not subject to a front-end sales charge or to a CDSC. Under most circumstances, you may reinvest dividends only into like classes of shares.
Exchanges
You may generally exchange all or part of your shares for shares of the same class of another Delaware Investments® Fund without paying a front-end sales charge or a CDSC at the time of the exchange. However, if you exchange shares from a money market fund that does not have a sales charge, you will pay any applicable sales charge on your new shares. When exchanging Class B and Class C shares of one fund for the same class of shares in other funds, your new shares will be subject to the same CDSC as the shares you originally purchased. The holding period for the CDSC will also remain the same, with the amount of time you held your original shares being credited toward the holding period of your new shares. In certain other circumstances, you may also be permitted to exchange your shares for shares of a different class of the Fund, but such exchange may be subject to a sales charge for the new shares. (Please refer to the SAI for more details.) You do not pay sales charges on shares that you acquired through the reinvestment of dividends. You may have to pay taxes on your exchange. When you exchange shares, you are purchasing shares in another fund, so you should be sure to get a copy of the fund's prospectus and read it carefully before buying shares through an exchange. We may refuse the purchase side of any exchange request if, in the Manager's judgment, a fund would be unable to invest effectively in accordance with its investment objective and policies or would otherwise potentially be adversely affected.
On demand service
Through the on demand service, you or your financial advisor may transfer money between your Fund account and your predesignated bank account by telephone request. There is a minimum transfer of $25 and a maximum transfer of $100,000. Delaware Investments does not charge a fee for this service; however, your bank may assess one.
Direct deposit service
Through the direct deposit service, you can have $25 or more in dividends and distributions deposited directly into your bank account. Delaware Investments does not charge a fee for this service; however, your bank may assess one. This service is not available for retirement plans.
Systematic withdrawal plan
For Class A and Class C shares, you can arrange a regular monthly or quarterly payment from your account made to you or someone you designate. If the value of your account is $5,000 or more, you can make withdrawals of at least $25 monthly, or $75 quarterly. You may also have your withdrawals deposited directly to your bank account through the direct deposit service.
The applicable Limited CDSC for Class A shares and the CDSC for Class C shares redeemed via a systematic withdrawal plan will be waived if the annual amount withdrawn in each year is less than 12% of the account balance on the date that the plan is established. If the annual amount withdrawn in any year exceeds 12% of the account balance on the date that the systematic withdrawal plan is established, all redemptions under the plan will be subject to the applicable CDSC, including an assessment for previously redeemed amounts under the plan.
Frequent trading of Fund shares
The Fund discourages purchases by market timers and purchase orders (including the purchase side of exchange orders) by shareholders identified as market timers may be rejected. The Board has adopted policies and procedures designed to detect, deter, and prevent trading activity detrimental to the Fund and its shareholders, such as market timing. The Fund will consider anyone who follows a pattern of market timing in any Delaware Investments® Fund or the Optimum Fund Trust to be a market timer and may consider anyone who has followed a similar pattern of market timing at an unaffiliated fund family to be a market timer.
Market timing of a fund occurs when investors make consecutive, rapid, short-term "roundtrips" — that is, purchases into a fund followed quickly by redemptions out of that fund. A short-term roundtrip is any redemption of fund shares within 20 Business Days of a purchase of that fund's shares. If you make a second such short-term roundtrip in a fund within 90 rolling calendar days as a previous short-term roundtrip in that fund, you may be considered a market timer. In determining whether market timing has occurred, the Fund will consider short-term roundtrips to include rapid purchases and sales of Fund shares through the exchange privilege. The Fund reserves the right to consider other trading patterns to be market timing.
Your ability to use the Fund's exchange privilege may be limited if you are identified as a market timer. If you are identified as a market timer, we will execute the redemption side of your exchange order but may refuse the purchase side of your exchange order. The Fund reserves the right to restrict or reject, without prior notice, any purchase order or exchange order for any reason, including any purchase order or exchange order accepted by any shareholder's financial intermediary or in any omnibus-type account. Transactions placed in violation of the Fund's market timing policy are not necessarily deemed accepted by the Fund and may be rejected by the Fund on the next Business Day following receipt by the Fund.
Redemptions will continue to be permitted in accordance with the Fund's current prospectus. A redemption of shares under these circumstances could be costly to a shareholder if, for example, the shares have declined in value, the shareholder recently paid a front-end sales charge, the shares are subject to a CDSC, or the sale results in adverse tax consequences. To avoid this risk, a shareholder should carefully monitor the purchases, sales, and exchanges of Fund shares and avoid frequent trading in Fund shares.
The Fund reserves the right to modify this policy at any time without notice, including modifications to the Fund's monitoring procedures and the procedures to close accounts to new purchases. Although the implementation of this policy involves judgments that are inherently subjective and may be selectively applied, we seek to make judgments and applications that are consistent with the interests of the Fund's shareholders. While we will take actions designed to detect and prevent market timing, there can be no assurance that such trading activity will be completely eliminated. Moreover, the Fund's market timing policy does not require the Fund to take action in response to frequent trading activity. If the Fund elects not to take any action in response to frequent trading, such frequent trading activity could continue.
Risks of market timing
By realizing profits through short-term trading, shareholders that engage in rapid purchases and sales or exchanges of the Fund's shares dilute the value of shares held by long-term shareholders. Volatility resulting from excessive purchases and sales or exchanges of Fund shares, especially involving large dollar amounts, may disrupt efficient portfolio management. In particular, the Fund may have difficulty implementing its long-term investment strategies if it is forced to maintain a higher level of its assets in cash to accommodate significant short-term trading activity. Excessive purchases and sales or exchanges of the Fund's shares may also force the Fund to sell portfolio securities at inopportune times to raise cash to accommodate short-term trading activity. This could adversely affect the Fund's performance, if, for example, the Fund incurs increased brokerage costs and realization of taxable capital gains without attaining any investment advantage.
A fund that invests significantly in foreign securities may be particularly susceptible to short-term trading strategies. This is because foreign securities are typically traded on markets that close well before the time a fund calculates its NAV (normally 4:00 p.m. Eastern time). Developments that occur between the closing of the foreign market and a fund's NAV calculation may affect the value of these foreign securities. The time-zone differences among international stock markets can allow a shareholder engaging in a short-term trading strategy to exploit differences in fund share prices that are based on closing prices of foreign securities established some time before a fund calculates its own share price.
Any fund that invests in securities that are thinly traded, traded infrequently, or relatively illiquid has the risk that the securities prices used to calculate the fund's NAV may not accurately reflect current market values. A shareholder may seek to engage in short-term trading to take advantage of these pricing differences. Funds that may be adversely affected by such arbitrage include, in particular, funds that significantly invest in small-cap securities, technology, and other specific industry sector securities, and in certain fixed income securities, such as high yield bonds, asset-backed securities, or municipal bonds.
Transaction monitoring procedures
The Fund, through its transfer agent, maintains surveillance procedures designed to detect excessive or short-term trading in Fund shares. This monitoring process involves several factors, which include scrutinizing transactions in Fund shares for violations of the Fund's market timing policy or other patterns of short-term or excessive trading. For purposes of these transaction monitoring procedures, the Fund may consider trading activity by multiple accounts under common ownership, control, or influence to be trading by a single entity. Trading activity identified by these factors, or as a result of any other available information, will be evaluated to determine whether such activity might constitute market timing. These procedures may be modified from time to time to improve the detection of excessive or short-term trading or to address other concerns. Such changes may be necessary or appropriate, for example, to deal with issues specific to certain retirement plans; plan exchange limits; U.S. Department of Labor regulations; certain automated or pre-established exchange, asset-allocation, or dollar cost averaging programs; or omnibus account arrangements.
Omnibus account arrangements are common forms of holding shares of the Fund, particularly among certain broker/dealers and other financial intermediaries, including sponsors of retirement plans and variable insurance products. The Fund will attempt to have financial intermediaries apply the Fund's monitoring procedures to these omnibus accounts and to the individual participants in such accounts. However, to the extent that a financial intermediary is not able or willing to monitor or enforce the Fund's frequent trading policy with respect to an omnibus account, the Fund or its agents may require the financial intermediary to impose its frequent trading policy, rather than the Fund's policy, to shareholders investing in the Fund through the financial intermediary. In addition, the Fund or its transfer agent may enter into shareholder information agreements with such financial intermediaries under which the Fund may receive information (such as taxpayer identification numbers and Fund transaction activity) in order to identify frequent trading activity.
A financial intermediary may impose different requirements or have additional restrictions on the frequency of trading than the Fund. Such restrictions may include, without limitation, requiring the trades to be placed by U.S. mail, prohibiting purchases for a designated period of time (typically 30 to 90 days) by investors who have recently purchased or redeemed Fund shares, and similar restrictions. The Fund's ability to impose such restrictions with respect to accounts traded through particular financial intermediaries may vary depending on systems capabilities, applicable contractual and legal restrictions, and cooperation of those financial intermediaries.
You should consult your financial intermediary regarding the application of such restrictions and to determine whether your financial intermediary imposes any additional or different limitations. In an effort to discourage market timers in such accounts, the Fund may consider enforcement against market timers at the participant level and at the omnibus level, up to and including termination of the omnibus account's authorization to purchase Fund shares.
Limitations on ability to detect and curtail market timing
Shareholders seeking to engage in market timing may employ a variety of strategies to avoid detection and, despite the efforts of the Fund and its agents to detect market timing in Fund shares, there is no guarantee that the Fund will be able to identify these shareholders or curtail their trading practices. In particular, the Fund may not be able to detect market timing attributable to a particular investor who effects purchase, redemption, and/or exchange activity in Fund shares through omnibus accounts. The difficulty of detecting market timing may be further compounded if these entities utilize multiple tiers or omnibus accounts.
Dividends, distributions, and taxes
Dividends and distributions
The Fund intends to qualify each year as a regulated investment company under the Code. As a regulated investment company, the Fund generally pays no federal income tax on the income and gains it distributes to you. The Fund expects to declare dividends daily and distribute all of its net investment income, if any, to shareholders as dividends monthly. The Fund will distribute net realized capital gains, if any, at least annually, usually in December. The Fund may distribute such income dividends and capital gains more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Fund. The amount of any distribution will vary, and there is no guarantee the Fund will pay either an income dividend or a capital gains distribution. We automatically reinvest all dividends and any capital gains, unless you direct us to do otherwise.
Annual statements
Each year, the Fund will send you an annual statement (Form 1099) of your account activity to assist you in completing your federal, state and local tax returns. Distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December. Prior to issuing your statement, the Fund makes every effort to reduce the number of corrected forms mailed to you. However, if the Fund finds it necessary to reclassify its distributions or adjust the cost basis of any covered shares sold or exchanged after you receive your tax statement, the Fund will send you a corrected Form 1099.
Avoid "buying a dividend"
At the time you purchase your Fund shares, the Fund's NAV may reflect undistributed income, undistributed capital gains, or net unrealized appreciation in value of portfolio securities held by the Fund. For taxable investors, a subsequent distribution to you of such amounts, although constituting a return of your investment, would be taxable. Buying shares in the Fund just before it declares an income dividend or capital gains distribution is sometimes known as "buying a dividend."
Tax considerations
Fund distributions.
The Fund expects, based on its investment objective and strategies, that its distributions, if any, will be taxable as ordinary income, capital gains, or some combination of both. This is true whether you reinvest your distributions in additional Fund shares or receive them in cash.
For federal income tax purposes, Fund distributions of short-term capital gains are taxable to you as ordinary income. Fund distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your shares. With respect to income dividends paid on or before December 31, 2012 (unless such provision is extended, possibly retroactively to January 1, 2013, or made permanent), a portion of income dividends reported by the Fund may be qualified dividend income eligible for taxation by individual shareholders at long-term capital gain rates provided certain holding period requirements are met. Because the income of the Fund is primarily derived from investments earning interest rather than dividend income, generally none or only a small portion of the income dividends paid to you by the Fund is anticipated to be qualified dividend income eligible for taxation by individuals at long-term capital gain tax rates.
Sale or redemption of Fund shares.
A sale or redemption of Fund shares is a taxable event and, accordingly, a capital gain or loss may be recognized. For tax purposes, an exchange of your Fund shares for shares of a different Delaware Investments® Fund is the same as a sale. Beginning with the 2012 calendar year, the Fund will be required to report to you and the Internal Revenue Service annually on Form 1099-B not only the gross proceeds of Fund shares you sell or redeem but also the cost basis for shares purchased or acquired on or after January 1, 2012 ("covered shares"). Cost basis will be calculated using the Fund's default method, unless you instruct the Fund to use a different calculation method. Shareholders should carefully review the cost basis information provided by the Fund and make any additional basis, holding period, or other adjustments that are required when reporting these amounts on their federal income tax returns. If your account is held by your investment representative (financial advisor or other broker), please contact that representative with respect to reporting of cost basis and available elections for your account. Tax-advantaged retirement accounts will not be affected. Additional information and updates regarding cost basis reporting and available shareholder elections will be on Delaware Investment's website at delawareinvestments.com as the information becomes available.
Medicare tax.
For taxable years beginning after December 31, 2012, an additional 3.8% Medicare tax will be imposed on certain net investment income (including ordinary dividends and capital gain distributions received from the Fund and net gains from redemptions or other taxable dispositions of Fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.
Backup withholding.
By law, if you do not provide the Fund with your proper taxpayer identification number and certain required certifications, you may be subject to backup withholding on any distributions of income, capital gains, or proceeds from the sale of your shares. The Fund also must withhold if the Internal Revenue Service instructs it to do so. When withholding is required, the amount will be 28% of any distributions or proceeds paid (for distributions and proceeds paid after December 31, 2012, the rate is scheduled to rise to 31% unless the 28% rate is extended, possibly retroactively to January 1, 2013, or made permanent).
State and local taxes.
Fund distributions and gains from the sale or exchange of your Fund shares generally are subject to state and local taxes.
Non-U.S. investors.
Non-U.S. investors may be subject to U.S. withholding tax at a 30% or lower treaty rate and U.S. estate tax and are subject to special U.S. tax certification requirements to avoid backup withholding and claim any treaty benefits. An exemption from U.S. withholding tax is provided for capital gain dividends paid by the Fund from long-term capital gains, if any. However, notwithstanding such exemption from U.S. withholding at the source, any such dividends and distributions of income and capital gains will be subject to backup withholding at a rate of 28% (or the then applicable rate) if you fail to properly certify that you are not a U.S. person.
Other Reporting and Withholding Requirements.
The Foreign Account Tax Compliance Act ("FATCA") requires the reporting to the Internal Revenue Service of certain direct and indirect ownership of foreign financial accounts by U.S. persons. Failure to provide this required information can result in a generally nonrefundable 30% tax on: (a) income dividends paid by the Fund after December 31, 2013 and (b) certain capital gain distributions (including proceeds arising from the sale Fund shares) paid by the Fund after December 31, 2016 to certain "foreign financial institutions" and "non-financial foreign entities."
This discussion of "Dividends, distributions, and taxes" is not intended or written to be used as tax advice. Because everyone's tax situation is unique, you should consult your tax professional about federal, state, local, or foreign tax consequences before making an investment in the Fund.
Certain management considerations
Investments by funds of funds and similar investment vehicles
The Fund may accept investments from funds of funds, as well as from similar investment vehicles, such as 529 Plans. A "529 Plan" is a college savings program that operates under Section 529 of the Internal Revenue Code. From time to time, the Fund may experience large investments or redemptions due to allocations or rebalancings by these funds of funds and/or similar investment vehicles. While it is impossible to predict the overall impact of these transactions over time, there could be adverse effects on portfolio management. For example, the Fund may be required to sell securities or invest cash at times when it would not otherwise do so. These transactions could also have tax consequences if sales of securities result in gains, and could also increase transaction costs or portfolio turnover.
Financial highlights
The financial highlights table is intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). The information for the 2012, 2011, and 2010 fiscal years has been audited by PricewaterhouseCoopers LLP, independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Fund's annual report, which is available upon request by calling 800 523-1918. For the fiscal years prior to 2010, the Fund's prior independent registered public accounting firm audited the Fund's financial statements.
Class A Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$4.200
|
$3.980
|
$3.560
|
$3.880
|
$4.260
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
|
0.308
|
0.315
|
0.356
|
0.323
|
0.299
|
Net realized and unrealized gain (loss)
|
(0.090)
|
0.231
|
0.412
|
(0.347)
|
(0.368)
|
Total from investment operations
|
0.218
|
0.546
|
0.768
|
(0.024)
|
(0.069)
|
Less dividends and distributions from:
|
|
|
|
|
|
Net investment income
|
(0.308)
|
(0.326)
|
(0.348)
|
(0.296)
|
(0.311)
|
Total dividends and distributions
|
(0.308)
|
(0.326)
|
(0.348)
|
(0.296)
|
(0.311)
|
|
|
|
|
|
|
Net asset value, end of period
|
$4.110
|
$4.200
|
$3.980
|
$3.560
|
$3.880
|
|
|
|
|
|
|
Total return
1
|
5.73%
|
14.11%
|
22.30%
|
0.81%
|
(1.74%)
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$311,859
|
$306,304
|
$335,684
|
$261,286
|
$86,809
|
Ratio of expenses to average net assets
|
1.11%
|
1.11%
|
1.11%
|
1.15%
|
1.13%
|
Ratio of expenses to average net assets prior to fees
waived and expense paid indirectly
|
1.18%
|
1.20%
|
1.25%
|
1.37%
|
1.31%
|
Ratio of net investment income to average net assets
|
7.71%
|
7.60%
|
9.25%
|
9.92%
|
7.28%
|
Ratio of net investment income to average net assets
prior to fees waived and expense paid indirectly
|
7.64%
|
7.51%
|
9.11%
|
9.70%
|
7.10%
|
Portfolio turnover
|
61%
|
115%
|
141%
|
89%
|
143%
|
1
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver(s) not been in effect.
|
Class B Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$4.190
|
$3.980
|
$3.560
|
$3.880
|
$4.260
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
|
0.280
|
0.286
|
0.329
|
0.300
|
0.271
|
Net realized and unrealized gain (loss)
|
(0.080)
|
0.221
|
0.412
|
(0.347)
|
(0.368)
|
Total from investment operations
|
0.200
|
0.507
|
0.741
|
(0.047)
|
(0.097)
|
Less dividends and distributions from:
|
|
|
|
|
|
Net investment income
|
(0.280)
|
(0.297)
|
(0.321)
|
(0.273)
|
(0.283)
|
Total dividends and distributions
|
(0.280)
|
(0.297)
|
(0.321)
|
(0.273)
|
(0.283)
|
|
|
|
|
|
|
Net asset value, end of period
|
$4.110
|
$4.190
|
$3.980
|
$3.560
|
$3.880
|
|
|
|
|
|
|
Total return
1
|
5.24%
|
13.06%
|
21.46%
|
0.11%
|
(2.42%)
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$4,924
|
$7,527
|
$10,143
|
$11,966
|
$7,827
|
Ratio of expenses to average net assets
|
1.81%
|
1.81%
|
1.81%
|
1.85%
|
1.83%
|
Ratio of expenses to average net assets prior to fees
waived and expense paid indirectly
|
1.88%
|
1.90%
|
1.95%
|
2.07%
|
2.01%
|
Ratio of net investment income to average net assets
|
7.01%
|
6.90%
|
8.55%
|
9.22%
|
6.58%
|
Ratio of net investment income to average net assets
prior to fees waived and expense paid indirectly
|
6.94%
|
6.81%
|
8.41%
|
9.00%
|
6.40%
|
Portfolio turnover
|
61%
|
115%
|
141%
|
89%
|
143%
|
1
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver(s) not been in effect.
|
Class C Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$4.200
|
$3.990
|
$3.560
|
$3.880
|
$4.260
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
|
0.280
|
0.287
|
0.329
|
0.300
|
0.270
|
Net realized and unrealized gain (loss)
|
(0.080)
|
0.221
|
0.422
|
(0.347)
|
(0.368)
|
Total from investment operations
|
0.200
|
0.508
|
0.751
|
(0.047)
|
(0.098)
|
Less dividends and distributions from:
|
|
|
|
|
|
Net investment income
|
(0.280)
|
(0.298)
|
(0.321)
|
(0.273)
|
(0.282)
|
Total dividends and distributions
|
(0.280)
|
(0.298)
|
(0.321)
|
(0.273)
|
(0.282)
|
|
|
|
|
|
|
Net asset value, end of period
|
$4.120
|
$4.200
|
$3.990
|
$3.560
|
$3.880
|
|
|
|
|
|
|
Total return
1
|
5.24%
|
13.04%
|
21.75%
|
0.10%
|
(2.44%)
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$65,771
|
$53,151
|
$36,060
|
$31,415
|
$21,146
|
Ratio of expenses to average net assets
|
1.81%
|
1.81%
|
1.81%
|
1.85%
|
1.83%
|
Ratio of expenses to average net assets prior to fees
waived and expense paid indirectly
|
1.88%
|
1.90%
|
1.95%
|
2.07%
|
2.01%
|
Ratio of net investment income to average net assets
|
7.01%
|
6.90%
|
8.55%
|
9.22%
|
6.58%
|
Ratio of net investment income to average net assets
prior to fees waived and expense paid indirectly
|
6.94%
|
6.81%
|
8.41%
|
9.00%
|
6.40%
|
Portfolio turnover
|
61%
|
115%
|
141%
|
89%
|
143%
|
1
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver(s) not been in effect.
|
Class R Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$4.210
|
$3.990
|
$3.570
|
$3.890
|
$4.270
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
|
0.301
|
0.308
|
0.349
|
0.316
|
0.291
|
Net realized and unrealized gain (loss)
|
(0.090)
|
0.231
|
0.412
|
(0.347)
|
(0.368)
|
Total from investment operations
|
0.211
|
0.539
|
0.761
|
(0.031)
|
(0.077)
|
Less dividends and distributions from:
|
|
|
|
|
|
Net investment income
|
(0.301)
|
(0.319)
|
(0.341)
|
(0.289)
|
(0.303)
|
Total dividends and distributions
|
(0.301)
|
(0.319)
|
(0.341)
|
(0.289)
|
(0.303)
|
|
|
|
|
|
|
Net asset value, end of period
|
$4.120
|
$4.210
|
$3.990
|
$3.570
|
$3.890
|
|
|
|
|
|
|
Total return
1
|
5.51%
|
13.87%
|
22.01%
|
0.62%
|
(1.93%)
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$14,637
|
$19,046
|
$14,708
|
$15,323
|
$11,305
|
Ratio of expenses to average net assets
|
1.31%
|
1.31%
|
1.31%
|
1.35%
|
1.33%
|
Ratio of expenses to average net assets prior to fees
waived and expense paid indirectly
|
1.48%
|
1.50%
|
1.55%
|
1.67%
|
1.61%
|
Ratio of net investment income to average net assets
|
7.51%
|
7.40%
|
9.05%
|
9.72%
|
7.08%
|
Ratio of net investment income to average net assets
prior to fees waived and expense paid indirectly
|
7.34%
|
7.21%
|
8.81%
|
9.40%
|
6.80%
|
Portfolio turnover
|
61%
|
115%
|
141%
|
89%
|
143%
|
1
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect.
|
Institutional Class Shares
|
2012
|
2011
|
2010
|
2009
|
Year ended
July 31, 2008
|
Net asset value, beginning of period
|
$4.200
|
$3.980
|
$3.560
|
$3.880
|
$4.260
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment income
|
0.320
|
0.328
|
0.367
|
0.332
|
0.312
|
Net realized and unrealized gain (loss)
|
(0.090)
|
0.231
|
0.412
|
(0.347)
|
(0.368)
|
Total from investment operations
|
0.230
|
0.559
|
0.779
|
(0.015)
|
(0.056)
|
Less dividends and distributions from:
|
|
|
|
|
|
Net Investment Income
|
(0.320)
|
(0.339)
|
(0.359)
|
(0.305)
|
(0.324)
|
Total dividends and distributions
|
(0.320)
|
(0.339)
|
(0.359)
|
(0.305)
|
(0.324)
|
|
|
|
|
|
|
Net asset value, end of period
|
$4.110
|
$4.200
|
$3.980
|
$3.560
|
$3.880
|
|
|
|
|
|
|
Total return
1
|
6.03%
|
14.45%
|
22.65%
|
1.11%
|
(1.45%)
|
|
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$185,843
|
$122,855
|
$59,831
|
$45,166
|
$37,465
|
Ratio of expenses to average net assets
|
0.81%
|
0.81%
|
0.81%
|
0.85%
|
0.83%
|
Ratio of expenses to average net assets prior to fees
waived and expense paid indirectly
|
0.88%
|
0.90%
|
0.95%
|
1.07%
|
1.01%
|
Ratio of net investment income to average net assets
|
8.01%
|
7.90%
|
9.55%
|
10.22%
|
7.58%
|
Ratio of net investment income to average net assets
prior to fees waived and expense paid indirectly
|
7.94%
|
7.81%
|
9.41%
|
10.00%
|
7.40%
|
Portfolio turnover
|
61%
|
115%
|
141%
|
89%
|
143%
|
1
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect.
|
How to read the financial highlights
Net investment income (loss)
Net investment income (loss) includes dividend and interest income earned from a fund's investments; it is calculated after expenses have been deducted.
Net realized and unrealized gain (loss) on investments
A realized gain occurs when we sell an investment at a profit, while a realized loss occurs when we sell an investment at a loss. When an investment increases or decreases in value but we do not sell it, we record an unrealized gain or loss. The amount of realized gain per share, if any, that we pay to shareholders would be listed under "Less dividends and distributions from: Net realized gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an investment in a fund. In calculating this figure for the financial highlights table, we include applicable fee waivers, exclude front-end sales charges and contingent deferred sales charges, and assume the shareholder has reinvested all dividends and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio, less any liabilities, that are attributable to that class of the fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for operating expenses and management fees. These expenses include accounting and administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income (loss) to average net assets
We determine this ratio by dividing net investment income (loss) by average net assets.
Portfolio turnover
This figure tells you the amount of trading activity in a fund's portfolio. A turnover rate of 100% would occur if, for example, a fund bought and sold all of the securities in its portfolio once in the course of a year or frequently traded a single security. A high rate of portfolio turnover in any year may increase brokerage commissions paid and could generate taxes for shareholders on realized investment gains.
Additional information
Contact information
-
Website:
delawareinvestments.com
-
Shareholder Service Center: 800 523-1918 (representatives available weekdays from 8:30 a.m. to 6:00 p.m. Eastern time)
-
For fund information, literature, price, yield, and performance figures.
-
For information on existing regular investment accounts and retirement plan accounts including wire investments, wire redemptions, telephone redemptions, and telephone exchanges.
-
Automated telephone service: 800 523-1918 (seven days a week, 24 hours a day)
-
Written correspondence: P.O. Box 9876, Providence, RI 02940-8076 or 4400 Computer Drive, Westborough, MA 01581-1722.
Additional information about the Fund's investments
is available in its annual and semiannual shareholder reports. In the Fund's annual shareholder report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during the period covered by the report. You can find more information about the Fund in its current SAI, which is filed electronically with the SEC, and which is legally a part of this Prospectus (it is incorporated by reference). To receive a free copy of the SAI, or the annual or semiannual report, or if you have any questions about investing in the Fund, write to us at P.O. Box 9876, Providence, RI 02940-8076 by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 by overnight courier service, or call toll-free 800 523-1918. The SAI and shareholder reports are available, free of charge, through the Fund's website (delawareinvestments.com). You may also obtain additional information about the Fund from your financial advisor.
You can find reports and other information about the Fund on the EDGAR database on the SEC website (sec.gov). You can get copies of this information, after paying a duplication fee, by e-mailing the SEC at publicinfo@sec.gov or by writing to the Public Reference Section of the SEC,
100 F Street, NE, Washington, DC 20549-1520. Information about the Fund, including its SAI, can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. For information on the Public Reference Room, call the SEC at 202 551-8090.
PR-137 [7/12] PDF 18232 [11/12]
Investment Company Act number: 811-02071
|
Prospectus
Fixed income
Delaware Diversified Floating Rate Fund
November 28, 2012
Nasdaq ticker symbols
|
Class A
|
DDFAX
|
Class C
|
DDFCX
|
Class R
|
DDFFX
|
Institutional Class
|
DDFLX
|
The U.S. Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
Get shareholder reports and prospectuses online instead of in the mail.
Visit delawareinvestments.com/edelivery.
Fund summary
Delaware Diversified Floating Rate Fund
What is the Fund's investment objective?
Delaware Diversified Floating Rate Fund seeks total return.
What are the Fund's fees and expenses?
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. 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 advisor, in the Fund's prospectus under the section entitled "About your account," and in the Fund's statement of additional information under the section entitled "Purchasing shares."
Shareholder fees (fees paid directly from your investment)
|
Class
|
A
|
C
|
R
|
Inst.
|
Maximum sales charge (load) imposed on purchases as
a percentage of offering price
|
2.75%
|
none
|
none
|
none
|
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lower
|
none
|
1.00%
1
|
none
|
none
|
Annual fund operating expenses (expenses that you pay each year as a percentage of the value of your investment)
|
Class
|
A
|
C
|
R
|
Inst.
|
Management fees
|
0.50%
|
0.50%
|
0.50%
|
0.50%
|
Distribution and service (12b-1) fees
|
0.30%
|
1.00%
|
0.60%
|
none
|
Other expenses
|
0.32%
|
0.32%
|
0.32%
|
0.32%
|
Total annual fund operating expenses
|
1.12%
|
1.82%
|
1.42%
|
0.82%
|
Fee waivers and expense reimbursements
|
(0.07%)
2
|
(0.02%)
2
|
(0.12%)
2
|
(0.02%)
2
|
Total annual fund operating expenses after fee waivers and expense reimbursements
|
1.05%
|
1.80%
|
1.30%
|
0.80%
|
1
|
Class C shares redeemed within one year of purchase are subject to a 1.00% contingent deferred sales charge (CDSC).
|
2
|
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 plan, taxes, interest, inverse floater program expenses, 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 annual fund operating expenses from exceeding, in an aggregate amount, 0.80% of the Fund's average daily net assets from November 28, 2012 through November 28, 2013. In addition, the Fund's distributor, Delaware Distributors, L.P. (Distributor), has contracted to limit the Class A and Class R shares' 12b-1 fee for the Fund to no more than 0.25% and 0.50% of average daily net assets, respectively, from November 28, 2012 through November 28, 2013. These waivers and reimbursements may only be terminated by agreement of the Manager or Distributor, as applicable, and the Fund.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and reflects the applicable waivers and reimbursements for the 1-year contractual period and the total operating expenses without waivers for years 2 through 10. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
|
|
(if not redeemed)
|
|
|
|
Class
|
A
|
C
|
C
|
R
|
Inst.
|
1 year
|
$379
|
$183
|
$283
|
$132
|
$82
|
3 years
|
$614
|
$571
|
$571
|
$438
|
$260
|
5 years
|
$868
|
$983
|
$983
|
$765
|
$453
|
10 years
|
$1,595
|
$2,136
|
$2,136
|
$1,692
|
$1,012
|
Portfolio turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 97% of the average value of its portfolio.
What are the Fund's principal investment strategies?
Under normal circumstances, the Fund will invest at least 80% of its net assets in floating-rate securities, including but not limited to, investment grade corporate bonds, bank loans, high yield bonds, nonagency mortgage-backed securities, asset-backed securities, securities issued or guaranteed by the U.S. government, municipal bonds, securities of foreign issuers in both developed and emerging markets, and may include derivative instruments that attempt to achieve a floating rate of income for the Fund when they are combined with a group of fixed-rate securities (the 80% Policy). The Manager will determine how much of the Fund's assets to allocate among the different types of securities in which the Fund may invest based on our evaluation of economic and market conditions and our assessment of the returns and potential for appreciation that can be achieved from various sectors of the fixed income market.
The instruments listed in the preceding paragraph may be variable and floating-rate fixed income securities that generally pay interest at rates that adjust whenever a specified interest rate changes and/or reset on predetermined dates (such as the last day of a month or calendar quarter). Derivative instruments may be utilized to effectively convert the fixed-rate interest payments from a group of certain Fund portfolio securities into floating-rate interest payments. The Fund may also invest in securities other than those listed above. The average portfolio duration (that is, the sensitivity to general changes in interest rates) of this Fund will generally not exceed one year.
Up to 50% of the Fund's total assets may be allocated to below-investment-grade securities within the Fund. Investments in emerging markets will, in the aggregate, be limited to no more than 15% of the Fund's total assets. We will limit non-U.S.-dollar-denominated securities to no more than 50% of net assets, but total non-U.S.-dollar currency exposure will be limited, in the aggregate, to no more than 25% of net assets. The Fund may also invest up to 50% of its total assets in a wide range of derivative instruments, including options, futures contracts, options on futures contracts, and swaps. In addition, the Fund may hold a portion of its assets in cash or cash equivalents. The Fund's 80% Policy described above may be changed without shareholder approval. However, shareholders will be given at least 60 days' notice prior to any such change.
What are the principal risks of investing in the Fund?
Investing in any mutual fund involves the risk that you may lose part or all of the money you invest. Over time, the value of your investment in the Fund will increase and decrease according to changes in the value of the securities in the Fund's portfolio. Principal risks include:
Investments not guaranteed by the Manager or its affiliates
— Investments in the Fund are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies, including their subsidiaries or related companies (Macquarie Group), and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Fund, the repayment of capital from the Fund, or any particular rate of return.
Market risk
— The risk that all or a majority of the securities in a certain market — such as the stock or bond market — will decline in value because of factors such as adverse political or economic conditions, future expectations, investor confidence, or heavy institutional selling.
Credit risk
— The risk that an issuer of a debt security, including a governmental issuer, may be unable to make interest payments and repay principal in a timely manner.
Bank loans and other indebtedness
risk
— The risk that the portfolio will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower and the lending institution.
Interest rate risk
— The risk that securities will decrease in value if interest rates rise. This risk is generally associated with bonds.
High yield (junk bond) risk
— The risk that high yield securities, commonly known as "junk bonds," are subject to reduced creditworthiness of issuers; increased risk of default and a more limited and less liquid secondary market; and greater price volatility and risk of loss of income and principal than are higher rated securities.
Prepayment risk
— The risk that the principal on a bond that is held by a portfolio will be prepaid prior to maturity at a time when interest rates are lower than what that bond was paying. A portfolio may then have to reinvest that money at a lower interest rate.
Foreign risk
— The risk that foreign securities (particularly in emerging markets) may be adversely affected by political instability; changes in currency exchange rates; inefficient markets and higher transaction costs; foreign economic conditions; or inadequate or different regulatory and accounting standards.
Forward foreign currency risk
— The use of forward foreign currency exchange contracts may substantially change a fund's exposure to currency exchange rates and could result in losses to the fund if currencies do not perform as the Manager expects. The use of these investments as a hedging technique to reduce a fund's exposure to currency risks may also reduce its ability to benefit from favorable changes in currency exchange rates.
Liquidity risk
— The possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them.
Derivatives risk
— Derivative contracts, such as options, futures, and swaps, may involve additional expenses (such as the payment of premiums) and are subject to significant loss if a security, or a securities index to which a derivative contract is associated, moves in the opposite direction from what the portfolio manager anticipated. Derivative contracts are also subject to the risk that the counterparty may fail to perform its obligations under the contract due to financial difficulties (such as a bankruptcy or reorganization).
Valuation risk
— The risk that a less liquid secondary market may make it more difficult for a fund to obtain precise valuations of certain securities in its portfolio.
Government and regulatory risk
— The risk that governments or regulatory authorities have, from time to time, taken or considered actions that could adversely affect various sectors of the securities markets.
How has Delaware Diversified Floating Rate
Fund performed?
The bar chart and table below provide some indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for the 1-year and lifetime periods compare with those of a broad measure of market performance. The Fund's past performance (before and after taxes) is not necessarily an indication of how it will perform in the future. The returns reflect expense caps in effect during these periods. The returns would be lower without the expense caps. You may obtain the Fund's most recently available month-end performance by calling 800 523-1918 or by visiting our website at delawareinvestments.com/performance.
Year-by-year total return (Class A)*
As of September 30, 2012, the Fund's Class A shares had a calendar year-to-date return of 4.64%. During the periods illustrated in this bar chart, Class A's highest quarterly return was 1.68% for the quarter ended September 30, 2010 and its lowest quarterly return was -2.42% for the quarter ended September 30,2011. The maximum Class A sales charge of 2.75%, which is normally deducted when you purchase shares, is not reflected in the highest/lowest quarterly returns or in the bar chart. If this sales charge were included, the returns would be less than those shown. The average annual returns in the table below do include the sales charge.
Average annual total returns for periods ended December 31, 2011*
|
1 year
|
Lifetime
2/26/10-
12/31/11)
|
Class A return before taxes
|
-2.56%
|
0.07%
|
Class A return after taxes on distributions
|
-3.26%
|
-0.68%
|
Class A return after taxes on distributions and sale of Fund shares
|
-1.67%
|
-0.37%
|
Class C return before taxes
|
-1.54%
|
0.85%
|
Class R return before taxes
|
-0.79%
|
1.33%
|
Institutional Class before taxes
|
0.44%
|
1.86%
|
BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index
(reflects no deduction for fees, expenses, or taxes)
|
0.27%
|
0.31%
|
* Because the Fund has combined its retail and institutional prospectuses, the bar chart and the after tax returns in the average annual total returns table show the performance of the Fund's Class A shares.
After-tax performance is presented only for Class A shares of the Fund. The after-tax returns for other Fund classes may vary. Actual after-tax returns depend on the investor's individual tax situation and may differ from the returns shown. After-tax returns are not relevant for shares held in tax-deferred investment vehicles such as employer-sponsored 401(k) plans and individual retirement accounts (IRAs). The after-tax returns shown are calculated using the highest individual federal marginal income tax rates in effect during the periods presented and do not reflect the impact of state and local taxes.
Who manages the Fund?
Investment manager
Delaware Management Company, a series of Delaware Management Business Trust
Portfolio managers
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Title with Delaware Management Company
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Start date on the Fund
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Paul Grillo, CFA
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Senior Vice President, Co-Chief Investment Officer – Total Return Fixed Income Strategy
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February 2010
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Roger A. Early, CPA, CFA, CFP
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Senior Vice President, Co-Chief Investment Officer - Total Return Fixed Income Strategy
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February 2010
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Kevin P. Loome, CFA
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Senior Vice President, Senior Portfolio Manager, Head of High Yield Investments
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February 2010
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J. David Hillmeyer, CFA
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Vice President, Senior Portfolio Manager
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February 2010
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Adam H. Brown, CFA
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Vice President, Portfolio Manager
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November 2011
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Purchase and redemption of Fund shares
You may purchase or redeem shares of the Fund on any day that the New York Stock Exchange (NYSE) is open for business (Business Day). Shares may be purchased or redeemed: through your financial advisor; through the Fund's website at delawareinvestments.com; by calling 800 523-1918; by regular mail (c/o Delaware Investments, P.O. Box 9876, Providence, RI 02940-8076); by overnight courier service (c/o Delaware Service Center,
4400 Computer Drive, Westborough, MA 01581-1722); or by wire.
For Class A and Class C shares, the minimum initial investment is $1,000 and subsequent investments can be made for as little as $100. The minimum initial investment for IRAs, Uniform Gifts/Transfers to Minors Act accounts, direct deposit purchase plans and automatic investment plans is $250 and through Coverdell Education Savings Accounts is $500, and subsequent investments in these accounts can be made for as little as $25. For Class R and Institutional Class shares, there is no minimum initial purchase requirement, but certain eligibility requirements must be met. The eligiblity requirements are described in the prospectus under "Choosing a share class" and on the Fund's website. We may reduce or waive the minimums or eligbility requirements in certain cases.
Tax information
The Fund's distributions generally are taxable to you as ordinary income, capital gains, or some combination of both, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an IRA.
Payments to broker/dealers and other
financial intermediaries
If you purchase shares of the Fund through a broker/dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker/dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.
How we manage the Fund
We take a disciplined approach to investing, combining investment strategies and risk management techniques that we believe can help shareholders meet their goals.
Our investment strategies
We analyze economic and market conditions, seeking to identify the securities or market sectors that we think are the best investments for the Fund. Securities in which the Fund may invest include, but are not limited to, the following:
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Investment grade and below-investment-grade corporate bonds;
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Loan participations (also known as bank loans);
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Securities of foreign issuers in both developed and emerging markets, denominated in foreign currencies and U.S. dollars;
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Nonagency mortgage-backed securities, asset-backed securities, commercial mortgage-backed securities (CMBS), collateralized mortgage obligations (CMOs), and real estate mortgage investment conduits (REMICs);
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Securities issued or guaranteed by the U.S. government, such as U.S. Treasurys;
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Securities issued by U.S. government agencies or instrumentalities, such as securities of the Government National Mortgage Association (Ginnie Mae);
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U.S. municipal securities;
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Various types of structured product securities; and
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Short-term investments, cash and cash equivalents.
Under normal circumstances, the Fund will invest at least 80% of its net assets in floating-rate securities, including but not limited to the securities listed above, and may include derivative instruments that attempt to achieve a floating rate of income for the Fund when they are combined with a group of fixed-rate securities (the 80% Policy). The instruments listed in the preceding paragraph may be variable and floating-rate fixed income securities that generally pay interest at rates that adjust whenever a specified interest rate changes and/or reset on predetermined dates (such as the last day of a month or calendar quarter). The average portfolio duration of this Fund will generally not exceed one year.
Before selecting securities for the Fund, we carefully evaluate each individual security, including its income potential and the size of bond issuance. The size of the issuance helps us evaluate how easily we may be able to buy and sell the security. We also do a thorough credit analysis of the issuer to determine whether that company or entity has the financial ability to meet the security's payments. We maintain a well-diversified portfolio of investments that represent many different asset classes, sectors, industries and global markets. Through diversification we can help to reduce the impact that any individual security might have on the portfolio should the issuer have difficulty making payments.
The investment grade corporate debt obligations in which the Fund may invest include, but are not limited to, bonds, notes (which may be convertible or nonconvertible), units consisting of bonds with stock or warrants to buy stock attached, debentures and convertible debentures, and commercial paper of U.S. companies. The Fund may also invest up to 50% of its total assets in below-investment-grade securities. The Fund will invest in both rated and unrated bonds. The rated bonds that the Fund may purchase in the high-yield sector will generally be rated lower than BBB- by Standard & Poor's (S&P) and Baa3 by Moody's Investors Service, Inc. (Moody's), or similarly rated by another nationally recognized statistical rating organization (NRSRO). Unrated bonds may be more speculative in nature than rated bonds.
The Fund may also invest in loan participations. These types of securities are also commonly known as bank loans. Bank loans are an interest in a loan or other direct indebtedness, such as an assignment, that entitles the acquirer of such interest to payments of interest, principal, and/or other amounts due under the structure of the loan or other direct indebtedness. In addition to being structured as secured or unsecured loans, such investments could be structured as novations or assignments, or represent trade or other claims owed by a company to a supplier. Some of the Fund's investments in bank loans may also include a "Libor floor." Bank loans with Libor floors generally ensure investors a minimum level of coupon payment, but the coupon rates for these types of securities may not adjust upward as quickly when rates rise since the coupon rate only adjusts when rates go higher than the applied Libor floor.
The Fund may also invest in non-U.S. securities, including up to 15% of its total assets in securities of issuers located in emerging markets. These fixed income securities may include foreign government securities, debt obligations of foreign companies, and securities issued by supranational entities. A supranational entity is an entity established or financially supported by the national governments of one or more countries to promote reconstruction or development. Examples of supranational entities include, among others, the International Bank for Reconstruction and Development (more commonly known as the World Bank), the European Economic Community, the European Investment Bank, the Inter-Development Bank, and the Asian Development Bank.
The Fund may invest in securities issued in any currency and may hold non-U.S. currencies. Securities of issuers within a given country may be denominated in the currency of another country or in multinational currency units, such as the euro. The Manager will limit non-U.S.-dollar-denominated securities to no more than 50% of net assets. The Fund's total non-U.S.-dollar currency exposure will be limited, in the aggregate, to no more than 25% of net assets. The Fund may, from time to time, purchase or sell foreign currencies and/or engage in forward foreign currency transactions in order to expedite settlement of Fund transactions and to minimize currency value fluctuations.
The Fund may also invest in mortgage-backed securities issued or guaranteed by the U.S. government, its agencies or instrumentalities, or by government-sponsored corporations. Other mortgage-backed securities in which the Fund may invest are issued by certain private, nongovernment entities. The Fund may also invest in securities that are backed by assets such as receivables on home equity and credit card loans, automobile, mobile home, recreational vehicle and other loans, wholesale dealer floor plans, and leases.
The Fund may invest in debt obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities. The U.S. government securities in which the Fund may invest include a variety of securities which are issued or guaranteed as to the payment of principal and interest by the U.S. government, and by various agencies or instrumentalities which have been established or are sponsored by the U.S. government. The Fund may also invest in municipal debt obligations that are issued by state and local governments to raise funds for various public purposes such as hospitals, schools, and general capital expenses.
The Fund may also invest up to 50% of its total assets in a wide range of derivative instruments, including options, futures contracts, options on futures contracts, and swaps. Derivative instruments may be utilized to effectively convert the fixed-rate interest payments from a group of certain Fund portfolio securities into floating-rate interest payments.
The Fund's investment objective is nonfundamental. This means that the Fund's Board of Trustees (Board) may change the objective without obtaining shareholder approval. If the objective were changed, the Fund would notify shareholders at least 60 days before the change in the objective became effective.
The securities in which the Fund typically invests
Fixed income securities offer the potential for greater income payments than stocks, and also may provide capital appreciation. Please see the Fund's statement of additional information (SAI) for additional information about certain of the securities described below as well as other securities in which the Fund may invest.
U.S. government securities
Direct U.S. obligations include bills, notes, and bonds, as well as other debt securities, issued by the U.S. Treasury, and securities of U.S. government agencies or instrumentalities. U.S. Treasury securities are backed by the "full faith and credit" of the United States. Securities issued or guaranteed by federal agencies and U.S. government-sponsored instrumentalities may or may not be backed by the "full faith and credit" of the United States. In the case of securities not backed by the "full faith and credit" of the United States, investors in such securities look principally to the agency or instrumentality issuing or guaranteeing the obligation for the ultimate repayment.
How the Fund uses them:
The Fund may invest in U.S. government securities for temporary purposes or otherwise, as is consistent with the Fund's investment objective and policies. These securities are issued or guaranteed as to the payment of principal and interest by the U.S. government, or by various agencies or instrumentalities which have been established or sponsored by the U.S. government.
Mortgage-backed securities
Mortgage-backed securities are fixed income securities that represent pools of mortgages, with investors receiving principal and interest payments as the underlying mortgage loans are paid back. Many are issued and guaranteed against default by the U.S. government or its agencies or instrumentalities, such as Freddie Mac, Fannie Mae, and Ginnie Mae. Others are issued by private financial institutions, with some fully collateralized by certificates issued or guaranteed by the U.S. government or its agencies or instrumentalities.
How the Fund uses them:
The Fund may invest in mortgage-backed securities issued or guaranteed by the U.S. government, its agencies or instrumentalities or by government-sponsored corporations.
The Fund may also invest in mortgage-backed securities that are secured by the underlying collateral of the private issuer. Such securities are not government securities and are not directly guaranteed by the U.S. government in any way. These include CMOs, REMICs, and CMBS.
Asset-backed securities
Asset-backed securities are bonds or notes backed by accounts receivable, including home equity, automobile, or credit loans.
How the Fund uses them:
The Fund may invest in asset-backed securities that are rated investment grade.
Corporate bonds
Corporate bonds are debt obligations issued by a corporation.
How the Fund uses them:
The Fund may invest in bonds rated in one of the four highest rating categories by an NRSRO (for example, rated BBB- or higher by S&P or Baa3 or higher by Moody's), and the Fund may invest in high yield corporate bonds as described below.
High yield corporate bonds (junk bonds)
High yield corporate bonds are debt obligations issued by a corporation and rated lower than BBB- by S&P and Baa3 by Moody's, or similarly rated by another NRSRO. High yield bonds, also known as "junk bonds," are issued by corporations that have lower credit quality and may have difficulty repaying principal and interest.
How the Fund uses them:
The Fund may invest up to 50% of its total assets in below-investment grade securities.
We carefully evaluate an individual company's financial situation, its management, the prospects for its industry, and the technical factors related to its bond offering. Our goal is to identify those companies that we believe will be able to repay their debt obligations in spite of poor ratings. We may invest in unrated bonds if we believe their credit quality is comparable to the rated bonds we are permitted to invest in. Unrated bonds may be more speculative in nature than rated bonds.
Collateralized mortgage obligations (CMOs) and real estate mortgage investment conduits (REMICs)
CMOs are privately issued mortgage-backed bonds whose underlying value is the mortgages that are collected into different pools according to their maturity. They are issued by U.S. government agencies and private issuers. REMICs are privately issued mortgage-backed bonds whose underlying value is a fixed pool of mortgages secured by an interest in real property. Like CMOs, REMICs offer different pools.
How the Fund uses them:
The Fund may invest in CMOs and REMICs. Certain CMOs and REMICs may have variable or floating interest rates and others may be stripped. Stripped mortgage securities are generally considered illiquid and to such extent, together with any other illiquid investments, will not exceed 15% of the Fund's net assets, which is the Fund's limit on investments in illiquid securities. In addition, subject to certain quality and collateral limitations, the Fund may invest in CMOs and REMICs issued by private entities that are not collateralized by securities issued or guaranteed by the U.S. government, its agencies, or instrumentalities, so called "nonagency" mortgage-backed securities.
Short-term debt instruments
These instruments include: (1) time deposits, certificates of deposit, and banker's acceptances issued by U.S. banks; (2) time deposits and certificates of deposit issued by foreign banks; (3) commercial paper of the highest quality rating; (4) short-term debt obligations with the highest quality rating; (5) U.S. government securities; and (6) repurchase agreements collateralized by those instruments.
How the Fund uses them:
The Fund may invest in these instruments either as a means of achieving its investment objective or, more commonly, as temporary defensive investments or pending investment in the Fund's principal investment securities. When investing all or a significant portion of the Fund's assets in these instruments, the Fund may not be able to achieve its investment objective.
Foreign securities
Debt issued by a non-U.S. company or a government other than the United States or by an agency, instrumentality, or political subdivision of such government.
How the Fund uses them:
The Fund may invest up to 50% of its total assets in securities of foreign companies or governments. The Fund may invest up to 15% of its total assets in securities of issuers located in emerging markets.
Forward foreign currency transactions
A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency on a fixed future date at a price that is set at the time of the contract. The future date may be any number of days from the date of the contract as agreed by the parties involved.
How the Fund uses them:
Although we value the Fund's assets daily in terms of U.S. dollars, we do not intend to convert its holdings of foreign currencies into U.S. dollars on a daily basis. We may, however, from time to time, purchase or sell foreign currencies and/or engage in forward foreign currency transactions in order to expedite settlement of Fund transactions and to minimize currency value fluctuations. The Manager will limit non-U.S.-dollar denominated securities to no more than 50% of net assets. The Fund's total non-U.S.- dollar currency exposure will be limited, in the aggregate, to no more than 25% of net assets.
Bank loans
A bank loan represents an interest in a loan or other direct indebtedness, such as an assignment, that entitles the acquiror of such interest to payments of interest, principal and/or other amounts due under the structure of the loan or other direct indebtedness. In addition to being structured as secured or unsecured loans, such investments could be structured as novations or assignments or represent trade or other claims owed by a company to a supplier.
How the Fund uses them:
The Fund may invest without restriction in bank loans that meet the Manager's credit standards. We perform our own independent credit analysis on each borrower and on the collateral securing each loan. We consider the nature of the industry in which the borrower operates, the nature of the borrower's assets, and the general quality and creditworthiness of the borrower. The Fund may invest in bank loans in order to enhance total return, to affect diversification, or to earn additional income. We will not use bank loans for reasons inconsistent with the Fund's investment objective.
Repurchase agreements
A repurchase agreement is an agreement between a buyer of securities, such as a fund, and a seller of securities, in which the seller agrees to buy the securities back within a specified time at the same price the buyer paid for them, plus an amount equal to an agreed-upon interest rate. Repurchase agreements are often viewed as equivalent to cash.
How the Fund uses them:
Typically, the Fund may use repurchase agreements as short-term investments for the Fund's cash position. In order to enter into these repurchase agreements, the Fund must have collateral of at least 102% of the repurchase price. The Fund will only enter into repurchase agreements in which the collateral is U.S. government securities. In the Manager's discretion, the Fund may invest overnight cash balances in short-term discount notes issued or guaranteed by the U.S. government, its agencies or instrumentalities, or government-sponsored enterprises.
Futures and options
Futures contracts are agreements for the purchase or sale of a security or a group of securities at a specified price, on a specified date. Unlike purchasing an option, a futures contract must be executed unless it is sold before the settlement date.
Options represent a right to buy or sell a swap agreement or a security or a group of securities at an agreed-upon price at a future date. The purchaser of an option may or may not choose to go through with the transaction. The seller of an option, however, must go through with the transaction if the purchaser exercises the option.
Certain options and futures may be considered derivative securities.
How the Fund uses them
: At times when we anticipate adverse conditions, we may want to protect gains on swap agreements or securities without actually selling them. We might use options or futures to neutralize the effect of any price declines, without selling a swap agreement or security, or as a hedge against changes in interest rates. We may also sell an option contract (often referred to as "writing" an option) to earn additional income for the Fund.
Use of these strategies can increase the operating costs of the Fund and can lead to loss of principal.
The Fund has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act (CEA) and, therefore, is not subject to registration or regulation as a commodity pool operator under the CEA.
Restricted securities
Restricted securities are privately placed securities whose resale is restricted under U.S. securities laws.
How the Fund uses them:
The Fund may invest in privately placed securities, including those that are eligible for resale only among certain institutional buyers without registration, which are commonly known as "Rule 144A Securities." Restricted securities that are determined to be illiquid may not exceed the Fund's limit on investments in illiquid securities.
Illiquid securities
Illiquid securities are securities that do not have a ready market and cannot be readily sold within seven days at approximately the price at which a fund has valued them.
How the Fund uses them:
The Fund may invest up to 15% of its net assets in illiquid securities.
Interest rate swap, index swap, and credit default swap agreements
In an interest rate swap, a fund receives payments from another party based on a variable or floating interest rate, in return for making payments based on a fixed interest rate. An interest rate swap can also work in reverse with a fund receiving payments based on a fixed interest rate and making payments based on a variable or floating interest rate.
In an index swap, a fund receives gains or incurs losses based on the total return of a specified index, in exchange for making interest payments to another party. An index swap can also work in reverse with a fund receiving interest payments from another party in exchange for movements in the total return of a specified index.
In a credit default swap, a fund may transfer the financial risk of a credit event occurring (a bond default, bankruptcy, or restructuring, for example) on a particular security or basket of securities to another party by paying that party a periodic premium; likewise, a fund may assume the financial risk of a credit event occurring on a particular security or basket of securities in exchange for receiving premium payments from another party.
Interest rate swaps, index swaps, and credit default swaps may be considered illiquid.
How the Fund uses them:
The Fund may use interest rate swaps to adjust its sensitivity to interest rates or to hedge against changes in interest rates. Index swaps may be used to gain exposure to markets that the Fund invests in, such as the corporate bond market. The Fund may also use index swaps as a substitute for futures or options contracts if such contracts are not directly available to the Fund on favorable terms. The Fund may enter into credit default swaps in order to hedge against a credit event, to enhance total return, or to gain exposure to certain securities or markets. The Fund may invest up to 50% of its total assets in a wide range of derivative instruments, including options, futures contracts, options on futures contracts and swaps.
Use of these strategies can increase the operating costs of the Fund and lead to loss of principal.
Time deposits
Time deposits are nonnegotiable deposits maintained in a banking institution for a specified period of time at a stated interest rate.
How the Fund uses them:
The Fund will not purchase time deposits maturing in more than seven days and time deposits maturing from two business days through seven calendar days will not exceed 15% of the Fund's total assets.
Zero coupon and pay-in-kind bonds
Zero coupon bonds are debt obligations that do not entitle the holder to any periodic payments of interest prior to maturity or a specified date when the securities begin paying current interest, and therefore are issued and traded at a discount from their face amounts or par value. Pay-in-kind (PIK) bonds pay interest through the issuance to holders of additional securities.
How the Fund uses them:
The Fund may purchase fixed income securities, including zero coupon bonds and PIK bonds consistent with its investment objective.
American depositary receipts (ADRs), European depositary receipts (EDRs), and global depositary receipts (GDRs)
ADRs are receipts issued by a U.S. depositary (usually a U.S. bank) and EDRs and GDRs are receipts issued by a depositary outside of the U.S. (usually a non-U.S. bank or trust company or a foreign branch of a U.S. bank). Depositary receipts represent an ownership interest in an underlying security that is held by the depositary. Generally, the underlying security represented by an ADR is issued by a foreign issuer and the underlying security represented by an EDR or GDR may be issued by a foreign or U.S. issuer. Sponsored depositary receipts are issued jointly by the issuer of the underlying security and the depositary, and unsponsored depositary receipts are issued by the depositary without the participation of the issuer of the underlying security. Generally, the holder of the depositary receipt is entitled to all payments of interest, dividends, or capital gains that are made on the underlying security.
How the Fund uses them:
The Fund may invest in sponsored and unsponsored ADRs. The Fund will typically invest in ADRs that are actively traded in the United States.
In conjunction with the Fund's investments in foreign securities, it may also invest in sponsored and unsponsored EDRs and GDRs.
Tax-exempt obligations
Tax-exempt obligations are commonly known as municipal bonds. These are debt obligations issued by or for a state or territory, its agencies or instrumentalities, municipalities, or other political subdivisions. The interest on these debt obligations can generally be excluded from federal income tax as well as personal income tax in the state where the bond is issued. Determination of a bond's tax-exempt status is based on the opinion of the bond issuer's legal counsel.
How the Fund uses them:
The Fund may invest in tax-exempt debt obligations rated in the top four quality grades by Standard & Poor's (S&P) or another NRSRO, or in unrated tax-exempt obligations if, in the Manager's opinion, they are equivalent in quality to the top four quality grades. These bonds may include general obligation bonds and revenue bonds.
Other investment strategies
The Fund may also invest in other securities, including certificates of deposit and obligations of both U.S. and foreign banks, corporate debt, and commercial paper.
Borrowing from banks
The Fund may borrow money from banks as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions. The Fund will be required to pay interest to the lending banks on the amounts borrowed. As a result, borrowing money could result in the Fund being unable to meet its investment objective.
Lending securities
The Fund may lend up to 25% of its assets to qualified broker/dealers or institutional investors for their use in securities transactions. Borrowers of the Fund's securities must provide collateral to the Fund and adjust the amount of collateral each day to reflect changes in the value of the loaned securities. These transactions may generate additional income for the Fund.
Purchasing securities on a when-issued or delayed-delivery basis
The Fund may buy or sell securities on a when-issued or delayed-delivery basis; that is, paying for securities before delivery or taking delivery at a later date. The Fund will designate cash or securities in amounts sufficient to cover its obligations, and will value the designated assets daily.
Temporary defensive positions
In response to unfavorable market conditions, the Fund may make temporary investments in cash or cash equivalents or other high-quality, short-term instruments. These investments may not be consistent with the Fund's investment objective. To the extent that the Fund holds such instruments, it may be unable to achieve its investment objective.
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may receive little or no return on your investment, and the risk that you may lose part or all of the money you invest. Before you invest in the Fund, you should carefully evaluate the risks. Because of the nature of the Fund, you should consider your investment to be a long-term investment that typically provides the best results when held for a number of years. The information below describes the principal risks you assume when investing in the Fund. Please see the SAI for a further discussion of these risks and other risks not discussed here.
Market risk
Market risk is the risk that all or a majority of the securities in a certain market — such as the stock or bond market — will decline in value because of economic conditions, future expectations, investor confidence, or heavy institutional selling.
Index swaps are subject to the same market risks as the investment market or sector that the index represents. Depending on the actual movements of the index and how well the portfolio manager forecasts those movements, a fund could experience a higher or lower return than anticipated.
How the Fund strives to manage it:
We maintain a long-term investment approach and focus on securities that we believe can continue to provide returns over an extended time frame regardless of interim market fluctuations. Generally, we do not try to predict overall market movements.
In evaluating the use of an index swap for the Fund, we carefully consider how market changes could affect the swap and how that compares to our investing directly in the market the swap is intended to represent. When selecting dealers with whom we would make interest rate or index swap agreements for the Fund, we focus on those dealers with high-quality ratings and do careful credit analysis before engaging in the transaction.
Industry and security risks
Industry risk is the risk that the value of securities in a particular industry (such as financial services or manufacturing) will decline because of changing expectations for the performance of that industry.
Security risk is the risk that the value of an individual stock or bond will decline because of changing expectations for the performance of the individual company issuing the stock or bond (due to situations that could range from decreased sales to events such as a pending merger or actual or threatened bankruptcy).
How the Fund strives to manage them:
We limit the amount of the Fund's assets invested in any one industry and in any individual security or issuer. We also follow a rigorous selection process when choosing securities for the portfolio.
Interest rate risk
Interest rate risk is the risk that securities will decrease in value if interest rates rise. The risk is greater for bonds with longer maturities than for those with shorter maturities. Investments in equity securities issued by small- and medium-size companies, which often borrow money to finance operations, may also be adversely affected by rising interest rates.
Swaps may be particularly sensitive to interest rate changes. Depending on the actual movements of interest rates and how well the portfolio manager anticipates them, a fund could experience a higher or lower return than anticipated.
How the Fund strives to manage it:
We limit the amount of the Fund's assets invested in any one industry and in any individual security.
The Fund is subject to various interest rate risks depending upon its investment objectives and policies. We cannot eliminate this risk, but we do try to address it by monitoring economic conditions, especially interest rate trends and their potential impact on the Fund. We do not try to increase returns on the Fund's investments in debt securities by predicting and aggressively capitalizing on interest rate movements.
By investing in swaps, the Fund is subject to additional interest rate risk. Each business day, we will calculate the amount the Fund must pay for any swaps it holds and will designate enough cash or other liquid securities to cover that amount.
Credit risk
Credit risk is the possibility that a bond's issuer (or an entity that insures the bond) will be unable to make timely payments of interest and principal. Changes in an issuer's financial strength or in a security's credit rating may affect a security's value, which would impact a fund's performance.
Investing in so-called "junk" or "high yield" bonds entails the risk of principal loss, which may be greater than the risk involved in investment grade bonds. High yield bonds are sometimes issued by companies whose earnings at the time the bond is issued are less than the projected debt payments on the bonds.
A protracted economic downturn may severely disrupt the market for high yield bonds, adversely affect the value of outstanding bonds, and adversely affect the ability of high yield issuers to repay principal and interest.
How the Fund strives to manage it:
We carefully evaluate the financial situation of each entity whose bonds are held in the portfolio. We also tend to hold a relatively large number of different bonds to minimize the risk should any individual issuer be unable to pay its interest or repay principal. This is a substantial risk for the Fund because it may invest up to 50% of net assets in fixed income securities rated below investment grade.
Prepayment risk
Prepayment risk is the risk that homeowners will prepay mortgages during periods of low interest rates, forcing a fund to reinvest its money at interest rates that might be lower than those on the prepaid mortgage. Prepayment risk may also affect other types of debt securities, but generally to a lesser extent than mortgage securities.
How the Fund strives to manage it:
We take into consideration the likelihood of prepayment when we select mortgages. We may look for mortgage securities that have characteristics that make them less likely to be prepaid, such as low outstanding loan balances or below-market interest rates.
Liquidity risk
Liquidity risk is the possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them. Illiquid securities may trade at a discount from comparable, more liquid investments, and may be subject to wide fluctuations in market value. A fund also may not be able to dispose of illiquid securities at a favorable time or price during periods of infrequent trading of an illiquid security.
How the Fund strives to manage it:
The Fund limits exposure to illiquid securities to no more than 15% of its net assets.
Derivatives risk
Derivatives risk is the possibility that a fund may experience a significant loss if it employs a derivatives strategy (including a strategy involving swaps such as interest rate swaps, index swaps, and credit default swaps) related to a security or a securities index and that security or index moves in the opposite direction from what the portfolio manager had anticipated. Another risk of derivative transactions is the creditworthiness of the counterparty because the transaction depends on the willingness and ability of the counterparty to fulfill its contractual obligations. Derivatives also involve additional expenses, which could reduce any benefit or increase any loss to a fund from using the strategy.
How the Fund strives to manage it:
We will use derivatives for defensive purposes, such as to protect gains or hedge against potential losses in the portfolio without actually selling a security, to neutralize the impact of interest rate changes, to increase diversification, or to earn additional income.
Forward foreign currency risk
The use of forward foreign currency exchange contracts may substantially change a fund's exposure to currency exchange rates and could result in losses to the fund if currencies do not perform as the Manager expects. The use of these investments as a hedging technique to reduce a fund's exposure to currency risks may also reduce its ability to benefit from favorable changes in currency exchange rates.
How the Fund strives to manage it:
The Fund is subject to this risk and may try to hedge currency risk by purchasing foreign currency exchange contracts. By agreeing to purchase or sell foreign securities at a preset price on a future date, the Fund strives to protect the value of the securities it owns from future changes in currency rates.
Foreign risk
Foreign risk is the risk that foreign securities may be adversely affected by political instability, changes in currency exchange rates, foreign economic or government conditions, increased transaction costs, or inadequate regulatory and accounting standards.
How the Fund strives to manage it:
We attempt to reduce the risks presented by such investments by conducting world-wide fundamental research, including country visits. In addition, we monitor current economic and market conditions and trends, the political and regulatory environment, and the value of currencies in different countries in an effort to identify the most attractive countries and securities. Additionally, when currencies appear significantly overvalued compared to average real exchange rates, we may hedge exposure to those currencies for defensive purposes.
Foreign government securities risk
Foreign government securities risk involves the ability of a foreign government or government-related issuer to make timely principal and interest payments on its external debt obligations. This ability to make payments will be strongly influenced by the issuer's balance of payments, including export performance, its access to international credits and investments, fluctuations in interest rates, and the extent of its foreign reserves.
How the Fund strives to manage it:
The Fund attempts to reduce the risks associated with investing in foreign governments by limiting the portion of its assets that may be invested in such securities. The Fund will not invest more than 50% of its total assets in foreign securities and not more than 15% in securities of issuers located in emerging markets.
Government and regulatory risks
Governments or regulatory authorities have, from time to time, taken or considered actions that could adversely affect various sectors of the securities markets. Government involvement in the private sector may, in some cases, include government investment in, or ownership of, companies in certain commercial business sectors; wage and price controls; or imposition of trade barriers and other protectionist measures. For example, an economic or political crisis may lead to price controls, forced mergers of companies, expropriation, the creation of government monopolies, foreign exchange controls, the introduction of new currencies (and the redenomination of financial obligations into those currencies), or other measures that could be detrimental to the investments of a fund.
How the Fund strives to manage them:
We evaluate the economic and political climate in the U.S. before selecting securities for the Fund. We typically diversify the Fund's assets among a number of different securities in a variety of sectors in order to minimize the impact to the Fund of any legislative or regulatory development affecting particular issuers, or market sectors.
Bank loans and other indebtedness risk
Bank loans and other direct indebtedness risk is the risk that a fund will not receive payment of principal, interest and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower. Loans that are fully secured offer a fund more protection than unsecured loans in the event of nonpayment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower's obligation, or that the collateral can be liquidated. Some loans or claims may be in default at the time of purchase. Certain of the loans and the other direct indebtedness acquired by a fund may involve revolving credit facilities or other standby financing commitments, which obligate a fund to pay additional cash on a certain date or on demand. These commitments may require a fund to increase its investment in a company at a time when that fund might not otherwise decide to do so (including at a time when the company's financial condition makes it unlikely that such amounts will be repaid). To the extent that a fund is committed to advance additional funds, it will at all times hold and maintain cash or other high grade debt obligations in an amount sufficient to meet such commitments.
As a fund may be required to rely upon another lending institution to collect and pass on to the fund amounts payable with respect to the loan and to enforce the fund's rights under the loan and other direct indebtedness, an insolvency, bankruptcy or reorganization of the lending institution may delay or prevent the fund from receiving such amounts. The highly leveraged nature of many such loans and other direct indebtedness may make such loans and other direct indebtedness especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other direct indebtedness may involve additional risk to the fund.
How the Fund strives to manage it:
These risks may not be completely eliminated, but we will attempt to reduce them through portfolio diversification, credit analysis, and attention to trends in the economy, industries, and financial markets. Should we determine that any of these securities may be illiquid, they would be subject to the Fund's restriction on illiquid securities.
Counterparty risk
If a fund enters into a derivative contract (such as a swap, futures, or options contract) or a repurchase agreement, it will be subject to the risk that the counterparty to such a contract or agreement may fail to perform its obligations under the contract or agreement due to financial difficulties (such as a bankruptcy or reorganization). As a result, the fund may experience significant delays in obtaining any recovery, may obtain only a limited recovery, or may obtain no recovery at all.
How the Fund strives to manage it:
The Fund tries to minimize this risk by considering the creditworthiness of all parties before it enters into transactions with them. The Fund may hold collateral from counterparties consistent with applicable regulations.
Zero coupon and pay-in-kind bonds
Zero coupon and pay-in-kind (PIK) bonds are generally considered to be more interest sensitive than income-bearing bonds, to be more speculative than interest-bearing bonds, and to have certain tax consequences that could, under certain circumstances, be adverse to a fund. For example, a fund accrues, and is required to distribute to shareholders, income on its zero coupon bonds. However, a fund may not receive the cash associated with this income until the bonds are sold or mature. If a fund does not have sufficient cash to make the required distribution of accrued income, the Fund could be required to sell other securities in its portfolio or to borrow to generate the cash required.
How the Fund strives to manage it:
The Fund may invest in zero coupon and PIK bonds to the extent consistent with its investment objective. We cannot eliminate the risks of zero coupon bonds, but we do try to address them by monitoring economic conditions, especially interest rate trends and their potential impact on the Fund.
Valuation risk
A less liquid secondary market as described above can make it more difficult for a fund to obtain precise valuations of the high yield securities in its portfolio. During periods of reduced liquidity, judgment plays a greater role in valuing high yield securities.
How the Fund strives to manage it:
We will strive to manage this risk by carefully evaluating individual bonds and by limiting the amount of the Fund's assets that can be allocated to privately placed high yield securities.
Disclosure of portfolio holdings information
A description of the Fund's policies and procedures with respect to the disclosure of its portfolio securities is available in the SAI.
Who manages the Fund
Investment manager
The Manager is a series of Delaware Management Business Trust, which is a subsidiary of Delaware Management Holdings, Inc. (DMHI). DMHI is a wholly owned subsidiary of Macquarie Group, Ltd. The Manager makes investment decisions for the Fund, manages the Fund's business affairs, and provides daily administrative services. For its services to the Fund, the Manager was paid an aggregate fee, net of fee waivers, of 0.48% of average daily net assets during the last fiscal year.
A discussion of the basis for the Board's approval of the Fund's investment advisory contract is available in the Fund's semiannual report to shareholders for the period ended January 31, 2012.
Portfolio managers
Paul Grillo, Roger Early, Kevin Loome, and Adam Brown, with David Hillmeyer as part of the daily management team, will have primary portfolio management responsibilities for the Fund.
Paul Grillo, CFA,
Senior Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy
Paul Grillo is a member of the firm's taxable fixed income portfolio management team with primary responsibility for portfolio construction and strategic asset allocation. He is also a member of the firm's asset allocation committee, which is responsible for building and managing multi-asset class portfolios. He joined Delaware Investments in 1992 as a mortgage-backed and asset-backed securities analyst, assuming portfolio management responsibilities in the mid-1990s. Grillo serves as co-lead portfolio manager for the firm's Diversified Income products and has been influential in the growth and distribution of the firm's multisector strategies. Prior to joining Delaware Investments, Grillo was a mortgage strategist and trader at Dreyfus Corporation. He also worked as a mortgage strategist and portfolio manager at Chemical Investment Group and as a financial analyst at Chemical Bank. Grillo holds a bachelor's degree in business management from North Carolina State University and an MBA with a concentration in finance from Pace University.
Roger A. Early, CPA, CFA, CFP,
Senior Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy
Roger A. Early rejoined Delaware Investments in March 2007 as a member of the firm's taxable fixed income portfolio management team, with primary responsibility for portfolio construction and strategic asset allocation. During his previous time at the firm, from 1994 to 2001, he was a senior portfolio manager in the same area, and he left Delaware Investments as head of its U.S. investment grade fixed income group. In recent years, Early was a senior portfolio manager at Chartwell Investment Partners and Rittenhouse Financial and was the chief investment officer for fixed income at Turner Investments. Prior to joining Delaware Investments in 1994, he worked for more than 10 years at Federated Investors where he managed more than $25 billion in mutual fund and institutional portfolios in the short-term and investment grade markets. He left the firm as head of institutional fixed income management. Earlier in his career, he held management positions with the Federal Reserve Bank, PNC Financial, Touche Ross, and Rockwell International. Early earned his bachelor's degree in economics from The Wharton School of the University of Pennsylvania and an MBA with concentrations in finance and accounting from the University of Pittsburgh. He is a member of the CFA Society of Philadelphia.
Kevin P. Loome, CFA,
Senior Vice President, Senior Portfolio Manager, Head of High Yield Investments
Kevin P. Loome is head of the High Yield fixed income team, responsible for portfolio construction and strategic asset allocation of all high yield fixed income assets. Prior to joining Delaware Investments in August 2007 in his current position, Loome spent 11 years at T. Rowe Price, starting as an analyst and leaving the firm as a portfolio manager. He began his career with Morgan Stanley as a corporate finance analyst in the New York and London offices. Loome received his bachelor's degree in commerce from the University of Virginia and earned an MBA from the Tuck School of Business at Dartmouth.
J. David Hillmeyer, CFA,
Vice President, Senior Portfolio Manager
J. David Hillmeyer is a member of the firm's taxable fixed income portfolio management team, with primary responsibility for portfolio construction and asset allocation of the diversified floating rate strategy. Additionally, he serves as co-portfolio manager for the fixed rate multisector and core plus strategies. Prior to joining Delaware Investments in August 2007 as a vice president and corporate bond trader, he worked for more than 11 years in various roles at Hartford Investment Management Company, including senior corporate bond trader, high yield portfolio manager / trader, and quantitative analyst. He began his career as an investment advisor in January 1989 at Shawmut Bank, leaving the firm as an investment officer in November 1995. Hillmeyer earned his bachelor's degree from Colorado State University, and he is a member of the CFA Society of Philadelphia and the Philadelphia Council for Business Economics.
Adam H. Brown, CFA,
Vice President, Portfolio Manager
Adam H. Brown is a portfolio manager on the firm's taxable fixed income team, with specific responsibilities for the bank loan portfolio. Prior to joining Delaware Investments in April 2011 as part of the firm's integration of Macquarie Four Corners Capital Management, he spent more than nine years with Four Corners, where he was a co-portfolio manager on four collateralized loan obligation (CLO) funds and a senior research analyst supporting noninvestment grade portfolios. Before that, Brown was with Wachovia Securities, where he worked in the leveraged finance group arranging senior secured bank loans and high yield bond financings for financial sponsors and corporate issuers. He earned a bachelor's degree in accounting from the University of Florida and an MBA from the A.B. Freeman School of Business at Tulane University.
The SAI provides additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio managers' ownership of Fund shares.
Manager of managers structure
The Fund and the Manager have received an exemptive order from the U.S. Securities and Exchange Commission (SEC) to operate under a manager of managers structure that permits the Manager, with the approval of the Board, to appoint and replace sub-advisors, enter into sub-advisory agreements, and materially amend and terminate sub-advisory agreements on behalf of the Fund without shareholder approval (Manager of Managers Structure). Under the Manager of Managers Structure, the Manager has ultimate responsibility, subject to oversight by the Board, for overseeing the Fund's sub-advisors and recommending to the Board their hiring, termination, or replacement. The SEC order does not apply to any sub-advisor that is affiliated with the Fund or the Manager. While the Manager does not currently expect to use the Manager of Managers Structure with respect to the Fund, the Manager may, in the future, recommend to the Board the establishment of the Manager of Managers Structure by recommending the hiring of one or more sub-advisors to manage all or a portion of the Fund's portfolio.
The Manager of Managers Structure enables the Fund to operate with greater efficiency and without incurring the expense and delays associated with obtaining shareholder approvals for matters relating to sub-advisors or sub-advisory agreements. The Manager of Managers Structure does not permit an increase in the overall management and advisory fees payable by the Fund without shareholder approval. Shareholders will be notified of any changes made to sub-advisors or sub-advisory agreements within 90 days of the changes.
Who's who
Board of trustees:
A mutual fund is governed by a board of trustees, which has oversight responsibility for the management of the fund's business affairs. Trustees establish procedures and oversee and review the performance of the fund's service providers.
Investment manager:
An investment manager is a company responsible for selecting portfolio investments consistent with the objective and policies stated in the mutual fund's prospectus. A written contract between a mutual fund and its investment manager specifies the services the investment manager performs and the fee the manager is entitled to receive.
Portfolio managers:
Portfolio managers make investment decisions for individual portfolios.
Distributor:
Most mutual funds continuously offer new shares to the public through distributors that are regulated as broker/dealers and are subject to the Financial Industry Regulatory Authority (FINRA) rules governing mutual fund sales practices.
Service agent:
Mutual fund companies employ service agents (sometimes called transfer agents) to maintain records of shareholder accounts, calculate and disburse dividends and capital gains, and prepare and mail shareholder statements and tax information, among other functions. Many service agents also provide customer service to shareholders.
Custodian:
Mutual funds are legally required to protect their portfolio securities, and most funds place them with a qualified bank custodian that segregates fund securities from other bank assets.
Financial advisors:
Financial advisors provide advice to their clients. They are associated with securities broker/dealers who have entered into selling and/or service arrangements with the distributor. Selling broker/dealers and financial advisors are compensated for their services generally through sales commissions, and through 12b-1 fees and/or service fees deducted from a fund's assets.
Shareholders:
Mutual fund shareholders have specific voting rights on matters such as material changes in the terms of a fund's management contract and changes to fundamental investment policies.
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share class has a different combination of sales charges, fees, and other features, you should consult your financial advisor to determine which class best suits your investment goals and time frame.
Delaware Management Trust Company will not accept applications to open new 403(b) custodial accounts or accept contributions to existing 403(b) custodial accounts.
Choosing a share class
Each share class may be eligible for purchase through programs sponsored by financial intermediaries that require the purchase of a specific class of shares.
Class A, Class C, and Class R shares of the Fund have each adopted a separate 12b-1 plan that allows it to pay distribution fees for the sale and distribution of its shares. Because these fees are paid out of the Fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
Class A
-
Class A shares have an up-front sales charge of up to 2.75% that you pay when you buy the shares.
-
If you invest $100,000 or more, your front-end sales charge will be reduced.
-
You may qualify for other reduced sales charges, and, under certain circumstances, the sales charge may be waived, as described in "How to reduce your sales charge" below.
-
Class A shares are also subject to an annual 12b-1 fee no greater than 0.30% (currently limited to 0.25%) of average daily net assets. See "Dealer compensation" below for further information.
-
Class A shares generally are not subject to a CDSC except in the limited circumstances described in the table below.
-
Class A shares generally are not available for purchase by anyone qualified to purchase Class R shares, except as described below.
Class A sales charges
The table below details your sales charges on purchases of Class A shares. The offering price for Class A shares includes the front-end sales charge. The sales charge as a percentage of the net amount invested is the maximum percentage of the amount invested rounded to the nearest hundredth. The actual sales charge that you pay as a percentage of the offering price and as a percentage of the net amount invested will vary depending on the then-current net asset value (NAV), the percentage rate of the sales charge, and rounding.
Amount of purchase
|
Sales charge as a % of offering price
|
Sales charge as a % of net amount invested
|
Less than $100,000
|
2.75%
|
|
3.23%
|
$100,000 but less than $250,000
|
2.00%
|
|
2.44%
|
$250,000 but less than $1 million
|
1.00%
|
|
1.34%
|
$1 million or more
|
none*
|
|
none*
|
*
There is no front-end sales charge when you purchase $1 million or more of Class A shares. However, if the Distributor paid your financial advisor a commission on your purchase of $1 million or more of Class A shares, you will have to pay a limited contingent deferred sales charge (Limited CDSC) of 0.75% if you redeem these shares within the first year after your purchase, unless a specific waiver of the Limited CDSC applies. The Limited CDSC will be paid to the Distributor and will be assessed on an amount equal to the lesser of: (1) the NAV at the time the Class A shares being redeemed were purchased; or (2) the NAV of such Class A shares at the time of redemption. For purposes of this formula, the "NAV at the time of purchase" will be the NAV at purchase of the Class A shares even if those shares are later exchanged for shares of another Delaware Investments
®
Fund and, in the event of an exchange of Class A shares, the "NAV of such shares at the time of redemption" will be the NAV of the shares acquired in the exchange. In determining whether a Limited CDSC is payable, it will be assumed that shares not subject to the Limited CDSC are the first redeemed followed by other shares held for the longest period of time. See "Dealer compensation" below for a description of the dealer commission that is paid.
Class C
-
Class C shares have no up-front sales charge, so the full amount of your purchase is invested in the Fund. However, you will pay a CDSC of 1.00% if you redeem your shares within 12 months after you buy them.
-
In determining whether the CDSC applies to a redemption of Class C shares, it will be assumed that shares held for more than 12 months are redeemed first followed by shares acquired through the reinvestment of dividends or distributions, and finally by shares held for 12 months or less. For further information on how the CDSC is determined, please see "Calculation of contingent deferred sales charges — Class C" below.
-
Under certain circumstances, the CDSC may be waived; please see "Waivers of contingent deferred sales charges" below for further information.
-
Class C shares are subject to an annual 12b-1 fee no greater than 1.00% of average daily net assets (of which 0.25% is a service fee) paid to the Distributor, dealers, or others for providing services and maintaining shareholder accounts.
-
Class C shares do not automatically convert to another class.
-
You may purchase only up to $1 million of Class C shares at any one time. Orders that exceed $1 million will be rejected. The limitation on maximum purchases varies for retirement plans.
Class R
-
Class R shares have no up-front sales charge, so the full amount of your purchase is invested in the Fund. Class R shares are not subject to a CDSC.
-
Class R shares are subject to an annual 12b-1 fee no greater than 0.60% (currently limited to 0.50%) of average daily net assets.
-
Class R shares do not automatically convert to another class.
-
Class R shares generally are available only to: (i) qualified and nonqualified plan shareholders covering multiple employees (including 401(k), 401(a), 457, and noncustodial 403(b) plans, as well as other nonqualified deferred compensation plans) with assets (at the time shares are considered for purchase) of $10 million or less; and (ii) individual retirement account (IRA) rollovers from plans that were previously maintained on the Delaware Investments® retirement recordkeeping system or BISYS's retirement recordkeeping system that are offering Class R shares to participants.
-
Except as noted above, no other IRAs are eligible for Class R shares (for example, no traditional IRAs, Roth IRAs, SIMPLE IRAs, SEPs, SARSEPs). For purposes of determining plan asset levels, affiliated plans may be combined at the request of the plan sponsor.
-
Any account holding Class A shares as of the date Class R shares were made available continues to be eligible to purchase Class A shares after that date. Any account holding Class R shares is not eligible to purchase Class A shares.
Institutional Class
-
Institutional Class shares have no up-front sales charge, so the full amount of your purchase is invested in the Fund.
-
Institutional Class shares do not assess a CDSC or a 12b-1 fee;
-
Institutional Class shares are available for purchase only by the following:
-
rollover IRAs from retirement plans and retirement plans introduced by persons not associated with brokers or dealers that are primarily engaged in the retail securities business;
-
tax-exempt employee benefit plans of the Manager, its affiliates, and securities dealers that have a selling agreement with the Distributor;
-
institutional advisory clients (including mutual funds) of the Manager or its affiliates, as well as those clients' affiliates, and their corporate sponsors, subsidiaries, related employee benefit plans, and rollover IRAs of, or from, such institutional advisory clients;
-
a bank, trust company, or similar financial institution investing for its own account or for the account of its trust customers for whom the financial institution is exercising investment discretion in purchasing Institutional Class shares, except where the investment is part of a program that requires payment to the financial institution of a Rule 12b-1 Plan fee;
-
RIAs investing on behalf of clients that consist solely of institutions and high net worth individuals having at least $1 million entrusted to an RIA for investment purposes (use of the Institutional Class shares is restricted to RIAs who are not affiliated or associated with a broker or dealer and who derive compensation for their services exclusively from their advisory clients);
-
certain plans qualified under Section 529 of the Internal Revenue Code, for which the Manager, Distributor, or Delaware Service Company, Inc. (DSC), or one or more of their affiliates, provide record keeping, administrative, investment management, marketing, distribution, or similar services;
-
programs sponsored by and/or controlled by financial intermediaries where: (1) such programs allow or require the purchase of Institutional Class shares; (2) the financial intermediary has entered into an agreement covering the arrangement with the Distributor and/or DSC; and (3) the financial intermediary (i) charges clients an ongoing fee for advisory, investment consulting or similar services, or (ii) offers the Institutional Class shares through a no-commission network or platform; or
-
private investment vehicles, including, but not limited to, foundations and endowments.
Calculation of contingent deferred sales charges — Class C
CDSCs are charged as a percentage of the dollar amount subject to the CDSC. The charge will be assessed on an amount equal to the lesser of the NAV at the time the shares being redeemed were purchased or the NAV of those shares at the time of redemption. No CDSC will be imposed on increases in NAV above the initial purchase price, nor will a CDSC be assessed on redemptions of shares acquired through reinvestment of dividends or capital gains distributions. For purposes of this formula, the "NAV at the time of purchase" will be the NAV at purchase of Class C shares of the Fund, even if those shares are later exchanged for shares of another Delaware Investments
®
Fund. In the event of an exchange of the shares, the "NAV of such shares at the time of redemption" will be the NAV of the shares that were acquired in the exchange.
Dealer compensation
The financial advisor that sells you shares of the Fund may be eligible to receive the following amounts as compensation for your investment in the Fund. These amounts are paid by the Distributor to the securities dealer with whom your financial advisor is associated. Institutional Class shares do not have a 12b-1 fee or sales charge so they are not included in the chart below.
|
Class A
1
|
Class C
2
|
Class R
3
|
Commission (%)
|
—
|
1.00%
|
—
|
Investment less than $100,000
|
2.35%
|
-
|
-
|
$100,000 but less than $250,000
|
1.75%
|
—
|
—
|
$250,000 but less than $1 million
|
0.75%
|
—
|
—
|
$1 million but less than $5 million
|
0.75%
|
—
|
—
|
$5 million but less than $25 million
|
0.50%
|
—
|
—
|
$25 million or more
|
0.25%
|
—
|
—
|
12b-1 fee to dealer
|
0.30%
|
1.00%
|
0.60%
|
1
On sales of Class A shares, the Distributor reallows to your securities dealer a portion of the front-end sales charge depending upon the amount you invested. Your securities dealer may be eligible to receive a 12b-1 fee of up to 0.30% from the date of purchase. The maximum 12b-1 fee applicable to Class A shares is 0.30%, however the Distributor has contracted to limit this amount to 0.25% from November 28, 2012 through November 28, 2013.
2
On sales of Class C shares, the Distributor may pay your securities dealer an up-front commission of 1.00%. The up-front commission includes an advance of the first year's 12b-1 service fee of up to 0.25%. During the first 12 months, the Distributor retains the full 1.00% 12b-1 fee to partially offset the up-front commission and the prepaid 0.25% service fee advanced at the time of purchase. Starting in the 13th month, your securities dealer may be eligible to receive the full 1.00% 12b-1 fee applicable to Class C. Alternatively, certain intermediaries may not be eligible to receive the up-front commission of 1.00%, but may receive the 12b-1 fee for Class C shares from the date of purchase.
3
On sales of Class R shares, the Distributor does not pay your securities dealer an up-front commission. Your securities dealer may be eligible to receive a 12b-1 fee of up to 0.60% from the date of purchase. The maximum 12b-1 fee applicable to Class R shares is 0.60%; however, the Distributor has contracted to limit this amount to 0.50% from November 28, 2012 through November 28, 2013.
Payments to intermediaries
The Distributor and its affiliates may pay additional compensation at their own expense and not as an expense of the Fund to certain affiliated or unaffiliated brokers, dealers, or other financial intermediaries (Financial Intermediaries) in connection with the sale or retention of Fund shares and/or shareholder servicing, including providing the Fund with "shelf space" or a higher profile with the Financial Intermediaries' consultants, salespersons, and customers (distribution assistance). For example, the Distributor or its affiliates may pay additional compensation to financial intermediaries for various purposes, including, but not limited to, promoting the sale of Fund shares, maintaining share balances and/or for sub-accounting, administrative, or shareholder processing services, marketing, educational support, and ticket charges. Such payments are in addition to any distribution fees, service fees, and/or transfer agency fees that may be payable by the Fund. The additional payments may be based on factors, including level of sales (based on gross or net sales or some specified minimum sales or some other similar criteria related to sales of the Fund and/or some or all other Delaware Investments
®
Funds), amount of assets invested by the Financial Intermediary's customers (which could include current or aged assets of the Fund and/or some or all other Delaware Investments
®
Funds), the Fund's advisory fees, some other agreed upon amount, or other measures as determined from time to time by the Distributor. The level of payments made to a qualifying Financial Intermediary in any given year may vary. To the extent permitted by SEC and FINRA rules and other applicable laws and regulations, the Distributor may pay, or allow its affiliates to pay, other promotional incentives or payments to Financial Intermediaries.
If a mutual fund sponsor or distributor makes greater payments for distribution assistance to your Financial Intermediary with respect to distribution of shares of that particular mutual fund than sponsors or distributors of other mutual funds make to your Financial Intermediary with respect to the distribution of the shares of their mutual funds, your Financial Intermediary and its salespersons may have a financial incentive to favor sales of shares of the mutual fund making the higher payments over shares of other mutual funds or over other investment options. In addition, depending on the arrangements in place at any particular time, a Financial Intermediary may also have a financial incentive for recommending a particular share class over other share classes. You should consult with your Financial Intermediary and review carefully any disclosure provided by such Financial Intermediary as to compensation it receives in connection with investment products it recommends or sells to you. A significant purpose of these payments is to increase sales of the Fund's shares. The Manager or its affiliates may benefit from the Distributor's or its affiliate's payment of compensation to financial intermediaries through increased fees resulting from additional assets acquired through the sale of Fund shares through financial intermediaries. In certain instances, the payments could be significant and may cause a conflict of interest for your Financial Intermediary. Any such payments will not change the net asset value (NAV) or the price of the Fund's shares.
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares. Please refer to the SAI for detailed information and eligibility requirements. You can also get additional information from your financial advisor. You or your financial advisor must notify us at the time you purchase shares if you are eligible for any of these programs. You may also need to provide information to your financial advisor or the Fund in order to qualify for a reduction in sales charges. Such information may include your Delaware Investments
®
Funds holdings in any other accounts, including retirement accounts, held indirectly or through an intermediary, and the names of qualifying family members and their holdings. We reserve the right to determine whether any purchase is entitled, by virtue of the foregoing, to the reduced sales charge. Class R and Institutional Class shares have no upfront sales charge or CDSC so they are not included in the chart below.
Letter of intent
Through a letter of intent, you agree to invest a certain amount in Delaware Investments® Funds (except money market funds with no sales charge) over a 13-month period to qualify for reduced front-end sales charges.
Class A
|
Class C
|
|
Available
|
Although the letter of intent and rights of accumulation do not apply to Class C, you can combine the value of your Class A shares with your purchase of Class C shares to fulfill your letter of intent or qualify for rights of accumulation.
|
Rights of accumulation
You can combine your holdings or purchases of all Delaware Investments® Funds (except money market funds with no sales charge), as well as the holdings and purchases of your spouse and children under 21 to qualify for reduced front-end sales charges.
Class A
|
Class C
|
|
Available
|
Although the letter of intent and rights of accumulation do not apply to Class C, you can combine the value of your Class A shares with your purchase of Class C shares to fulfill your letter of intent or qualify for rights of accumulation.
|
Reinvestment of redeemed shares
Up to 12 months after you redeem shares, you can reinvest the proceeds without paying a sales charge.
Class A
|
Class C
|
You may not have to pay an additional front-end sales charge.
|
Not available.
|
SIMPLE IRA, SEP, SARSEP, 401(k), SIMPLE 401(k), Profit Sharing, Money Purchase,
403(b)(7), and 457 Retirement Plans
These investment plans may qualify for reduced sales charges by combining the purchases of all members of the group. Members of these groups may also qualify to purchase shares without a front-end sales charge and may qualify for a waiver of any CDSCs on Class A shares.
Class A
|
Class C
|
You may not have to pay an additional front-end sales charge.
|
Not available.
|
Buying Class A shares at net asset value
Class A shares of the Fund may be purchased at NAV under the following circumstances, provided that you notify the Fund in advance that the trade qualifies for this privilege. The Fund reserves the right to modify or terminate these arrangements at any time.
-
Shares purchased under the Delaware Investments® dividend reinvestment plan and, under certain circumstances, the exchange privilege and the 12-month reinvestment privilege.
-
Purchases by: (i) current and former officers, Trustees/Directors, and employees of any Delaware Investments® Fund, the Manager, or any of the Manager's current affiliates and those that may in the future be created; (ii) legal counsel to the Delaware Investments® Funds; and (iii) registered representatives and employees of broker/dealers who have entered into dealer's agreements with the Distributor. At the direction of such persons, their family members (regardless of age) and any employee benefit plan established by any of the foregoing entities, counsel, or broker/dealers may also purchase shares at NAV.
-
Shareholders who own Class A shares of Delaware Cash Reserve
®
Fund as a result of a liquidation of a Delaware Investments
®
Fund may exchange into Class A shares of another Delaware Investments® Fund at NAV.
-
Purchases by bank employees who provide services in connection with agreements between the bank and unaffiliated brokers or dealers concerning sales of shares of the Delaware Investments® Funds.
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Purchases by certain officers, trustees, and key employees of institutional clients of the Manager or any of its affiliates.
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Purchases for the benefit of the clients of brokers, dealers, and registered investment advisors if such brokers, dealers, or investment advisors have entered into an agreement with the Distributor providing specifically for the purchase of Class A shares in connection with special investment products, such as wrap accounts or similar fee-based programs. Investors may be charged a fee when effecting transactions in Class A shares through a broker or agent that offers these special investment products.
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Purchases by financial institutions investing for the accounts of their trust customers if they are not eligible to purchase shares of the Fund's Institutional Class, if applicable.
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Purchases by retirement plans that are maintained on retirement platforms sponsored by financial intermediary firms, provided the financial intermediary firms or their trust companies (or entities performing similar trading/clearing functions) have entered into an agreement with respect to such retirement platforms.
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Purchases by certain legacy bank sponsored retirement plans that meet requirements set forth in the SAI.
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Purchases by certain legacy retirement assets that meet requirements set forth in the SAI.
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Investments made by plan level and/or participant retirement accounts that are for the purpose of repaying a loan taken from such accounts.
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Purchases by certain participants in defined contribution plans and members of their households whose plan assets will be rolled over into IRA accounts (IRA Program) where the financial intermediary has entered into an agreement specifically relating to such IRA Program with the Distributor and/or the Fund's transfer agent.
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Purchases by certain participants of particular group retirement plans as described in the SAI.
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Loan repayments made to a Fund account in connection with loans originated from accounts previously maintained by another investment firm.
Waivers of contingent deferred sales charges
Certain sales charges may be based on historical cost. Therefore, you should maintain any records that substantiate these costs because the Fund, its transfer agent, and financial intermediaries may not maintain this information. Information about existing sales charges and sales charge reductions and waivers is available free of charge on the Delaware Investments® Funds' website at delawareinvestments.com. Additional information on sales charges can be found in the SAI, which is available upon request. Class R and Institutional Class shares have no upfront sales charge or CDSC so they are not included in the chart below.
The Fund's applicable CDSCs may be waived under the following circumstances:
Redemptions in accordance with a systematic withdrawal plan
Redemptions in accordance with a systematic withdrawal plan, provided the annual amount selected to be withdrawn under the plan does not exceed 12% of the value of the account on the date that the systematic withdrawal plan was established or modified.
Classes A
1
and C
|
Available
|
Redemptions that result from the right to liquidate a shareholder's account
Redemptions that result from the right to liquidate a shareholder's account if the aggregate NAV of the shares held in the account is less than the then-effective minimum account size.
Classes A
1
and C
|
Available
|
Section 401(a) qualified retirement plan distributions
Distributions to participants or beneficiaries from a retirement plan qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (Internal Revenue Code).
Class A
1
|
Class C
|
Available
|
Not available
|
Section 401(a) qualified retirement plan redemptions
Redemptions pursuant to the direction of a participant or beneficiary of a retirement plan qualified under Section 401(a) of the Internal Revenue Code with respect to that retirement plan.
Class A
1
|
Class C
|
Available
|
Not available
|
Periodic distributions from an individual retirement account
Periodic distributions from an individual retirement account (traditional IRA, Roth IRA, SIMPLE IRA, SEP, SARSEP, Coverdell ESA) or a qualified plan
2
(401(k), SIMPLE 401(k), Profit Sharing, Money Purchase, 403(b)(7), and 457 Retirement Plans) not subject to a penalty under Section 72(t)(2)(A) of the Internal Revenue Code or a hardship or unforeseen emergency provision in the qualified plan as described in Treas. Reg. §1.401(k)-1(d)(3) and Section 457(d)(1)(A)(iii) of the Internal Revenue Code.
Classes A
1
and C
|
Available
|
Returns of excess contributions due to any regulatory limit
Returns of excess contributions due to any regulatory limit from an individual retirement account (traditional IRA, Roth IRA, SIMPLE IRA, SEP, SARSEP, Coverdell ESA) or a qualified plan
2
(401(k), SIMPLE 401(k), Profit Sharing, Money Purchase, 403(b)(7), and 457 Retirement Plans).
Classes A
1
and C
|
Available
|
Distributions by other employee benefit plans
Distributions by other employee benefit plans to pay benefits.
Class A
1
|
Class C
|
Available
|
Not available
|
Systematic withdrawals from a retirement account or qualified plan
Systematic withdrawals from a retirement account or qualified plan that are not subject to a penalty pursuant to Section 72(t)(2)(A) of the Internal Revenue Code or a hardship or unforeseen emergency provision in the qualified plan
2
as described in Treas. Reg. §1.401(k)-1(d)(3) and Section 457(d)(1)(A)(iii) of the Internal Revenue Code. The systematic withdrawal may be pursuant to the systematic withdrawal plan for the Delaware Investments® Funds or a systematic withdrawal permitted by the Internal Revenue Code.
Classes A
1
and C
|
Available
|
Distributions from an account of a redemption resulting from death or disability
Distributions from an account of a redemption resulting from the death or disability (as defined in Section 72(t)(2)(A) of the Internal Revenue Code) of a registered owner or a registered joint owner occurring after the purchase of the shares being redeemed. In the case of accounts established under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act or trust accounts, the waiver applies upon the death of all beneficial owners.
Classes A
1
and C
|
Available
|
Redemptions by certain legacy retirement assets
Redemptions by certain legacy retirement assets that meet the requirements set forth in the SAI.
Classes A
1
and C
|
Available
|
Redemptions by the classes of shareholders who are permitted to purchase shares at NAV
Redemptions by the classes of shareholders who are permitted to purchase shares at NAV, regardless of the size of the purchase.
Class A
1
|
Class C
|
Available
|
Not available
|
1
The waiver of Class A shares relates to a waiver of the Limited CDSC. Please note that you or your financial advisor will have to notify us at the time of purchase that the trade qualifies for such waiver.
2
Qualified plans that are fully redeemed at the direction of the plan's fiduciary are subject to any applicable CDSC or Limited CDSC, unless the redemption is due to the termination of the plan.
How to buy shares
Through your financial advisor
Your financial advisor can handle all the details of purchasing shares, including opening an account. Your financial advisor may charge a separate fee for this service.
By mail
Complete an investment slip and mail it with your check, made payable to the fund and class of shares you wish to purchase, to Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 or 4400 Computer Drive, Westborough, MA 01581-1722 for investments by overnight courier service. If you are making an initial purchase by mail, you must include a completed investment application (or an appropriate retirement plan application if you are opening a retirement account) with your check.
Please note that purchase orders submitted by mail will not be accepted until such purchase orders are received by Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 for investments by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 for investments by overnight courier service. Please do not send purchase orders to 2005 Market Street, Philadelphia, PA.
By wire
Ask your bank to wire the amount you want to invest to The Bank of New York Mellon, ABA #011001234, bank account #000073-6910. Include your account number and the name of the fund and class of shares in which you want to invest. If you are making an initial purchase by wire, you must first call us at 800 523-1918 so we can assign you an account number.
By exchange
You may exchange all or part of your investment in one or more Delaware Investments® Funds for shares of other Delaware Investments® Funds. Please keep in mind, however, that under most circumstances you are allowed to exchange only between like classes of shares. To open an account by exchange, call the Shareholder Service Center at 800 523-1918.
Through automated shareholder services
For Class A and Class C shares only, you may purchase or exchange shares through our automated telephone service, or through our website, delawareinvestments.com. For more information about how to sign up for these services, call our Shareholder Service Center at 800 523-1918.
Calculating share price
The price you pay for shares will depend on when we receive your purchase order. If your order is received by an authorized agent or us before the close of regular trading on the NYSE, which is normally 4:00 p.m. Eastern time, you will pay that day's closing share price, which is based on a fund's NAV. If your order is received after the close of regular trading on the NYSE, you will pay the next Business Day's price. We reserve the right to reject any purchase order.
We determine the NAV per share for each class of a Delaware Investments® Fund at the close of regular trading on the NYSE on each Business Day. The NAV per share for each class of a fund is calculated by subtracting the liabilities of each class from its total assets and dividing the resulting number by the number of shares outstanding for that class. We generally price securities and other assets for which market quotations are readily available at their market value. For a fund that invests primarily in foreign securities, the NAV may change on days when a shareholder will not be able to purchase or redeem fund shares because foreign markets are open at times and on days when U.S. markets are not. We price fixed income securities on the basis of valuations provided to us by an independent pricing service that uses methods approved by the Board. For all other securities, we use methods approved by the Board that are designed to price securities at their fair market values.
Fair valuation
When the Fund uses fair value pricing, it may take into account any factors it deems appropriate. The Fund may determine fair value based upon developments related to a specific security, current valuations of foreign stock indices (as reflected in U.S. futures markets), and/or U.S. sector or broad stock market indices. The prices of securities used by the Fund to calculate its NAV may differ from quoted or published prices for the same securities. Fair value pricing may involve subjective judgments and it is possible that the fair value determined for a security is materially different than the value that could be realized upon the sale of that security.
The Fund anticipates using fair value pricing for securities primarily traded on U.S. exchanges only under very limited circumstances, such as the early closing of the exchange on which a security is traded or suspension of trading in the security. The Fund may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Fund values its securities at 4:00 p.m. Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. To account for this, the Fund may frequently value many foreign equity securities using fair value prices based on third-party vendor modeling tools to the extent available.
The Board has delegated responsibility for valuing the Fund's assets to a Pricing Committee of the Manager, which operates under the policies and procedures approved by the Board and which is subject to the Board's oversight.
Retirement plans
In addition to being an appropriate investment for your IRA, Roth IRA, and Coverdell Education Savings Account, the Fund may be suitable for group retirement plans. You may establish your IRA account even if you are already a participant in an employer-sponsored retirement plan. For more information on how the Fund can play an important role in your retirement planning or for details about group plans, please consult your financial advisor, or call our Shareholder Service Center at 800 523-1918.
Document delivery
To reduce fund expenses, we try to identify related shareholders in a household and send only one copy of a fund's financial reports and prospectus. This process, called "householding," will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call our Shareholder Service Center at 800 523-1918. At any time you may view current prospectuses and financial reports on our website.
Inactive accounts
Please note that your account may be transferred to the appropriate state if no activity occurs in the account within the time period specified by state law.
How to redeem shares
When you send us a properly completed request to redeem or exchange shares and the request is received by an authorized agent or us before the close of regular trading on the NYSE (normally 4:00 p.m. Eastern time), you will receive the NAV next determined after we receive your request. If we receive your request after the close of regular trading on the NYSE, you will receive the NAV next determined on the next Business Day. We will deduct any applicable CDSCs. You may also have to pay taxes on the proceeds from your sale of shares. We will send you a check, normally the next Business Day, but no later than seven days after we receive your request to sell your shares. If you purchased your shares by check and sell them before your check has cleared, which can take up to 15 days, we will wait until your check has cleared before we send you your redemption proceeds.
If you are required to pay a CDSC when you redeem your shares, the amount subject to the fee will be based on the shares' NAV when you purchased them or their NAV when you redeem them, whichever is less. This arrangement ensures that you will not pay a CDSC on any increase in the value of your shares. You also will not pay the charge on any shares acquired by reinvesting dividends or capital gains. If you exchange shares of one fund for shares of another, you do not pay a CDSC at the time of the exchange. If you later redeem those shares, the purchase price for purposes of the CDSC formula will be the price you paid for the original shares, not the exchange price. The redemption price for purposes of this formula will be the NAV of the shares you are actually redeeming.
If you hold your shares in certificates, you must submit the certificates with your request to sell the shares. We recommend that you send your certificates by certified mail.
Through your financial advisor
Your financial advisor can handle all the details of redeeming your shares. Your financial advisor may charge a separate fee for this service.
By mail
You may redeem your shares by mail by writing to: Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 or 4400 Computer Drive, Westborough, MA 01581-1722 for redemptions by overnight courier service. All owners of the account must sign the request. For redemptions of more than $100,000, you must include a signature guarantee for each owner. Signature guarantees are also required when redemption proceeds are going to an address other than the address of record on the account.
Please note that redemption orders submitted by mail will not be considered accepted until such orders are received by Delaware Investments at P.O. Box 9876, Providence, RI 02940-8076 for redemptions by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 for redemptions by overnight courier service. Please do not send redemption requests to 2005 Market Street, Philadelphia, PA.
By telephone
You may redeem up to $100,000 of your shares by telephone. You may have the proceeds sent to you by check or, if you redeem at least $1,000 of shares, you may have the proceeds sent directly to your bank by wire. If you request a wire deposit, a bank wire fee may be deducted from your proceeds. Bank information must be on file before you request a wire redemption.
By wire
You may redeem $1,000 or more of your shares and have the proceeds deposited directly to your bank account, normally the next Business Day after we receive your request. If you request a wire deposit, a bank wire fee may be deducted from your proceeds. Bank information must be on file before you request a wire redemption.
Through automated shareholder services
For Class A, Class C, and Class R shares only, you may redeem shares through our automated telephone service or through our website, delawareinvestments.com. For more information about how to sign up for these services, call our Shareholder Service Center at 800 523-1918.
Redemptions-in-kind
The Fund has reserved the right to pay for redemptions with portfolio securities under certain conditions. See the SAI for more information on redemptions-in-kind.
Account minimums
For Class A, Class C, and Class R shares, if you redeem shares and your account balance falls below the required account minimum of $1,000 ($250 for IRAs, Roth IRAs, Uniform Gifts to Minors Act and Uniform Transfers to Minors Act accounts, or accounts with automatic investing plans, and $500 for Coverdell Education Savings Accounts) for three or more consecutive months, you will have until the end of the current calendar quarter to raise the balance to the minimum. If your account is not at the minimum by the required time, you may be charged a $9 fee for that quarter and each quarter after that until your account reaches the minimum balance. If your account does not reach the minimum balance, we may redeem your account after 60 days' written notice to you. Any CDSC that would otherwise be applicable will not apply to such a redemption.
For Institutional Class shares, if you redeem shares and your account balance falls below $250, the Fund may redeem your shares after 60 days' written notice to you.
Investor services
To help make investing with us as easy as possible, and to help you build your investments, we offer the following investor services.
Automatic investment plan
The automatic investment plan allows you to make regular monthly or quarterly investments directly from your checking account.
Direct deposit
With direct deposit, you can make additional investments through payroll deductions, recurring government or private payments such as Social Security, or direct transfers from your bank account.
Electronic delivery
With Delaware eDelivery, you can receive your fund documents electronically instead of via U.S. mail. When you sign up for eDelivery, you can access your account statements, shareholder reports, and other fund materials online, in a secure internet environment at any time, from anywhere.
Online account access
Online account access is a password-protected area of the Delaware Investments
®
Funds' website that gives you access to your account information and allows you to perform transactions in a secure internet environment.
Systematic exchange option
With the systematic exchange option, you can arrange automatic monthly exchanges between your shares in one or more Delaware Investments® Funds. These exchanges are subject to the same rules as regular exchanges (see below) and require a minimum monthly exchange of $100 per fund.
Dividend reinvestment plan
Through the dividend reinvestment plan, you can have your distributions reinvested in your account or the same share class in another Delaware Investments® Fund. The shares that you purchase through the dividend reinvestment plan are not subject to a front-end sales charge or to a CDSC. Under most circumstances, you may reinvest dividends only into like classes of shares.
Exchanges
You may generally exchange all or part of your shares for shares of the same class of another Delaware Investments® Fund without paying a front-end sales charge or a CDSC at the time of the exchange. However, if you exchange shares from a money market fund that does not have a sales charge, you will pay any applicable sales charge on your new shares. When exchanging Class B and Class C shares of one fund for the same class of shares in other funds, your new shares will be subject to the same CDSC as the shares you originally purchased. The holding period for the CDSC will also remain the same, with the amount of time you held your original shares being credited toward the holding period of your new shares. In certain other circumstances, you may also be permitted to exchange your shares for shares of a different class of the Fund, but such exchange may be subject to a sales charge for the new shares. (Please refer to the SAI for more details.) You do not pay sales charges on shares that you acquired through the reinvestment of dividends. You may have to pay taxes on your exchange. When you exchange shares, you are purchasing shares in another fund, so you should be sure to get a copy of the fund's prospectus and read it carefully before buying shares through an exchange. We may refuse the purchase side of any exchange request if, in the Manager's judgment, a fund would be unable to invest effectively in accordance with its investment objective and policies or would otherwise potentially be adversely affected.
On demand service
Through the on demand service, you or your financial advisor may transfer money between your Fund account and your predesignated bank account by telephone request. This service is not available for retirement plans. There is a minimum transfer of $25 and a maximum transfer of $100,000, except for purchases into IRAs. Delaware Investments does not charge a fee for this service; however, your bank may assess one.
Direct deposit service
Through the direct deposit service, you can have $25 or more in dividends and distributions deposited directly into your bank account. Delaware Investments does not charge a fee for this service; however, your bank may assess one. This service is not available for retirement plans.
Systematic withdrawal plan
For Class A, Class B, and Class C shares, you can arrange a regular monthly or quarterly payment from your account made to you or someone you designate. If the value of your account is $5,000 or more, you can make withdrawals of at least $25 monthly, or $75 quarterly. You may also have your withdrawals deposited directly to your bank account through the direct deposit service.
The applicable Limited CDSC for Class A shares and the CDSC for Class B and C shares redeemed via a systematic withdrawal plan will be waived if the annual amount withdrawn in each year is less than 12% of the account balance on the date that the plan is established. If the annual amount withdrawn in any year exceeds 12% of the account balance on the date that the systematic withdrawal plan is established, all redemptions under the plan will be subject to the applicable CDSC, including an assessment for previously redeemed amounts under the plan.
Frequent trading of Fund shares
The Fund discourages purchases by market timers and purchase orders (including the purchase side of exchange orders) by shareholders identified as market timers may be rejected. The Board has adopted policies and procedures designed to detect, deter, and prevent trading activity detrimental to the Fund and its shareholders, such as market timing. The Fund will consider anyone who follows a pattern of market timing in any Delaware Investments® Fund or the Optimum Fund Trust to be a market timer and may consider anyone who has followed a similar pattern of market timing at an unaffiliated fund family to be a market timer.
Market timing of a fund occurs when investors make consecutive, rapid, short-term "roundtrips" — that is, purchases into a fund followed quickly by redemptions out of that fund. A short-term roundtrip is any redemption of fund shares within 20 Business Days of a purchase of that fund's shares. If you make a second such short-term roundtrip in a fund within 90 rolling calendar days as a previous short-term roundtrip in that fund, you may be considered a market timer. In determining whether market timing has occurred, the Fund will consider short-term roundtrips to include rapid purchases and sales of Fund shares through the exchange privilege. The Fund reserves the right to consider other trading patterns to be market timing.
Your ability to use the Fund's exchange privilege may be limited if you are identified as a market timer. If you are identified as a market timer, we will execute the redemption side of your exchange order but may refuse the purchase side of your exchange order. The Fund reserves the right to restrict or reject, without prior notice, any purchase order or exchange order for any reason, including any purchase order or exchange order accepted by any shareholder's financial intermediary or in any omnibus-type account. Transactions placed in violation of the Fund's market timing policy are not necessarily deemed accepted by the Fund and may be rejected by the Fund on the next Business Day following receipt by the Fund.
Redemptions will continue to be permitted in accordance with the Fund's current prospectus. A redemption of shares under these circumstances could be costly to a shareholder if, for example, the shares have declined in value, the shareholder recently paid a front-end sales charge, the shares are subject to a CDSC, or the sale results in adverse tax consequences. To avoid this risk, a shareholder should carefully monitor the purchases, sales, and exchanges of Fund shares and avoid frequent trading in Fund shares.
The Fund reserves the right to modify this policy at any time without notice, including modifications to the Fund's monitoring procedures and the procedures to close accounts to new purchases. Although the implementation of this policy involves judgments that are inherently subjective and may be selectively applied, we seek to make judgments and applications that are consistent with the interests of the Fund's shareholders. While we will take actions designed to detect and prevent market timing, there can be no assurance that such trading activity will be completely eliminated. Moreover, the Fund's market timing policy does not require the Fund to take action in response to frequent trading activity. If the Fund elects not to take any action in response to frequent trading, such frequent trading activity could continue.
Risks of market timing
By realizing profits through short-term trading, shareholders that engage in rapid purchases and sales or exchanges of the Fund's shares dilute the value of shares held by long-term shareholders. Volatility resulting from excessive purchases and sales or exchanges of Fund shares, especially involving large dollar amounts, may disrupt efficient portfolio management. In particular, the Fund may have difficulty implementing its long-term investment strategies if it is forced to maintain a higher level of its assets in cash to accommodate significant short-term trading activity. Excessive purchases and sales or exchanges of the Fund's shares may also force the Fund to sell portfolio securities at inopportune times to raise cash to accommodate short-term trading activity. This could adversely affect the Fund's performance, if, for example, the Fund incurs increased brokerage costs and realization of taxable capital gains without attaining any investment advantage.
A fund that invests significantly in foreign securities may be particularly susceptible to short-term trading strategies. This is because foreign securities are typically traded on markets that close well before the time a fund calculates its NAV (normally 4:00 p.m. Eastern time). Developments that occur between the closing of the foreign market and a fund's NAV calculation may affect the value of these foreign securities. The time-zone differences among international stock markets can allow a shareholder engaging in a short-term trading strategy to exploit differences in fund share prices that are based on closing prices of foreign securities established some time before a fund calculates its own share price.
Any fund that invests in securities that are thinly traded, traded infrequently, or relatively illiquid has the risk that the securities prices used to calculate the fund's NAV may not accurately reflect current market values. A shareholder may seek to engage in short-term trading to take advantage of these pricing differences. Funds that may be adversely affected by such arbitrage include, in particular, funds that significantly invest in small-cap securities, technology, and other specific industry sector securities, and in certain fixed income securities, such as high yield bonds, asset-backed securities, or municipal bonds.
Transaction monitoring procedures
The Fund, through its transfer agent, maintains surveillance procedures designed to detect excessive or short-term trading in Fund shares. This monitoring process involves several factors, which include scrutinizing transactions in Fund shares for violations of the Fund's market timing policy or other patterns of short-term or excessive trading. For purposes of these transaction monitoring procedures, the Fund may consider trading activity by multiple accounts under common ownership, control, or influence to be trading by a single entity. Trading activity identified by these factors, or as a result of any other available information, will be evaluated to determine whether such activity might constitute market timing. These procedures may be modified from time to time to improve the detection of excessive or short-term trading or to address other concerns. Such changes may be necessary or appropriate, for example, to deal with issues specific to certain retirement plans; plan exchange limits; U.S. Department of Labor regulations; certain automated or pre-established exchange, asset-allocation, or dollar cost averaging programs; or omnibus account arrangements.
Omnibus account arrangements are common forms of holding shares of the Fund, particularly among certain broker/dealers and other financial intermediaries, including sponsors of retirement plans and variable insurance products. The Fund will attempt to have financial intermediaries apply the Fund's monitoring procedures to these omnibus accounts and to the individual participants in such accounts. However, to the extent that a financial intermediary is not able or willing to monitor or enforce the Fund's frequent trading policy with respect to an omnibus account, the Fund or its agents may require the financial intermediary to impose its frequent trading policy, rather than the Fund's policy, to shareholders investing in the Fund through the financial intermediary. In addition, the Fund or its transfer agent may enter into shareholder information agreements with such financial intermediaries under which the Fund may receive information (such as taxpayer identification numbers and Fund transaction activity) in order to identify frequent trading activity.
A financial intermediary may impose different requirements or have additional restrictions on the frequency of trading than the Fund. Such restrictions may include, without limitation, requiring the trades to be placed by U.S. mail, prohibiting purchases for a designated period of time (typically 30 to 90 days) by investors who have recently purchased or redeemed Fund shares, and similar restrictions. The Fund's ability to impose such restrictions with respect to accounts traded through particular financial intermediaries may vary depending on systems capabilities, applicable contractual and legal restrictions, and cooperation of those financial intermediaries.
You should consult your financial intermediary regarding the application of such restrictions and to determine whether your financial intermediary imposes any additional or different limitations. In an effort to discourage market timers in such accounts, the Fund may consider enforcement against market timers at the participant level and at the omnibus level, up to and including termination of the omnibus account's authorization to purchase Fund shares.
Limitations on ability to detect and curtail market timing
Shareholders seeking to engage in market timing may employ a variety of strategies to avoid detection and, despite the efforts of the Fund and its agents to detect market timing in Fund shares, there is no guarantee that the Fund will be able to identify these shareholders or curtail their trading practices. In particular, the Fund may not be able to detect market timing attributable to a particular investor who effects purchase, redemption, and/or exchange activity in Fund shares through omnibus accounts. The difficulty of detecting market timing may be further compounded if these entities utilize multiple tiers or omnibus accounts.
Dividends, distributions, and taxes
Dividends and distributions
The Fund intends to qualify each year as a regulated investment company under the Code. As a regulated investment company, the Fund generally pays no federal income tax on the income and gains it distributes to you. The Fund expects to declare dividends daily and distribute all of its net investment income, if any, to shareholders as dividends monthly. The Fund will distribute net realized capital gains, if any, at least annually, usually in December. The Fund may distribute such income dividends and capital gains more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Fund. The amount of any distribution will vary, and there is no guarantee the Fund will pay either an income dividend or a capital gains distribution. We automatically reinvest all dividends and any capital gains, unless you direct us to do otherwise.
Annual statements
Each year, the Fund will send you an annual statement (Form 1099) of your account activity to assist you in completing your federal, state and local tax returns. Distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December. Prior to issuing your statement, the Fund makes every effort to reduce the number of corrected forms mailed to you. However, if the Fund finds it necessary to reclassify its distributions or adjust the cost basis of any covered shares sold or exchanged after you receive your tax statement, the Fund will send you a corrected Form 1099.
Avoid "buying a dividend"
At the time you purchase your Fund shares, the Fund's NAV may reflect undistributed income, undistributed capital gains, or net unrealized appreciation in value of portfolio securities held by the Fund. For taxable investors, a subsequent distribution to you of such amounts, although constituting a return of your investment, would be taxable. Buying shares in the Fund just before it declares an income dividend or capital gains distribution is sometimes known as "buying a dividend."
Tax considerations
Fund distributions.
The Fund expects, based on its investment objective and strategies, that its distributions, if any, will be taxable as ordinary income, capital gains, or some combination of both. This is true whether you reinvest your distributions in additional Fund shares or receive them in cash.
For federal income tax purposes, Fund distributions of short-term capital gains are taxable to you as ordinary income. Fund distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your shares. With respect to income dividends paid on or before December 31, 2012 (unless such provision is extended, possibly retroactively to January 1, 2013, or made permanent), a portion of income dividends reported by the Fund may be qualified dividend income eligible for taxation by individual shareholders at long-term capital gain rates provided certain holding period requirements are met. Because the income of the Fund is primarily derived from investments earning interest rather than dividend income, generally none or only a small portion of the income dividends paid to you by the Fund is anticipated to be qualified dividend income eligible for taxation by individuals at long-term capital gain tax rates.
Sale or redemption of Fund shares.
A sale or redemption of Fund shares is a taxable event and, accordingly, a capital gain or loss may be recognized. For tax purposes, an exchange of your Fund shares for shares of a different Delaware Investments® Fund is the same as a sale. Beginning with the 2012 calendar year, the Fund will be required to report to you and the Internal Revenue Service annually on Form 1099-B not only the gross proceeds of Fund shares you sell or redeem but also the cost basis for shares purchased or acquired on or after January 1, 2012 ("covered shares"). Cost basis will be calculated using the Fund's default method, unless you instruct the Fund to use a different calculation method. Shareholders should carefully review the cost basis information provided by the Fund and make any additional basis, holding period, or other adjustments that are required when reporting these amounts on their federal income tax returns. If your account is held by your investment representative (financial advisor or other broker), please contact that representative with respect to reporting of cost basis and available elections for your account. Tax-advantaged retirement accounts will not be affected. Additional information and updates regarding cost basis reporting and available shareholder elections will be on Delaware Investment's website at delawareinvestments.com as the information becomes available.
Medicare tax.
For taxable years beginning after December 31, 2012, an additional 3.8% Medicare tax will be imposed on certain net investment income (including ordinary dividends and capital gain distributions received from the Fund and net gains from redemptions or other taxable dispositions of Fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount.
Backup withholding.
By law, if you do not provide the Fund with your proper taxpayer identification number and certain required certifications, you may be subject to backup withholding on any distributions of income, capital gains, or proceeds from the sale of your shares. The Fund also must withhold if the Internal Revenue Service instructs it to do so. When withholding is required, the amount will be 28% of any distributions or proceeds paid (for distributions and proceeds paid after December 31, 2012, the rate is scheduled to rise to 31% unless the 28% rate is extended, possibly retroactively to January 1, 2013, or made permanent).
State and local taxes.
Fund distributions and gains from the sale or exchange of your Fund shares generally are subject to state and local taxes.
Non-U.S. investors.
Non-U.S. investors may be subject to U.S. withholding tax at a 30% or lower treaty rate and U.S. estate tax and are subject to special U.S. tax certification requirements to avoid backup withholding and claim any treaty benefits. An exemption from U.S. withholding tax is provided for capital gain dividends paid by the Fund from long-term capital gains, if any. However, notwithstanding such exemption from U.S. withholding at the source, any such dividends and distributions of income and capital gains will be subject to backup withholding at a rate of 28% (or the then applicable rate) if you fail to properly certify that you are not a U.S. person.
Other Reporting and Withholding Requirements.
The Foreign Account Tax Compliance Act ("FATCA") requires the reporting to the Internal Revenue Service of certain direct and indirect ownership of foreign financial accounts by U.S. persons. Failure to provide this required information can result in a generally nonrefundable 30% tax on: (a) income dividends paid by the Fund after December 31, 2013 and (b) certain capital gain distributions (including proceeds arising from the sale Fund shares) paid by the Fund after December 31, 2016 to certain "foreign financial institutions" and "non-financial foreign entities."
This discussion of "Dividends, distributions, and taxes" is not intended or written to be used as tax advice. Because everyone's tax situation is unique, you should consult your tax professional about federal, state, local, or foreign tax consequences before making an investment in the Fund.
Certain management considerations
Investments by funds of funds and similar investment vehicles
The Fund may accept investments from funds of funds, as well as from similar investment vehicles, such as 529 Plans. A "529 Plan" is a college savings program that operates under Section 529 of the Internal Revenue Code. From time to time, the Fund may experience large investments or redemptions due to allocations or rebalancings by these funds of funds and/or similar investment vehicles. While it is impossible to predict the overall impact of these transactions over time, there could be adverse effects on portfolio management. For example, the Fund may be required to sell securities or invest cash at times when it would not otherwise do so. These transactions could also have tax consequences if sales of securities result in gains, and could also increase transaction costs or portfolio turnover.
Financial highlights
The financial highlights table is intended to help you understand the Fund's financial performance for the period of the Fund's operations. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the annual report, which is available upon request by calling 800 523-1918.
Class A Shares
|
2012
|
2011
|
2/26/10
1
to 7/31/10
|
Net asset value, beginning of period
|
$8.590
|
$8.490
|
$8.500
|
Income (loss) from investment operations:
|
|
|
|
Net investment income
2
|
0.193
|
0.166
|
0.088
|
Net realized and unrealized gain (loss)
|
(0.005)
|
0.114
|
(0.014)
|
Total from investment operations
|
0.188
|
0.280
|
0.074
|
Less dividends and distributions from:
|
|
|
|
Net investment income
|
(0.208)
|
(0.180)
|
(0.084)
|
|
|
|
|
Total dividends and distributions
|
(0.208)
|
(0.180)
|
(0.084)
|
|
|
|
|
Net asset value, end of period
|
$8.570
|
$8.590
|
$8.490
|
Total return
3
|
2.24%
|
3.33%
|
0.87%
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
Net assets, end of period (000 omitted)
|
$49,009
|
$55,209
|
$2,959
|
Ratio of expenses to average net assets
|
1.05%
|
1.05%
|
1.04%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
1.12%
|
1.34%
|
4.92%
|
Ratio of net investment income to average net assets
|
2.28%
|
1.92%
|
2.43%
|
Ratio of net investment income (loss) to average net assets prior to fees waived and expense paid indirectly
|
2.21%
|
1.63%
|
(1.45%)
|
Portfolio turnover
|
97%
|
75%
|
39%
|
1
|
Date of commencement of operations; ratios have been annualized and total return and portfolio turnover have not been annualized.
|
2
|
The average shares outstanding method has been applied for per share information.
|
3
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods reflects waivers by the manager and distributor. Performance would have been lower had the waivers not been in effect.
|
Class C Shares
|
2012
|
2011
|
2/26/10
1
to 7/31/10
|
Net asset value, beginning of period
|
$8.590
|
$8.490
|
$8.500
|
Income (loss) from investment operations:
|
|
|
|
Net investment income
2
|
0.130
|
0.102
|
0.062
|
Net realized and unrealized gain (loss)
|
(0.006)
|
0.116
|
(0.014)
|
Total from investment operations
|
0.124
|
0.218
|
0.048
|
Less dividends and distributions from:
|
|
|
|
Net investment income
|
(0.144)
|
(0.118)
|
(0.058)
|
|
|
|
|
Total dividends and distributions
|
(0.144)
|
(0.118)
|
(0.058)
|
|
|
|
|
Net asset value, end of period
|
$8.570
|
$8.590
|
$8.490
|
Total return
3
|
1.47%
|
2.58%
|
0.56%
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
Net assets, end of period (000 omitted)
|
$25,495
|
$25,769
|
$1,714
|
Ratio of expenses to average net assets
|
1.80%
|
1.80%
|
1.79%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
1.82%
|
2.04%
|
5.62%
|
Ratio of net investment income to average net assets
|
1.53%
|
1.17%
|
1.68%
|
Ratio of net investment income (loss) to average net assets prior to fees waived and expense paid indirectly
|
1.51%
|
0.93%
|
(2.15%)
|
Portfolio turnover
|
97%
|
75%
|
39%
|
1
|
Date of commencement of operations; ratios have been annualized and total return and portfolio turnover have not been annualized.
|
2
|
The average shares outstanding method has been applied for per share information.
|
3
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect.
|
Class R Shares
|
2012
|
2011
|
2/26/10
1
to 7/31/10
|
Net asset value, beginning of period
|
$8.590
|
$8.500
|
$8.500
|
Income (loss) from investment operations:
|
|
|
|
Net investment income
2
|
0.173
|
0.145
|
0.079
|
Net realized and unrealized gain (loss)
|
(0.011)
|
0.106
3
|
(0.004)
|
Total from investment operations
|
0.162
|
0.251
3
|
0.075
|
Less dividends and distributions from:
|
|
|
|
Net investment income
|
(0.182)
|
(0.161)
|
(0.075)
|
|
|
|
|
Total dividends and distributions
|
(0.182)
|
(0.161)
|
(0.075)
|
|
|
|
|
Net asset value, end of period
|
$8.570
|
$8.590
3
|
$8.500
|
Total return
4
|
1.93%
|
2.96%
|
0.89%
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
Net assets, end of period (000 omitted)
|
$5
|
$5
|
$5
|
Ratio of expenses to average net assets
|
1.30%
|
1.30%
|
1.29%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
1.42%
|
1.64%
|
5.22%
|
Ratio of net investment income to average net assets
|
2.03%
|
1.67%
|
2.18%
|
Ratio of net investment income (loss) to average net assets prior to fees waived and expense paid indirectly
|
1.91%
|
1.33%
|
(1.75%)
|
Portfolio turnover
|
97%
|
75%
|
39%
|
1
|
Date of commencement of operations; ratios have been annualized and total return and portfolio turnover have not been annualized.
|
2
|
The average shares outstanding method has been applied for per share information.
|
3
|
Includes adjustments from the period ending July 31, 2010 in the amount of $9 (or $0.010 per share) which impacted total return by -0.12%. The adjustment is to correct a mis-allocation of distributions among share classes which had no impact on distribution amounts reported and paid to shareholders.
|
4
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods reflects a waiver by the manager and distributor. Performance would have been lower had the waiver not been in effect.
|
Institutional Class Shares
|
2012
|
2011
|
2/26/10
1
to 7/31/10
|
Net asset value, beginning of period
|
$8.590
|
$8.490
|
$8.500
|
Income (loss) from investment operations:
|
|
|
|
Net investment income
2
|
0.214
|
0.187
|
0.098
|
Net realized and unrealized gain (loss)
|
(0.005)
|
0.117
|
(0.016)
|
Total from investment operations
|
0.209
|
0.304
|
0.082
|
Less dividends and distributions from:
|
|
|
|
Net Investment Income
|
(0.229)
|
(0.204)
|
(0.092)
|
|
|
|
|
Total dividends and distributions
|
(0.229)
|
(0.204)
|
(0.092)
|
|
|
|
|
Net asset value, end of period
|
$8.570
|
$8.590
|
$8.490
|
Total return
3
|
2.49%
|
3.61%
|
0.97%
|
|
|
|
|
Ratios and supplemental data:
|
|
|
|
Net assets, end of period (000 omitted)
|
$31,663
|
$33,231
|
$3,394
|
Ratio of expenses to average net assets
|
0.80%
|
0.80%
|
0.79%
|
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly
|
0.82%
|
1.04%
|
4.62%
|
Ratio of net investment income to average net assets
|
2.53%
|
2.17%
|
2.68%
|
Ratio of net investment income (loss) to average net assets prior to fees waived and expense paid indirectly
|
2.51%
|
1.93%
|
(1.15%)
|
Portfolio turnover
|
97%
|
75%
|
39%
|
1
|
Date of commencement of operations; ratios have been annualized and total return and portfolio turnover have not been annualized.
|
2
|
The average shares outstanding method has been applied for per share information.
|
3
|
Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect.
|
How to read the financial highlights
Net investment income (loss)
Net investment income (loss) includes dividend and interest income earned from a fund's investments; it is calculated after expenses have been deducted.
Net realized and unrealized gain (loss) on investments
A realized gain occurs when we sell an investment at a profit, while a realized loss occurs when we sell an investment at a loss. When an investment increases or decreases in value but we do not sell it, we record an unrealized gain or loss. The amount of realized gain per share, if any, that we pay to shareholders would be listed under "Less dividends and distributions from: Net realized gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an investment in a fund. In calculating this figure for the financial highlights table, we include applicable fee waivers, exclude front-end sales charges and contingent deferred sales charges, and assume the shareholder has reinvested all dividends and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio, less any liabilities, that are attributable to that class of the fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for operating expenses and management fees. These expenses include accounting and administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income (loss) to average net assets
We determine this ratio by dividing net investment income (loss) by average net assets.
Portfolio turnover
This figure tells you the amount of trading activity in a fund's portfolio. A turnover rate of 100% would occur if, for example, a fund bought and sold all of the securities in its portfolio once in the course of a year or frequently traded a single security. A high rate of portfolio turnover in any year may increase brokerage commissions paid and could generate taxes for shareholders on realized investment gains.
Additional information
Contact information
-
Website:
delawareinvestments.com
-
Shareholder Service Center: 800 523-1918 (representatives available weekdays from 8:30 a.m. to 6:00 p.m. Eastern time)
-
For fund information, literature, price, yield, and performance figures.
-
For information on existing regular investment accounts and retirement plan accounts including wire investments, wire redemptions, telephone redemptions, and telephone exchanges.
-
Automated telephone service: 800 523-1918 (seven days a week, 24 hours a day)
-
Written correspondence: P.O. Box 9876, Providence, RI 02940-8076 or 4400 Computer Drive, Westborough, MA 01581-1722.
Additional information about the Fund's investments
is available in its annual and semiannual shareholder reports. In the Fund's annual shareholder report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during the period covered by the report. You can find more information about the Fund in its current SAI, which is filed electronically with the SEC, and which is legally a part of this Prospectus (it is incorporated by reference). To receive a free copy of the SAI, or the annual or semiannual report, or if you have any questions about investing in the Fund, write to us at P.O. Box 9876, Providence, RI 02940-8076 by regular mail or 4400 Computer Drive, Westborough, MA 01581-1722 by overnight courier service, or call toll-free 800 523-1918. The SAI and shareholder reports are available, free of charge, through the Fund's website (delawareinvestments.com). You may also obtain additional information about the Fund from your financial advisor.
You can find reports and other information about the Fund on the EDGAR database on the SEC website (sec.gov). You can get copies of this information, after paying a duplication fee, by e-mailing the SEC at publicinfo@sec.gov or by writing to the Public Reference Section of the SEC,
100 F Street, NE, Washington, DC 20549-1520. Information about the Fund, including its SAI, can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. For information on the Public Reference Room, call the SEC at 202 551-8090.
PR-215 [7/12] POD 18234 [11/12]
Investment Company Act number: 811-02071
|
STATEMENT OF ADDITIONAL
INFORMATION
November 28, 2012
DELAWARE GROUP INCOME
FUNDS
|
Nasdaq
ticker symbols
|
|
|
|
|
|
Institutional
|
Fund
|
Class
A
|
Class
B
|
Class
C
|
Class
R
|
Class
|
Delaware
Corporate Bond Fund
|
DGCAX
|
DGCBX
|
DGCCX
|
DGCRX
|
DGCIX
|
Delaware
Extended Duration Bond Fund
|
DEEAX
|
DEEBX
|
DEECX
|
DEERX
|
DEEIX
|
Delaware
High-Yield Opportunities Fund
|
DHOAX
|
DHOBX
|
DHOCX
|
DHIRX
|
DHOIX
|
Delaware
Diversified Floating Rate Fund
|
DDFAX
|
n/a
|
DDFCX
|
DDFFX
|
DDFLX
|
Delaware
Core Bond Fund
|
DPFIX
|
n/a
|
DCBCX
|
DEBRX
|
DCBIX
|
P.O. Box 9876, Providence, RI
02940-8076 (regular mail)
4400 Computer
Drive, Westborough, MA 01581-1722 (overnight courier service)
For Prospectuses, Performance, and
Information on Existing Accounts: 800 523-1918
For Dealer Services
(Broker/Dealers only): 800 362-7500
This Statement of
Additional Information (Part B) supplements the information contained in the
current prospectuses (the Prospectuses), each dated November 28, 2012, as they
may be amended from time to time, for Delaware Corporate Bond Fund, Delaware
Extended Duration Bond Fund, Delaware High-Yield Opportunities Fund, Delaware
Diversified Floating Rate Fund, and Delaware Core Bond Fund (each, a Fund and
collectively, the Funds). This Part B should be read in conjunction with the
applicable Prospectus. This Part B is not itself a Prospectus but is, in its
entirety, incorporated by reference into each Prospectus. A Prospectus may be
obtained through our website at delawareinvestments.com; by writing or calling
your financial adviser; or by contacting the Funds distributor, Delaware
Distributors, L.P. (the Distributor), at the above address, or by calling the
above phone numbers. Please do not send any correspondence to 2005 Market
Street, Philadelphia, PA. The Funds financial statements, the notes relating
thereto, the financial highlights, and the report of the independent registered
public accounting firm are incorporated by reference from each Funds annual
report (Annual Report) into this Part B. An Annual Report will accompany any
request for Part B. An Annual Report can be obtained, without charge, by calling
800 523-1918 .
TABLE OF
CONTENTS
|
|
Page
|
|
Page
|
Organization and Classification
|
2
|
Purchasing Shares
|
56
|
Investment Objectives, Restrictions, and
Policies
|
2
|
Investment Plans
|
68
|
Investment Strategies and Risks
|
4
|
Determining Offering Price and Net Asset
Value
|
71
|
Disclosure of Portfolio Holdings
Information
|
34
|
Redemption and Exchange
|
72
|
Management of the Trust
|
35
|
Distributions and Taxes
|
78
|
Investment Manager and Other Service
Providers
|
46
|
Performance
|
93
|
Portfolio Managers
|
52
|
Financial Statements
|
93
|
Trading Practices and Brokerage
|
54
|
Principal Holders
|
94
|
Capital Structure
|
56
|
Appendix A Description of Ratings
|
103
|
This Part B
describes the Funds, which are series of Delaware Group Income Funds (the
Trust). The Funds offer Class A, Class B, Class C, and Class R shares (except
Delaware Diversified Floating Rate Fund and Delaware Core Bond Fund, which do
not offer Class B shares) (collectively, the Retail Classes). Each Fund also
offers an Institutional Class (collectively the Institutional Classes). All
references to shares in this Part B refer to all classes of shares of the
Funds, except where noted. The Funds investment manager is Delaware Management
Company (the Manager), a series of Delaware Management Business Trust.
ORGANIZATION
AND CLASSIFICATION
|
Organization
The Trust was
originally organized as a Delaware corporation in 1970 and was subsequently
reorganized as a Maryland corporation on March 4, 1983 and as a Delaware
statutory trust on September 29, 1999.
Classification
The Trust
is an open-end management investment company. Each Funds portfolio of assets is
diversified as defined by the Investment Company Act of 1940, as amended (the
1940 Act). The 1940 Act requires a diversified fund, with respect to 75% of
the value of its total assets, to invest (1) no more than 5% of the value of the
Funds total assets in the securities of any one issuer and (2) in no more than
10% of the outstanding voting securities of such issuer. This limitation
generally requires a diversified fund to invest in securities issued by a
minimum of 16 issuers.
INVESTMENT OBJECTIVES,
RESTRICTIONS, AND POLICIES
|
Investment
Objectives
Each Funds investment objective is
described in the Prospectuses. Each Funds investment objective is
nonfundamental, and may be changed without shareholder approval. However, the
Trusts Board of Trustees (Board) must approve any changes to nonfundamental
investment objectives and a Fund will notify shareholders at least 60 days prior
to a material change in the Funds investment objective.
Fundamental Investment
Restrictions
Each Fund has adopted the following
restrictions that cannot be changed without approval by the holders of a
majority of the Funds outstanding shares, which is a vote by the holders of
the lesser of (i) 67% or more of the voting securities present in person or by
proxy at a meeting, if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy; or (ii) more than 50% of the
outstanding voting securities. The percentage limitations contained in the
restrictions and policies set forth herein apply at the time of purchase of
securities.
Each Fund may not:
1. Make investments that will result in the concentration (as that term
may be defined in the 1940 Act, any rule or order thereunder, or U.S. Securities
and Exchange Commission (SEC) staff interpretation thereof) of its investments
in the securities of issuers primarily engaged in the same industry, provided
that this restriction does not limit the Fund from investing in obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
or in tax-exempt securities or certificates of deposit. The Delaware Diversified
Floating Rate Fund may, from time to time, make investments that will result in
the concentration (as that term may be defined in the 1940 Act, any rule or
order thereunder, or SEC staff interpretation thereof) of its investments in the
securities of issuers within various industries or industry
groupings.
2. Borrow money or issue senior securities, except as the 1940 Act, any
rule or order thereunder, or
SEC staff
interpretation thereof, may permit.
2
3. Underwrite the
securities of other issuers, except that the Fund may engage in transactions
involving the acquisition, disposition, or resale of its portfolio securities,
under circumstances where it may be considered to be an underwriter under the
Securities Act of 1933, as amended (the 1933 Act).
4. Purchase or sell real estate, unless acquired as a result of ownership
of securities or other instruments, and provided that this restriction does not
prevent the Fund from investing in issuers which invest, deal or otherwise
engage in transactions in real estate or interests therein, or investing in
securities that are secured by real estate or interests therein.
5. Purchase or sell physical commodities, unless acquired as a result of
ownership of securities or other instruments and provided that this restriction
does not prevent the Fund from engaging in transactions involving futures
contracts and options thereon or investing in securities that are secured by
physical commodities.
6. Make loans, provided that this restriction does not prevent the Fund
from purchasing debt obligations, entering into repurchase agreements, loaning
its assets to broker/dealers or institutional investors and investing in loans,
including assignments and participation interests.
Nonfundamental Investment
Restrictions
In addition to the fundamental policies
and investment restrictions described above, and the various general investment
policies described in the Prospectuses, each Fund will be subject to the
following investment restriction, which is considered nonfundamental and may be
changed by the Board without shareholder approval: Each Fund may not invest more
than 15% of its net assets in securities that it cannot sell or dispose of in
the ordinary course of business within seven days at approximately the value at
which the Fund has valued the investment.
For purposes of each Funds concentration policy, each Fund intends to
comply with the SEC staff position that securities issued or guaranteed as to
principal and interest by any single foreign government are considered to be
securities of issuers in the same industry. In applying each Funds policy on
concentration: (i) utility companies will be divided according to their
services, for example, gas, gas transmission, electric, and telephone will each
be considered a separate industry; (ii) financial service companies will be
classified according to the end users of their services, for example, automobile
finance, bank finance, and diversified finance will each be considered a
separate industry; and (iii) asset-backed securities will be classified
according to the underlying assets securing such securities.
Except for the Funds policy with respect to borrowing, any investment
restriction or limitation that involves a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after an acquisition of securities or a
utilization of assets and such excess results therefrom.
Portfolio
Turnover
Portfolio trading will be undertaken principally to accomplish
each Funds respective investment objective. The Funds are free to dispose of
portfolio securities at any time, subject to complying with the Internal Revenue
Code of 1986, as amended (the Internal Revenue Code), and the 1940 Act, when
changes in circumstances or conditions make such a move desirable in light of
each Funds respective investment objective. The Funds will not attempt to
achieve or be limited to a predetermined rate of portfolio turnover. Such
turnover always will be incidental to transactions undertaken with a view to
achieving each Funds respective investment objective.
The portfolio turnover rate tells you the amount of trading activity in a
Funds portfolio. A turnover rate of 100% would occur, for example, if all of a
Funds investments held at the beginning of a year were replaced by the end of
the year, or if a single investment was frequently traded. The turnover rate
also may be affected by cash requirements from redemptions and repurchases of a
Funds shares. A high rate of portfolio turnover in any year may increase
brokerage commissions paid and could generate taxes for shareholders on realized
investment gains. In investing to achieve its investment objective, a Fund may
hold securities for any period of time.
3
The Funds may
engage in active and frequent trading of portfolio securities, which means that
portfolio turnover can be expected to exceed 100%. The Funds have, in the past,
experienced portfolio turnover rates that were significantly in excess of 100%.
For the fiscal years ended July 31, 2011 and 2012, the Funds portfolio
turnover rates were as follows:
|
2011
|
2012
|
Delaware High-Yield Opportunities
Fund
|
115%
|
61%
|
Delaware Corporate Bond Fund
|
204%
|
202%
|
Delaware Extended Duration Bond
Fund
|
147%
|
172%
|
Delaware Diversified Floating Rate
Fund
|
75%
|
97%
|
Delaware Core Bond Fund
|
503%
|
517%
|
INVESTMENT
STRATEGIES AND RISKS
|
The Prospectuses discuss the Funds investment objectives, strategies and
risks. The following discussion supplements the description of the Funds
investment strategies and risks that are included in the Prospectuses. The
Funds investment strategies are nonfundamental and may be changed without
shareholder approval.
Asset-Backed
Securities
Delaware Diversified Floating Rate Fund and Delaware Core Bond
Fund may each invest a portion of its assets in asset-backed securities. All
such securities must be rated in one of the four highest rating categories by a
reputable credit rating agency (for example, higher than BBB- as rated by
Standard & Poors Group, a division of The McGraw-Hill Companies, Inc.
(S&P), or higher than Baa3 as rated by Moodys Investor Services, Inc.
(Moodys)). Such receivables are securitized in either a pass-through or a
pay-through structure. Pass-through securities provide investors with an income
stream consisting of both principal and interest payments in respect of the
receivables in the underlying pool. Pay-through asset-backed securities are debt
obligations issued usually by a special purpose entity, which are collateralized
by the various receivables and in which the payments on the underlying
receivables provide the income stream to pay the debt service on the debt
obligations issued.
The rate of principal payment on asset-backed securities will be affected
by the principal payments received on the underlying assets. Such rate of
payments may be affected by economic and various other factors such as changes
in interest rates or the concentration of collateral in a particular geographic
area. Therefore, the yield may be difficult to predict and actual yield to
maturity may be more or less than the anticipated yield to maturity. The credit
quality of most asset-backed securities depends primarily on the credit quality
of the assets underlying such securities, how well the entities issuing the
securities are insulated from the credit risk of the originator or affiliated
entities, and the amount of credit support provided to the securities. Due to
the shorter maturity of the collateral backing such securities, there tends to
be less of a risk of substantial prepayment than with mortgage-backed securities
but the risk of such a prepayment does exist. Such asset-backed securities do,
however, involve certain risks not associated with mortgage-backed securities,
including the risk that security interest cannot be adequately or in many cases,
ever, established as well as other risks which may be peculiar to the collateral
backing such securities. For example, with respect to credit card receivables, a
number of state and federal consumer credit laws give debtors the right to set
off certain amounts owed on the credit cards, thereby reducing the outstanding
balance. In the case of automobile receivables, there is a risk that the holders
may not have either a proper or first security interest in all of the
obligations backing such receivables due to the large number of vehicles
involved in a typical issuance and technical requirements under state laws.
Therefore, recoveries on repossessed collateral may not always be available to
support payments on the securities.
Asset-backed securities are often backed by a pool of assets representing
the obligations of a number of different parties. To lessen the effect of
failures by obligors on underlying assets to make payments, such securities may
contain elements of credit support. Such credit support falls into two
categories: (i) liquidity protection, and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
due on the underlying pool is timely. Protection against losses resulting from
ultimate default enhances the likelihood of payments of the obligations on at
least some of the assets in the pool. Such protection may be provided through
guarantees, insurance policies, or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the transaction
or through a combination of such approaches. Delaware Diversified Floating Rate
Fund and Delaware Core Bond Fund will not pay any additional fees for such
credit support, although the existence of credit support may increase the price
of a security.
4
Examples of
credit support arising out of the structure of the transaction include
senior-subordinated securities (multiple class securities with one or more
classes subordinate to other classes as to the payment of principal thereof and
interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of reserve
funds (where cash or investments, sometimes funded from a portion of the
payments on the underlying assets, are held in reserve against future losses)
and over collateralization (where the scheduled payments on, or the principal
amount of, the underlying assets exceeds that required to make payments of the
securities and pay any servicing or other fees). The degree of credit support
provided for each issue is generally based on historical information respecting
the level of credit risk associated with the underlying assets. Delinquencies or
losses in excess of those anticipated could adversely affect the return on an
investment in such issue.
Borrowing From Banks
Each Fund may borrow money as a temporary
measure for extraordinary purposes or to facilitate redemptions. A Fund will not
borrow money in excess of one-third of the value of its net assets. A Fund has
no intention of increasing its net income through borrowing. Any borrowing will
be done from a bank and, to the extent that such borrowing exceeds 5% of the
value of a Funds net assets, asset coverage of at least 300% is required. In
the event that such asset coverage shall at any time fall below 300%, a Fund
shall, within three days thereafter (not including Sundays or holidays, or such
longer period as the SEC may prescribe by rules and regulations), reduce the
amount of its borrowings to such an extent that the asset coverage of such
borrowings shall be at least 300%. A Fund will not pledge more than 10% of its
net assets, or issue senior securities as defined in the 1940 Act, except for
notes to banks. Investment securities will not be purchased while a Fund has an
outstanding borrowing.
Combined Transactions
Delaware Diversified Floating Rate Fund
may enter into multiple transactions, including multiple options transactions,
multiple futures transactions, multiple currency transactions (including forward
currency contracts) and multiple interest rate transactions and any combination
of futures, options, currency, and interest rate transactions (component
transactions), instead of a single transaction, as part of a single or combined
strategy when, in the opinion of the Manager, it is in the best interests of the
Fund to do so. A combined transaction will usually contain elements of risk that
are present in each of its component transactions. Although combined
transactions are normally entered into based on the Managers judgment that the
combined strategies will reduce risk or otherwise more effectively achieve the
desired portfolio management goal, it is possible that the combination will
instead increase such risks or hinder achievement of the portfolio management
objective.
Convertible Debt and
Non-Traditional Equity Securities
From time
to time, a portion of Delaware Corporate Bond Fund, Delaware Extended Duration
Bond Fund, Delaware High-Yield Opportunities Fund, and Delaware Diversified
Floating Rate Funds assets may be invested in convertible and debt securities
of issuers in any industry. A convertible security is a security which may be
converted at a stated price within a specified period of time into a certain
quantity of the common stock of the same or a different issuer. Convertible and
debt securities are senior to common stocks in a corporations capital
structure, although convertible securities are usually subordinated to similar
nonconvertible securities. Convertible and debt securities provide a
fixed-income stream and the opportunity, through its conversion feature, to
participate in the capital appreciation resulting from a market price advance in
the convertible securitys underlying common stock. Just as with debt
securities, convertible securities tend to increase in market value when
interest rates decline and tend to decrease in value when interest rates rise.
However, the price of a convertible security is also influenced by the market
value of the securitys underlying common stock and tends to increase as the
market value of the underlying stock rises, whereas it tends to decrease as the
market value of the underlying stock declines. Convertible and debt securities
acquired by a Fund may be rated below investment grade, or unrated. These lower
rated convertible and debt securities are subject to credit risk considerations
substantially similar to such considerations affecting high risk, high-yield
bonds, commonly referred to as junk bonds. See High-Yield, High Risk
Securities for a further discussion of these types of
investments.
5
Delaware
Corporate Bond Fund, Delaware Extended Duration Bond Fund and Delaware
High-Yield Opportunities Fund may invest in convertible preferred stocks that
offer enhanced yield features, such as Preferred Equity Redemption Cumulative
Stock (PERCS), which provide an investor, such as the Fund, with the
opportunity to earn higher dividend income than is available on a companys
common stock. A PERCS is a preferred stock which generally features a mandatory
conversion date, as well as a capital appreciation limit which is usually
expressed in terms of a stated price. Upon the conversion date, most PERCS
convert into common stock of the issuer (PERCS are generally not convertible
into cash at maturity). Under a typical arrangement, if after a predetermined
number of years the issuers common stock is trading at a price below that set
by the capital appreciation limit, each PERCS would convert to one share of
common stock. If, however, the issuers common stock is trading at a price above
that set by the capital appreciation limit, the holder of the PERCS would
receive less than one full share of common stock. The amount of that fractional
share of common stock received by the PERCS holder is determined by dividing the
price set by the capital appreciation limit of the PERCS by the market price of
the issuers common stock. PERCS can be called at any time prior to maturity,
and hence do not provide call protection. However, if called early, the issuer
may pay a call premium over the market price to the investor. This call premium
declines at a preset rate daily, up to the maturity date of the PERCS.
Delaware Corporate Bond Fund, Delaware Extended Duration Bond Fund and
Delaware High-Yield Opportunities Fund may also invest in other enhanced
convertible securities. These include but are not limited to ACES (Automatically
Convertible Equity Securities), PEPS (Participating Equity Preferred Stock),
PRIDES (Preferred Redeemable Increased Dividend Equity Securities), SAILS (Stock
Appreciation Income Linked Securities), TECONS (Term Convertible Notes), QICS
(Quarterly Income Cumulative Securities) and DECS (Dividend Enhanced Convertible
Securities). ACES, PEPS, PRIDES, SAILS, TECONS, QICS, and DECS all have the
following features: they are company-issued convertible preferred stock; unlike
PERCS, they do not have capital appreciation limits; they seek to provide the
investor with high current income, with some prospect of future capital
appreciation; they are typically issued with three to four-year maturities; they
typically have some built-in call protection for the first two to three years;
investors have the right to convert them into shares of common stock at a preset
conversion ratio or hold them until maturity; and upon maturity, they will
automatically convert to either cash or a specified number of shares of common
stock.
Credit Default
Swaps
Each Fund may enter into credit default
swap (CDS) contracts to the extent consistent with its investment objectives
and strategies. A CDS contract is a risk-transfer instrument (in the form of a
derivative security) through which one party (the purchaser of protection)
transfers to another party (the seller of protection) the financial risk of a
Credit Event (as defined below), as it relates to a particular reference
security or basket of securities (such as an index). In exchange for the
protection offered by the seller of protection, the purchaser of protection
agrees to pay the seller of protection a periodic premium. In the most general
sense, the benefit for the purchaser of protection is that, if a Credit Event
should occur, it has an agreement that the seller of protection will make it
whole in return for the transfer to the seller of protection of the reference
security or securities. The benefit for the seller of protection is the premium
income it receives. A Fund might use CDS contracts to limit or to reduce the
risk exposure of the Fund to defaults of the issuer or issuers of the Funds
portfolio holdings (i.e., to reduce risk when the Fund owns or has exposure to
such securities). A Fund also might use CDS contracts to create or vary exposure
to securities or markets.
CDS transactions may involve general market, illiquidity, counterparty,
and credit risks. CDS prices may also be subject to rapid movements in response
to news and events affecting the underlying securities. The aggregate notional
amount (typically, the principal amount of the reference security or securities)
of a Funds investments in the CDS contracts will be limited to 15% (50% for
Delaware Diversified Floating Rate Fund) of the Funds total net assets. As the
purchaser or seller of protection, a Fund may be required to segregate cash or
other liquid assets to cover its obligations under certain CDS
contracts.
6
Where a Fund is a
purchaser of protection, it will designate on its books and records cash or
liquid securities sufficient to cover its premium payments under the CDS. To the
extent that the Fund, as a purchaser of protection, may be required in the event
of a credit default to deliver to the counterparty (1) the reference security
(or basket of securities), (2) a security (or basket of securities) deemed to be
the equivalent of the reference security (or basket of securities), or (3) the
negotiated monetary value of the obligation, the Fund will designate the
reference security (or basket of securities) on its books and records as being
held to satisfy its obligation under the CDS or, where the Fund does not own the
reference security (or basket of securities), the Fund will designate on its
books and records cash or liquid securities sufficient to satisfy the potential
obligation. To the extent that the Fund, as a seller of protection, may be
required, in the event of a credit default, to deliver to the counterparty some
or all of the notional amount of the CDS, it will designate on its books and
records cash or liquid securities sufficient to cover the obligation. If the CDS
permits a Fund to offset its obligations against the obligations of the
counterparty under the CDS, then the Fund will only designate on its books and
records cash or liquid securities sufficient to cover the Funds net obligation
to the counterparty, if any. All cash and liquid securities designated by a Fund
to cover its obligations under CDSs will be marked to market daily to cover
these obligations.
As the seller of protection in a CDS contract, a Fund would be required
to pay the par (or other agreed-upon) value of a reference security (or basket
of securities) to the counterparty in the event of a default, bankruptcy,
failure to pay, obligation acceleration, modified restructuring or agreed upon
event (each of these events is a Credit Event). If a Credit Event occurs, a
Fund generally would receive the security or securities to which the Credit
Event relates in return for the payment to the purchaser of the par value.
Provided that no Credit Event occurs, a Fund would receive from the counterparty
a periodic stream of payments over the term of the contract in return for this
credit protection. In addition, if no Credit Event occurs during the term of the
CDS contract, a Fund would have no delivery requirement or payment obligation to
the purchaser of protection. As the seller of protection, a Fund would have
credit exposure to the reference security (or basket of securities). A Fund will
not sell protection in a CDS contract if it cannot otherwise hold the security
(or basket of securities).
As the purchaser of protection in a CDS contract, the Fund would pay a
premium to the seller of protection. In return, the Fund would be protected by
the seller of protection from a Credit Event on the reference security (or
basket of securities). A risk in this type of transaction is that the seller of
protection may fail to satisfy its payment obligations to a Fund if a Credit
Event should occur. This risk is known as counterparty risk and is described in
further detail below.
If the purchaser of protection does not own the reference security (or
basket of securities), the purchaser of protection may be required to purchase
the reference security (or basket of securities) in the case of a Credit Event
on the reference security (or basket of securities). If the purchaser of
protection cannot obtain the security (or basket of securities), it may be
obligated to deliver a security (or basket of securities) that is deemed to be
equivalent to the reference security (or basket of securities) or the negotiated
monetary value of the obligation.
Each CDS contract is individually negotiated. The term of a CDS contract,
assuming no Credit Event occurs, is typically between two and five years. CDS
contracts may be unwound through negotiation with the counterparty.
Additionally, a CDS contract may be assigned to a third party. In either case,
the unwinding or assignment involves the payment or receipt of a separate
payment by a Fund to terminate the CDS contract.
Counterparty risk.
A significant risk in CDS transactions is the creditworthiness of the
counterparty because the integrity of the transaction depends on the willingness
and ability of the counterparty to meet its contractual obligations. If there is
a default by a counterparty who is a purchaser of protection, a Funds potential
loss is the agreed upon periodic stream of payments from the purchaser of
protection. If there is a default by a counterparty that is a seller of
protection, a Funds potential loss is the failure to receive the par value or
other agreed upon value from the seller of protection if a Credit Event occurs.
As with any contractual remedy, there is no guarantee that a Fund would be
successful in pursuing such remedies. For example, the counterparty may be
judgment proof due to insolvency. A Fund thus assumes the risk that it will be
delayed or prevented from obtaining payments owed to it.
7
Duration
Most
debt obligations provide interest (coupon) payments in addition to a final (par)
payment at maturity. Some obligations also have call provisions. Depending on
the relative magnitude of these payments and the nature of the call provisions,
the market values of debt obligations may respond differently to changes in the
level and structure of interest rates. Traditionally, a debt securitys
term-to-maturity has been used as a proxy for the sensitivity of the securitys
price to changes in interest rates (which is the interest rate risk or
volatility of the security). However, term-to-maturity measures only the time
until a debt security provides its final payment, taking no account of the
pattern of the securitys payments prior to maturity.
Duration is a measure of the expected life of a fixed income security
that was developed as a more precise alternative to the concept of
term-to-maturity. Duration incorporates a bonds yield, coupon interest
payments, final maturity and call features into one measure. Duration is one of
the fundamental tools used by the Manager in the selection of fixed income
securities. Duration is a measure of the expected life of a fixed income
security on a present value basis. Duration takes the length of the time
intervals between the present time and the time that the interest and principal
payments are scheduled or, in the case of a callable bond, expected to be
received, and weights them by the present values of the cash to be received at
each future point in time. For any fixed income security with interest payments
occurring prior to the payment of principal, duration is always less than
maturity. In general, all other factors being the same, the lower the stated or
coupon rate of interest of a fixed income security, the longer the duration of
the security; conversely, the higher the stated or coupon rate of interest of a
fixed income security, the shorter the duration of the security.
There are some situations where even the standard duration calculation
does not properly reflect the interest rate exposure of a security. For example,
floating and variable rate securities often have final maturities of ten or more
years; however, their interest rate exposure corresponds to the frequency of the
coupon reset. Another example where the interest rate exposure is not properly
captured by duration is the case of mortgage pass-through securities. The stated
final maturity of such securities is generally 30 years, but current prepayment
rates are more critical in determining the securities interest rate exposure.
In these and other similar situations, the Manager will use sophisticated
analytical techniques that incorporate the economic life of a security into the
determination of its interest rate exposure.
Equity
Securities
Each Fund, except for Delaware Core Bond
Fund, may invest in income-producing equity securities. In addition, Delaware
High-Yield Opportunities Fund may make limited use of non-income producing
equity securities.
Equity securities represent ownership interests in a company and consist
of common stocks, preferred stocks, warrants to acquire common stocks and
securities convertible into common stock. Investments in equity securities in
general are subject to market risks that may cause their prices to fluctuate
over time. Fluctuations in the value of equity securities in which a Fund
invests will cause the net asset value of the Fund to fluctuate.
Foreign and Emerging Markets
Securities
A Fund may be subject to
foreign withholding taxes on income from certain foreign securities. This, in
turn, could reduce a Funds distributions paid to shareholders.
8
Special rules govern the federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules generally
include the following: (i) the acquisition of, or becoming the obligor under, a
bond or other debt instrument (including, to the extent provided in Treasury
Regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract, option and similar financial instruments other than
any regulated futures contract or non-equity option marked to market. The
disposition of a currency other than the U.S. dollar by a U.S. taxpayer is also
treated as a transaction subject to the special currency rules. However, foreign currency-related regulated futures contracts
and non-equity options are generally not subject to the special currency rules,
if they are or would be treated as sold for their fair market value at year-end
under the marking to market rules applicable to other futures contracts, unless
an election is made to have such currency rules apply. With respect to
transactions covered by the special rules, foreign currency gain or loss is
calculated separately from any gain or loss on the underlying transaction and is
normally taxable as ordinary gain or loss. A taxpayer may elect to treat as
capital gain or loss foreign currency gain or loss arising from certain
identified forward contracts, futures contracts and options that are capital
assets in the hands of the taxpayer and which are not part of a straddle.
Certain transactions subject to the special currency rules that are part of a
section 988 hedging transaction (as defined in the Internal Revenue Code and
U.S. Treasury Regulations) will be integrated and treated as a single
transaction or otherwise treated consistently for purposes of the Internal
Revenue Code. The income tax effects of integrating and treating a transaction
as a single transaction are generally to create a synthetic debt instrument that
is subject to the original discount provisions. It is anticipated that some of
the non-U.S. dollar denominated investments and foreign currency contracts the
Funds may make or enter into will be subject to the special currency rules
described above.
Foreign Currency
Transactions
The
Funds may each purchase or sell currencies and/or engage in forward foreign
currency transactions in order to expedite settlement of portfolio transactions
and to minimize currency value fluctuations.
When the Funds enters into a forward contract to sell, for a fixed amount
of U.S. dollars or other appropriate currency, the amount of foreign currency
approximating the value of some or all of its assets denominated in such foreign
currency, its custodian bank will place or will cause to be placed cash or
liquid equity or debt securities in a separate account of the Fund in an amount
not less than the value of the Funds total assets committed to the consummation
of such forward contracts. If the additional cash or securities placed in the
separate account declines, additional cash or securities will be placed in the
account on a daily basis so that the value of the account will equal the amount
of the Funds commitments with respect to such contracts. Forward foreign
currency contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A forward
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. The Funds will account for forward contracts by marking to
market each day at daily exchange rates.
Foreign currency options are traded in a manner substantially similar to
options on securities. In particular, an option on foreign currency provides the
holder with the right to purchase, in the case of a call option, or to sell, in
the case of a put option, a stated quantity of a particular currency for a fixed
price up to a stated expiration date. The writer of the option undertakes the
obligation to deliver, in the case of a call option, or to purchase, in the case
of a put option, the quantity of the currency called for in the option, upon
exercise of the option by the holder. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations in exchange
rates, although, in the event of a rate movement adverse to the Funds position,
the Fund may forfeit the entire amount of the premium plus any related
transaction costs. As in the case of other types of options, the writing of an
option on a foreign currency will constitute only a partial hedge, up to the
amount of the premium received, and the Funds could be required to purchase or
sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses.
The Funds will write call options only if they are covered and put
options only if they are secured. A call written by the Funds will be considered
covered if the Fund owns short-term debt securities with a value equal to the
face amount of the option contract and denominated in the currency upon which
the call is written. A put option written by the Funds will be considered
secured if, so long as the Fund is obligated as the writer of the put, it
segregates with its custodian bank cash or liquid high grade debt securities
equal at all times to the aggregate exercise price of the put.
9
As in the case of
other types of options, the holder of an option on foreign currency is required
to pay a one-time, non-refundable premium, which represents the cost of
purchasing the option. The holder can lose the entire amount of this premium, as
well as related transaction costs, but not more than this amount. The writer of
the option, in contrast, generally is required to make initial and variation
margin payments, similar to margin deposits required in the trading of futures
contacts and the writing of other types of options. The writer is therefore
subject to risk of loss beyond the amount originally invested and above the
value of the option at the time it is entered into.
Certain options on foreign currencies, like forward contracts, are traded
over-the-counter through financial institutions acting as market-makers in such
options and the underlying currencies. Such transactions therefore involve risks
not generally associated with exchange-traded instruments. Options on foreign
currencies may also be traded on national securities exchanges regulated by the
SEC or commodities exchanges regulated by the Commodity Futures Trading
Commission.
A foreign currency futures contract is a bilateral agreement providing
for the purchase and sale of a specified type and amount of a foreign currency.
By its terms, a futures contract provides for a specified settlement date on
which, in the case of the majority of foreign currency futures contracts, the
currency underlying the contract is delivered by the seller and paid for by the
purchaser, or on which, in the case of certain futures contracts, the difference
between the price at which the contract was entered into and the contracts
closing value is settled between the purchaser and seller in cash. Futures
contracts differ from options in that they are bilateral agreements, with both
the purchaser and the seller equally obligated to complete the transactions. In
addition, futures contracts call for settlement only on the expiration date, and
cannot be exercised at any other time during their term. The purchase or sale
of a futures contract also differs from the purchase or sale of a security or
the purchase of an option in that no purchase price is paid or received.
Instead, an amount of cash or cash equivalents, which varies but may be as low
as 5% or less of the value of the contract, must be deposited with the broker as
initial margin as a good faith deposit. Subsequent payments to and from the
broker referred to as variation margin are made on a daily basis as the value
of the currency underlying the futures contract fluctuates, making positions in
the futures contract more or less valuable, a process known as marking to the
market.
A futures contract may be purchased or sold only on an exchange, known as
a contract market, designated by the Commodity Futures Trading Commission for
the trading of such contract, and only through a registered futures commission
merchant which is a member of such contract market. A commission must be paid on
each completed purchase and sale transaction. The contract market clearinghouse
guarantees the performance of each party to a futures contract by in effect
taking the opposite side of such contract. At any time prior to the expiration
of a futures contract, a trader may elect to close out its position by taking an
opposite position on the contract market on which the position was entered into,
subject to the availability of a secondary market, which will operate to
terminate the initial position. At that time, a final determination of variation
margin is made and any loss experienced by the trader is required to be paid to
the contract market clearing house while any profit due to the trader must be
delivered to it.
A call option on a futures contract provides the holder with the right to
purchase, or enter into a long position in, the underlying futures contract. A
put option on a futures contract provides the holder with the right to sell, or
enter into a short position, in the underlying futures contract. In both
cases, the option provides for a fixed exercise price up to a stated expiration
date. Upon exercise of the option by the holder, the contract market
clearinghouse establishes a corresponding short position for the writer of the
option, in the case of a call option, or a corresponding long position in the
case of a put option, and the writer delivers to the holder the accumulated
balance in the writers margin account which, represents the amount by which the
market price of the futures contract at exercise exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. In the event that an option written by a Fund is exercised,
the Fund will be subject to all the risks associated with the trading of futures
contracts, such as payment of variation margin deposits. In addition, the writer
of an option on a futures contract, unlike the holder, is subject to initial and
variation margin requirements on the option position.
10
A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the traders profit
or loss on the transaction.
An option becomes
worthless to the holder when it expires. Upon exercise of an option, the
exchange or contract market clearinghouse assigns exercise notices on a random
basis to those of its members which have written options of the same series and
with the same expiration date. A brokerage firm receiving such notices then
assigns them on a random basis to those of its customers which have written
options of the same series and expiration date. A writer, therefore, has no
control over whether an option will be exercised against it, nor over the timing
of such exercise.
Foreign
Investments
Investors should recognize that investing
in securities issued by foreign corporations and foreign governments involves
certain considerations, including those set forth in the Prospectus, which are
not typically associated with investments in United States issuers. Since the
securities of foreign issuers are frequently denominated in foreign currencies,
and since the Funds may temporarily hold un-invested reserves in bank deposits
in foreign currencies, the Funds will be affected favorably or unfavorably by
changes in currency rates and in exchange control regulations, and may incur
costs in connection with conversions between various currencies. The investment
policies of the Funds permit them to enter into forward foreign
currency exchange
contracts and to engage in certain options and futures activities in order to
hedge holdings and commitments against changes in the level of future currency
rates. See Foreign Currency Transactions above.
Delaware Diversified Floating Rate Fund and Delaware Core Bond Fund each
have the right to purchase securities in any developed, underdeveloped or
emerging country. Investors should consider carefully the substantial risks
involved in investing in securities issued by companies and governments of
foreign nations. These risks are in addition to the usual risks inherent in
domestic investments. There is the possibility of expropriation, nationalization
or confiscatory taxation, taxation of income earned in foreign nations or other
taxes imposed with respect to investments in foreign nations, foreign exchange
control (which may include suspension of the ability to transfer currency from a
given country), default in foreign government securities, political or social
instability, or diplomatic developments which could affect investments in
securities of issuers in those nations.
In addition, in many countries, there is substantially less publicly
available information about issuers than is available in reports about companies
in the United States, and this information tends to be of a lesser quality.
Foreign companies are not subject to uniform accounting, auditing and financial
reporting standards, and auditing practices and requirements may not be
comparable to those applicable to United States companies. In particular, the
assets and profits appearing on the financial statements of a developing or
emerging country issuer may not reflect its financial position or results of
operations in the way they would be reflected had the financial statements been
prepared in accordance with United States generally accepted accounting
principles. Also, for an issuer that keeps accounting records in local currency,
inflation accounting rules may require for both tax and accounting purposes that
certain assets and liabilities be restated on the issuers balance sheet in
order to express items in terms of currency or constant purchasing power.
Inflation accounting may indirectly generate losses or profits.
Consequently, financial data may be materially affected by
restatements for inflation and may not accurately reflect the real condition of
those issuers and securities markets.
It is also expected that the expenses for custodial arrangements of the
Funds will be somewhat greater than the expenses for the custodial arrangements
for U.S. securities of equal value. Dividends and interest paid by foreign
issuers may be subject to withholding and other foreign taxes. Although in some
countries a portion of these taxes is recoverable, the non-recovered portion of
foreign withholding taxes will reduce the income the Funds receive from the
companies comprising the Funds investments. See Dividends, Distributions, and
Taxes.
11
Further, the Funds may encounter difficulty or be unable to pursue legal
remedies and obtain judgments in foreign courts. Commission rates on
securities transactions in foreign countries, which are sometimes fixed rather
than subject to negotiation as in the United States, are likely to be higher.
Further, the settlement period of securities transactions in foreign markets may
be longer than in domestic markets, and may be subject to administrative
uncertainties. In many foreign countries, there is less government supervision
and regulation of business and industry practices, stock exchanges, brokers, and
listed companies than in the United States, and capital requirements for
brokerage firms are generally lower. The foreign securities markets of many of
the countries in which the Funds may invest may also be smaller, less liquid,
and subject to greater price volatility than those in the United
States.
Compared to the
United States and other developed countries, emerging countries may have
volatile social conditions, relatively unstable governments and political
systems, economies based on only a few industries and economic structures that
are less diverse and mature, and securities markets that trade a small number of
securities, which can result in a low or nonexistent volume of trading. Prices
in these securities markets tend to be volatile and, in the past, securities in
these countries have offered greater potential for gain (as well as loss) than
securities of companies located in developed countries. Until recently, there
has been an absence of a capital market structure or market-oriented economy in
certain emerging countries. Further, investments and opportunities for
investments by foreign investors are subject to a variety of national policies
and restrictions in many emerging countries. These restrictions may take the
form of prior governmental approval, limits on the amount or type of securities
held by foreigners, limits on the types of companies in which foreigners may
invest, and prohibitions on foreign investments in issuers or industries deemed
sensitive to national interests. Additional restrictions may be imposed at any
time by these or other countries in which the Funds invest. Also, the
repatriation of both investment income and capital from several foreign
countries is restricted and controlled under certain regulations, including, in
some cases, the need for certain governmental consents. Although these
restrictions may in the future make it undesirable to invest in emerging
countries, the Manager does not believe that any current repatriation
restrictions would affect their decision to invest in such countries. Countries
such as those in which the Funds may invest have historically experienced and
may continue to experience, substantial, and in some periods extremely high
rates of inflation for many years, high interest rates, exchange rate
fluctuations or currency depreciation, large amounts of external debt, balance
of payments and trade difficulties, and extreme poverty and unemployment. Other
factors which may influence the ability or willingness to service debt include,
but are not limited to, a countrys cash-flow situation, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
its debt service burden to the economy as a whole, its governments policy
towards the IMF, the World Bank and other international agencies, and the
political constraints to which a government debtor may be subject.
With respect to investment in debt issues of foreign governments, the
ability of a foreign government or government-related issuer to make timely and
ultimate payments on its external debt obligations will also be strongly
influenced by the issuers balance of payments, including export performance,
its access to international credits and investments, fluctuations in interest
rates, and the extent of its foreign reserves. A country whose exports are
concentrated in a few commodities or whose economy depends on certain strategic
imports could be vulnerable to fluctuations in international prices of these
commodities or imports. To the extent that a country receives payment for its
exports in currencies other than dollars, its ability to make debt payments
denominated in dollars could be adversely affected. If a foreign government or
government-related issuer cannot generate sufficient earnings from foreign trade
to service its external debt, it may need to depend on continuing loans and aid
from foreign governments, commercial banks and multilateral organizations, and
inflows of foreign investment. The commitment on the part of these foreign
governments, multilateral organizations and others to make such disbursements
may be conditioned on the governments implementation of economic reforms and/or
economic performance and the timely service of its obligations. Failure to
implement such reforms, achieve such levels of economic performance, or repay
principal or interest when due may curtail the willingness of such third parties
to lend funds, which may further impair the issuers ability or willingness to
service its debts in a timely manner. The cost of servicing external debt will
also generally be adversely affected by rising international interest rates
because many external debt obligations bear interest at rates which are adjusted
based upon international interest rates. The ability to service external debt
will also depend on the level of the relevant governments international
currency reserves and its access to foreign exchange. Currency devaluations may
affect the ability of a government issuer to obtain sufficient foreign exchange
to service its external debt.
12
As a result of
the foregoing, a foreign governmental issuer may default on its obligations. If
such a default occurs, the Funds may have limited effective legal recourse
against the issuer and/or guarantor. Remedies must, in some cases, be pursued in
the courts of the defaulting party itself, and the ability of the holder of
foreign government and government-related debt securities to obtain recourse may
be subject to the political climate in the relevant country. In addition, no
assurance can be given that the holders of commercial bank debt will not contest
payments to the holders of other foreign government and government-related debt
obligations in the event of default under their commercial bank loan
agreements.
With respect to forward foreign currency exchanges, the precise matching
of forward contract amounts and the value of the securities involved is
generally not possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency strategy is highly
uncertain. See Forward Foreign Currency Exchange Contracts below.
With reference to the Funds investments in foreign government
securities, there is the risk that a foreign governmental issuer may default on
its obligations. If such a default occurs, the Funds may have limited effective
legal recourse against the issuer and/or guarantor. Remedies must, in some
cases, be pursued in the courts of the defaulting party itself, and the ability
of the holder of foreign government and government-related debt securities to
obtain recourse may be subject to the political climate in the relevant country.
In addition, no assurance can be given that the holders of commercial bank debt
will not contest payments to the holders of other foreign government and
government-related debt obligations in the event of default under their
commercial bank loan agreements. The issuers of foreign government and
government-related debt securities have in the past experienced substantial
difficulties in servicing their external debt obligations, which have led to
defaults on certain obligations and the restructuring of certain indebtedness.
Restructuring arrangements have included, among other things, reducing and
rescheduling interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and unpaid interest to
Brady Bonds, and obtaining new credit to finance interest payments. Holders of
certain foreign government and government-related high yield securities may be
requested to participate in the restructuring of such obligations and to extend
further loans to their issuers. There can be no assurance that Brady Bonds and
other foreign government and government-related securities will not be subject
to similar defaults or restructuring arrangements which may adversely affect the
value of such investments.
Furthermore, certain
participants in the secondary market for such debt may be directly involved in
negotiating the terms of these arrangements and may therefore have access to
information not available to other market participants.
Investments and opportunities for investments by foreign investors in
emerging market countries are subject to a variety of national policies and
restrictions. These restrictions may take the form of prior governmental
approval, limits on the amount or type of securities held by foreigners, limits
on the types of companies in which foreigners may invest and prohibitions on
foreign investments in issuers or industries deemed sensitive to national
interests. Additional restrictions may be imposed at any time by these or other
countries in which the Funds invest. Although these restrictions may in the
future make it undesirable to invest in emerging countries, the Manager does not
believe that any current registration restrictions would affect its decision to
invest in such countries.
As disclosed in the Funds Prospectuses, the foreign short-term fixed
income securities in which the Fund may invest may be U.S. dollar or foreign
currency denominated, including the euro. Such securities may include those
issued by supranational entities. A supranational entity is an entity
established or financially supported by the national governments of one or more
countries to promote development or reconstruction. They include: The Work Bank,
European Investment Bank, Asian Development Bank, European Economic Community,
and the Inter-American Development Bank. Such fixed income securities will be
typically rated, at the time of purchase, AA or higher by S&P or Aa or
higher by Moodys, or of comparable quality as determined by the
Manager.
13
Forward Foreign Currency Exchange
Contracts
The foreign investments made by the Funds
present currency considerations which pose special risks, as described in the
Prospectuses.
Although the
Funds each value their assets daily in terms of U.S. dollars, they do not intend
to convert its holdings of foreign currencies into U.S. dollars on a daily
basis. The Funds will, however, from time to time, purchase or sell foreign
currencies and/or engage in forward foreign currency transactions in order to
expedite settlement of Fund transactions and to minimize currency value
fluctuations. The Funds may conduct their foreign currency exchange transactions
on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through entering into contracts to purchase or sell foreign
currencies at a future date (i.e., a forward foreign currency contract or
forward contract). The Funds will convert currency on a spot basis from time
to time, and investors should be aware of the costs of currency
conversion.
A forward contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract, agreed upon by the parties, at a price set at the time of the
contract.
The Funds may enter into forward contracts to lock in the price of a
security it has agreed to purchase or sell, in terms of U.S. dollars or other
currencies in which the transaction will be consummated. By entering into a
forward contract for the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in the underlying
security transaction, a Fund will be able to protect itself against a possible
loss resulting from an adverse change in currency exchange rates during the
period between the date the security is purchased or sold and the date on which
payment is made or received.
For example, when the Manager believes that the currency of a particular
foreign country may suffer a significant decline against the U.S. dollar or
against another currency, the Funds may enter into a forward contract to sell,
for a fixed amount of U.S. dollars or other appropriate currency, the amount of
foreign currency approximating the value of some or all of a Funds securities
denominated in such foreign currency. The Funds will not enter into forward
contracts or maintain a net exposure to such contracts where the consummation of
the contracts would obligate the Funds to deliver an amount of foreign currency
in excess of the value of the Funds securities or other assets denominated in
that currency.
The Funds may enter into forward contracts to hedge the currency risk
associated with the purchase of individual securities denominated in particular
currencies. In the alternative, the Funds may also engage in currency cross
hedging when, in the opinion of the Manager, the historical relationship among
foreign currencies suggests that the Funds may achieve the same protection for a
foreign security at reduced cost and/or administrative burden through the use of
a forward contract relating to a currency other than the U.S. dollar or the
foreign currency in which the security is denominated.
At the maturity of a forward contract, the Funds may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an offsetting contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Funds may realize gain or loss from currency
transactions.
With respect to forward foreign currency contracts, the precise matching
of forward contract amounts and the value of the securities involved is
generally not possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency strategy is highly
uncertain.
14
It is impossible to forecast the market value of Fund securities at the
expiration of the contract. Accordingly, it may be necessary for the
Funds to purchase additional foreign currency on the spot market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency the Funds are obligated to deliver and if a decision
is made to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the Fund security if its market value exceeds
the amount of foreign currency a Fund is obligated to deliver.
Futures and Options on
Futures
In order
to remain fully invested, to facilitate investments in portfolio securities, and
to reduce transaction costs, Delaware Core Bond Fund may, to a limited extent,
enter into futures contracts, purchase or sell options on futures contracts and
engage in certain transactions in options on securities, and may enter into
closing transactions with respect to such activities. Delaware Core Bond Fund
will only enter into these transactions for hedging purposes if it is consistent
with the Funds investment objectives and policies, and the Funds will not
engage in such transactions to the extent that obligations relating to futures
contracts, options on futures contracts, and options on securities, in the
aggregate, exceed 25% of the Funds assets.
Delaware Corporate Bond Fund, Delaware Extended Duration Bond Fund,
Delaware Diversified Floating Rate Fund, and Delaware Core Bond Fund may enter
into contract for the purchase or sale for future delivery of securities or
foreign currencies. When the Funds engage in futures transactions, to the extent
required by the SEC, they will maintain with their custodian bank, assets in a
segregated account to cover their obligations with respect to such contracts,
which assets will consist of cash, cash equivalents, or high quality debt
securities from their portfolios, in an amount equal to the difference between
the fluctuating market value of such futures contracts and the aggregate value
of the margin payments made by the Funds with respect to such futures
contracts.
The Funds may enter into such futures contracts to protect against the
adverse affects of fluctuations in interest or foreign exchange rates without
actually buying or selling the securities or foreign currency. For example, if
interest rates are expected to increase, the Funds might enter into futures
contracts for the sale of debt securities. Such a sale would have much the same
effect as selling an equivalent value of the debt securities owned by the Funds.
If interest rates did increase, the value of the debt securities in the
portfolio would decline, but the value of the futures contracts to the Funds
would increase at approximately the same rate, thereby keeping the net asset
value of the Funds from declining as much as it otherwise would have. Similarly,
when it is expected that interest rates may decline, futures contracts may be
purchased to hedge in anticipation of subsequent purchases of securities at
higher prices. Since the fluctuations in the value of futures contracts should
be similar to those of debt securities, the Funds could take advantage of the
anticipated rise in value of debt securities without actually buying them until
the market had stabilized. At that time, the futures contracts could be
liquidated and the Funds could then buy debt securities on the cash
market.
With respect to options on futures contracts, when either Delaware
Corporate Bond Fund or Delaware Extended Duration Bond Fund is not fully
invested, it may purchase a call option on a futures contract to hedge against a
market advance due to declining interest rates. The writing of a call option on
a futures contract constitutes a partial hedge against declining prices of the
U.S. government securities which are deliverable upon exercise of the futures
contract. If the futures price at the expiration of the option is below the
exercise price, the a Fund will retain the full amount of the option premium
which provides a partial hedge against any decline that may have occurred in the
portfolio holdings. The writing of a put option on a futures contract
constitutes a partial hedge against increasing prices of the securities which
are deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, a Fund will retain
the full amount of the option premium which provides a partial hedge against any
increase in the price of U.S. government securities which the Fund intend to
purchase.
15
Consistent with the limited purposes for which Delaware Diversified
Floating Rate Fund may engage in these transactions, the Fund may enter into
such futures contracts to protect against the adverse effects of fluctuations in
interest rates without actually buying or selling the securities. For example,
if interest rates are expected to increase, Delaware Diversified Floating Rate
Fund might enter into futures contracts for the sale of debt securities. Such a sale would have much
the same effect as selling an equivalent value of the debt securities owned by
Delaware Diversified Floating Rate Fund. If interest rates did increase, the
value of the debt securities in the portfolio would decline, but the value of
the futures contracts to Delaware Diversified Floating Rate Fund would increase
at approximately the same rate, thereby keeping the net asset value (NAV) of
the Fund from declining as much as it otherwise would have. Similarly, when it
is expected that interest rates may decline, futures contracts may be purchased
to hedge in anticipation of subsequent purchases of securities at higher prices.
Because the fluctuations in the value of futures contracts should be similar to
those of debt securities, Delaware Diversified Floating Rate Fund could take
advantage of the anticipated rise in value of debt securities without actually
buying them until the market had stabilized. At that time, the futures contracts
could be liquidated and Delaware
Diversified
Floating Rate Fund could then buy debt securities on the cash market.
Foreign currency
futures contracts operate similarly to futures contracts concerning securities.
When Delaware Diversified Floating Rate Fund sells a futures contract on a
foreign currency, they are obligated to deliver that foreign currency at a
specified future date. Similarly, a purchase by Delaware Diversified Floating
Rate Fund gives it a contractual right to receive a foreign currency. This
enables Delaware Diversified Floating Rate Fund to lock in exchange rates.
Delaware Diversified Floating Rate Fund may also purchase and write options to
buy or sell futures contracts in which the Fund may invest and enter into
related closing transactions. Options on futures are similar to options except
that options on futures give the purchaser the right, in return for the premium
paid, to assume a position in a futures contract, rather than actually to
purchase or sell the futures contract, at a specified exercise price at any time
during the period of the option. Delaware Diversified Floating Rate Fund will
not enter into futures contracts and options thereon to the extent that more
than 5% of the Funds assets are required as futures contract margin deposits
and premiums on options, and only to the extent that obligations under such
futures contracts and options thereon would not exceed 50% of the Funds total
assets. In the case of an option that is in-the-money at the time of purchase,
the in-the-money amount may be excluded in calculating the 5% limit.
With respect to options on futures contracts, when Delaware Corporate
Bond Fund, Delaware Extended Duration Bond Fund, Delaware Diversified Floating
Rate Fund, and Delaware Core Bond Fund are not fully invested, they may purchase
a call option on a futures contract to hedge against a market advance due to
declining interest rates. The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an individual
security. Depending on the pricing of the option compared to either the price of
the futures contract upon which it is based or the price of the underlying debt
securities, it may or may not be less risky than ownership of the futures
contract or underlying debt securities.
The writing of a call option on a futures contract constitutes a partial
hedge against the declining price of the security which is deliverable upon
exercise of the futures contract. If the futures price at the expiration of the
option is below the exercise price, Delaware Diversified Floating Rate Fund and
Delaware Core Bond Fund will retain the full amount of the option premium which
provides a partial hedge against any decline that may have occurred in the
Funds holdings. The writing of a put option on a futures contract constitutes a
partial hedge against the increasing price of the security which is deliverable
upon exercise of the futures contract. If the futures price at the expiration of
the option is higher than the exercise price, Delaware Diversified Floating Rate
Fund and Delaware Core Bond Fund will retain the full amount of option premium,
which provides a partial hedge against any increase in the price of securities
which the Funds intend to purchase.
If a put or call option that Delaware Diversified Floating Rate Fund or
Delaware Core Bond Fund has written is exercised, the Fund will incur a loss,
which will be reduced by the amount of the premium it receives. Depending on the
degree of correlation between changes in the value of its portfolio securities
and changes in the value of its futures positions, the Funds losses from
existing options on futures may, to some extent, be reduced or increased by
changes in the value of portfolio securities. The purchase of a put option on a
futures contract is similar in some respects to the purchase of protective puts
on portfolio securities. For example, consistent with the limited purposes for
which Delaware Diversified Floating Rate Fund and Delaware Core Bond Fund will
engage in these activities, the Funds will purchase a put option on a futures
contract to hedge the Funds securities against the risk of rising interest
rates.
16
To the extent
that interest rates move in an unexpected direction, Delaware Corporate Bond
Fund,
Delaware Extended Duration Bond Fund,
Delaware Diversified Floating Rate Fund, and Delaware Core Bond Fund may not
achieve the anticipated benefits of futures contracts or options on futures
contracts, or may realize a loss. For example, if a Fund is hedged against the
possibility of an increase in interest rates, which would adversely affect the
price of securities held in its portfolio, and interest rates decrease instead,
the Fund will lose part or all of the benefit of the increased value of its
securities because it will have offsetting losses in its futures position. In
addition, in such situations, if the Fund had insufficient cash, it may be
required to sell securities from its portfolio to meet daily variation margin
requirements. Such sales of securities may, but will not necessarily, be at
increased prices which reflect the rising market. Delaware Corporate Bond Fund,
Delaware Extended Duration Bond Fund, Delaware Diversified Floating Rate Fund,
and Delaware Core Bond Fund may be required to sell securities at a time when it
may be disadvantageous to do so.
Further, with respect to options on futures contracts, Delaware Corporate
Bond Fund, Delaware Extended Duration Bond Fund, Delaware Diversified Floating
Rate Fund, and Delaware Core Bond Fund may seek to close out an option position
by writing or buying an offsetting position covering the same securities or
contracts and have the same exercise price and expiration date. The ability to
establish and close out positions on options will be subject to the maintenance
of a liquid secondary market, which cannot be assured.
Lastly, it should be noted that the Trust on behalf of the Funds has
filed with the National Futures Association a notice claiming an exclusion from
the definition of the term commodity pool operator (CPO) under the Commodity
Exchange Act, as amended, and the rules of the Commodity Futures Trading
Commission promulgated thereunder, with respect to each Funds operation.
Accordingly, Delaware Diversified Floating Rate Fund is not subject to
registration or regulation as a CPO.
Although not a fundamental policy, Delaware Corporate Bond Fund and
Delaware Extended Duration Bond Fund currently intend to limit their investments
in futures contracts and options thereon to the extent that not more than 5% of
each Funds assets are required as futures contract margin deposits and premiums
on options and only to the extent that obligations under such contracts and
transactions represent not more than 20% of each Funds assets.
High-Yield, High Risk
Securities
Investing in so-called high-yield or high risk securities
entails certain risks, including the risk of loss of principal, which may be
greater than the risks involved in investment grade securities, and which should
be considered by investors contemplating an investment in the Funds. Such
securities are sometimes issued by companies whose earnings at the time of
issuance are less than the projected debt service on the high-yield securities.
The risks include the following:
Youth and Volatility of the High-Yield
Market
.
Although the market for high-yield
securities has been in existence for many years, including periods of economic
downturns, the high-yield market grew rapidly during the long economic expansion
which took place in the United States during the 1980s. During that economic
expansion, the use of high-yield debt securities to fund highly leveraged
corporate acquisitions and restructurings increased dramatically. As a result,
the high-yield market grew substantially during that economic expansion.
Although experts disagree on the impact recessionary periods have had and will
have on the high-yield market, some analysts believe a protracted economic
downturn would severely disrupt the market for high-yield securities, would
adversely affect the value of outstanding bonds and would adversely affect the
ability of high-yield issuers to repay principal and interest. Those analysts
cite volatility experienced in the high-yield market in the past as evidence for
their position. It is likely that protracted periods of economic uncertainty
would result in increased volatility in the market prices of high-yield
securities, an increase in the number of high-yield bond defaults and
corresponding volatility in a Funds net asset value.
17
Liquidity and Valuation
.
The secondary market
for high-yield securities is currently dominated by institutional investors,
including mutual funds and certain financial institutions. There is generally no
established retail secondary market for high-yield securities. As a result, the
secondary market for high-yield securities is more limited and less liquid than other
secondary securities markets. The high-yield secondary market is particularly
susceptible to liquidity problems when the institutions which dominate it
temporarily cease buying such securities for regulatory, financial or other
reasons, such as the savings and loan crisis. A less liquid secondary market may
have an adverse effect on a Funds ability to dispose of particular issues, when
necessary, to meet a Funds liquidity needs or in response to a specific
economic event, such as the deterioration in the creditworthiness of the issuer.
In addition, a less liquid secondary market makes it more difficult for a Fund
to obtain precise valuations of the high-yield securities in its portfolio.
During periods involving such liquidity problems, judgment plays a greater role
in valuing high-yield securities than is normally the case. The secondary market
for high-yield securities is also generally considered to be more likely to be
disrupted by adverse publicity and investor perceptions than the more
established secondary securities markets. Privately placed high-yield securities
are particularly susceptible to the liquidity and valuation risks outlined
above.
Legislative
and Regulatory Action and Proposals
.
There are a variety of legislative actions
which have been taken or which are considered from time to time by the United
States Congress which could adversely affect the market for high-yield bonds.
For example, Congressional legislation limited the deductibility of interest
paid on certain high-yield bonds used to finance corporate acquisitions. Also,
Congressional legislation has, with some exceptions, generally prohibited
federally-insured savings and loan institutions from investing in high-yield
securities. Regulatory actions have also affected the high-yield market. For
example, many insurance companies have restricted or eliminated their purchases
of high-yield bonds as a result of, among other factors, actions taken by the
National Association of Insurance Commissioners. If similar legislative and
regulatory actions are taken in the future, they could result in further
tightening of the secondary market for high-yield issues and could reduce the
number of new high-yield securities being issued.
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund may
invest up to 20% of their respective net assets in securities rated BBB- by
Standard & Poors (S&P) or Baa3 by Moodys Investors Service, Inc.s
(Moodys).
Interest Rate and Index
Swaps
Delaware Corporate Bond Fund, Delaware Extended Duration Bond
Fund, and Delaware Core Bond Fund may invest in interest rate and index swaps to
the extent consistent with their respective investment objectives and
strategies. A Fund will only invest in swaps in which all the reference rates
are related to or derived from instruments or markets in which the Fund is
otherwise eligible to invest, and subject to the investment limitations on the
instruments to which the purchased reference rate relates.
Swaps are agreements to exchange payment streams over a period of time
with another party, called a counterparty. Each payment stream is based on a
specified rate, which could be a fixed or variable interest rate, the rate of
return on an index, or some other reference rate. The payment streams are
calculated with reference to a hypothetical principal amount, called the
notional principal or the notional amount. For example, in an interest rate swap
one party may agree to pay a fixed interest rate to a counterparty and to
receive in return variable interest rate payments from the counterparty. The
amount that each party pays is calculated by multiplying the fixed and variable
rates, respectively, by the notional amount. The payment streams may thus be
thought of as interest payments on the notional amount. The notional amount does
not actually change hands at any point in the swap transaction; it is used only
to calculate the value of the payment streams.
When two counterparties each wish to swap interest rate payments, they
typically each enter into a separate interest rate swap contract with a
broker/dealer intermediary, who is the counterparty in both transactions, rather
than entering into a swap contract with each other directly. The broker/dealer
intermediary enters into numerous transactions of this sort, and attempts to
manage its portfolio of swaps so as to match and offset its payment receipts and
obligations.
The typical minimum notional amount is $5 million. Variable interest
rates are usually set by reference to the London Inter-Bank Offered Rate
(LIBOR). The typical maximum term of an interest rate swap agreement ranges
from one to 12 years. Index swaps tend to be shorter term, often for one
year.
18
The Funds may also engage in index swaps, also called total
return
swaps. In an index swap, a Fund may enter into a contract with a
counterparty in which the counterparty will make payments to the Fund based on
the positive returns of an index, such as a corporate bond index, in return for
the Fund paying to the counterparty a fixed or variable interest rate, as well
as paying to the counterparty any negative returns on the index. In a sense, the
Fund is purchasing exposure to an index in the amount of the notional principal
in return for making interest rate payments on the notional principal. As with
interest rate swaps, the notional principal does not actually change hands at
any point in the transaction. The counterparty, typically an investment bank,
manages its obligations to make total return payments by maintaining an
inventory of the fixed-income securities that are included in the
index.
Swap transactions
provide several benefits to the Funds. Interest rate swaps may be used as a
duration management tool. Duration is a measure of a bonds interest-rate
sensitivity, expressed in terms of years because it is related to the length of
time remaining on the life of a bond. In general, the longer a bonds duration,
the more sensitive the bonds price will be to changes in interest rates. The
average duration of a Fund is the weighted average of the durations of the
Funds fixed-income securities.
If a Fund wished to shorten the duration of certain of its assets, longer
term assets could be sold and shorter term assets acquired, but these
transactions have potential tax and return differential consequences. By using
an interest rate swap, the Fund could agree to make semi-annual
fixed
rate payments and
receive semi-annual
floating
rate LIBOR payments adjusted every six months. The duration
of the floating rate payments received by the Fund will now be six months. In
effect, the Fund has reduced the duration of the notional amount invested from a
longer term to six months over the life of the swap agreement.
The Funds may also use swaps to gain exposure to specific markets. For
example, suppose bond dealers have particularly low inventories of corporate
bonds, making it difficult for a fixed-income fund to increase its exposure to
the corporate bond segment of the market. It is generally not possible to
purchase exchange-traded options on a corporate bond index. A Fund could
replicate exposure to the corporate bond market, however, by engaging in an
index swap in which the Fund gains exposure to a corporate bond index in return
for paying a LIBOR-based floating interest rate.
Other uses of swaps could help permit the Funds to preserve a return or
spread on a particular investment or portion of its portfolio or to protect
against an increase in the price of securities a Fund anticipates purchasing at
a later date. Interest rate swaps may also be considered as a substitute for
interest rate futures in many cases where the hedging horizon is longer than the
maturity of the typical futures contract, and may be considered to provide more
liquidity than similar forward contracts, particularly long-term forward
contracts.
The Funds will not be permitted to enter into any swap transaction
unless, at the time of entering into such transaction, the unsecured long-term
debt of the actual counterparty, combined with any credit enhancements, is rated
at least BBB- by S&P or Baa3 by Moody's or is determined to be of equivalent
credit quality by the Manager.
Counterparty risk.
The primary risk of swap transactions is the creditworthiness of the
counterparty, since the integrity of the transaction depends on the willingness
and ability of the counterparty to maintain the agreed upon payment stream. This
risk is often referred to as counterparty risk. If there is a default by a
counterparty in a swap transaction, the Funds potential loss is the net amount
of payments the Fund is contractually entitled to receive for one payment period
(if any the Fund could be in a net payment position), not the entire notional
amount, which does not change hands in a swap transaction. Swaps do not involve
the delivery of securities or other underlying assets or principal as collateral
for the transaction. A Fund will have contractual remedies pursuant to the swap
agreement but, as with any contractual remedy, there is no guarantee that a Fund
would be successful in pursuing them -- the counterparty may be judgment proof
due to insolvency, for example. The Funds thus assume the risk that they will be
delayed or prevented from obtaining payments owed to them. The standard industry
swap agreements do, however, permit a Fund to terminate a swap agreement (and
thus avoid making additional payments) in the event that a counterparty fails to
make a timely payment to the Fund.
19
In response to
this counterparty risk, several securities firms have established separately
capitalized subsidiaries that have a higher credit rating, permitting them to
enter into swap transactions as a dealer. The Funds will not be permitted to
enter into any swap transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the actual counterparty, combined
with any credit enhancements, is rated at least A by S&P or Moodys or is
determined to be of equivalent credit quality by the Manager. In addition, the
Manager will closely monitor the ongoing creditworthiness of swap counterparties
in order to minimize the risk of swaps.
In addition to counterparty risk, the use of swaps also involves risks
similar to those associated with ordinary portfolio security transactions. If
the portfolio manager is incorrect in his or her forecast of market values or
interest rates, the investment performance of a Fund which has entered into a
swap transaction could be less favorable than it would have been if this
investment technique were not used. It is important to note, however, that there
is no upper limit on the amount a Fund might theoretically be required to pay in
a swap transaction.
In order to ensure that a Fund will only engage in swap transactions to
the extent consistent with its investment objectives and strategies, a Fund will
only engage in a swap transaction if all of the reference rates used in the swap
are related to or derived from securities, instruments, or markets that are
otherwise eligible investments for the Fund. Similarly, the extent to which a
Fund may invest in a swap, as measured by the notional amount, will be subject
to the same limitations as the eligible investments to which the purchased
reference rate relates.
The Funds will, consistent with industry practice, segregate and
mark-to-market daily cash or other liquid assets having an aggregate market
value at least equal to the net amount of the excess, if any, of the Funds
payment obligations over its entitled payments with respect to each swap
contract. To the extent that a Fund is obligated by a swap to pay a fixed or
variable interest rate, the Fund may segregate securities that are expected to
generate income sufficient to meet the Funds net payment
obligations.
There is not a well developed secondary market for interest rate or index
swaps. Most interest rate swaps are nonetheless relatively liquid because they
can be sold back to the counterparty/dealer relatively quickly at a determinable
price. Many index swaps, on the other hand, are considered to be illiquid
because the counterparty/dealer will typically not unwind an index swap prior to
its termination (and, not surprisingly, index swaps tend to have much shorter
terms). A Fund may therefore treat all swaps as subject to their limitation on
illiquid investments. For purposes of calculating these percentage limitations,
a Fund will refer to the notional amount of the swap. For example, if a Fund
holds interest rate swaps and is required to make payments based on variable
interest rates, it will have to make increased payments if interest rates rise,
which will not necessarily be offset by the fixed-rate payments it is entitled
to receive under the swap agreement.
Swaps will be priced using fair value pricing. The income provided by a
swap should be qualifying income for purposes of Subchapter M of the Internal
Revenue Code. Swaps should not otherwise result in any significant
diversification or valuation issues under Subchapter M.
Caps, Floors, and Collars.
Delaware Diversified Floating Rate Fund may purchase or sell
caps, floors, and collars related to swap transactions. Delaware Diversified
Floating Rate Fund expects to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a duration management
technique or to protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. Delaware Diversified Floating Rate Fund
intends to use these transactions as hedges and not speculative investments and
will not sell interest rate caps or floors where it does not own securities or
other instruments providing the income stream that the Fund may be obligated to
pay. Interest rate swaps involve the exchange by Delaware Diversified Floating
Rate Fund with another party of their respective commitments to pay or receive
interest,
e.g.
, an exchange of floating rate payments for fixed rate payments with
respect to a nominal amount of principal. A currency swap is an agreement to
exchange cash flows on a notional amount of two or more currencies based on the
relative value differential among them and an index swap is an agreement to swap
cash flows on a notional amount based on changes in the values of the reference
indices. The purchase of a cap entitles the purchaser to receive payments on a
notional principal amount from the party selling such cap to the extent that
a specified index exceeds a predetermined interest rate or amount. The purchase
of a floor entitles the purchaser to receive payments on a notional principal
amount from the party selling such floor to the extent that a specified index
falls below a predetermined interest rate or amount. A collar is a combination
of a cap and a floor that preserves a certain return within a predetermined
range of interest rates or values.
20
Delaware Diversified Floating Rate Fund will usually enter into swaps on a net
basis,
i.e.
, the two payment streams are netted out in a cash settlement on the
payment date or dates specified in the instrument, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments. Inasmuch as
these swaps, caps, floors, and collars are entered into for good faith hedging
purposes, the Manager and Fund believes such obligations constitute senior
securities under the 1940 Act and, accordingly, will not treat them as being
subject to its borrowing restrictions. If there is a default by the
counterparty, the Fund may have contractual remedies pursuant to the agreements
related to the transaction. Caps, floors, and collars are more recent
innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than swaps.
Investment Companies
Each Fund is permitted to invest in
other investment companies, including open-end, closed-end or unregistered
investment companies, either within the percentage limits set forth in the 1940
Act, any rule or order thereunder, or SEC staff interpretation thereof, or
without regard to percentage limits in connection with a merger, reorganization,
consolidation, or other similar transaction. However, each Fund may not operate
as a fund of funds which invests primarily in the shares of other investment
companies as permitted by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own
shares are utilized as investments by such a fund of funds.
Lending of Portfolio
Securities
Delaware Diversified Floating Rate
Fund has the ability to lend securities from its portfolio to brokers, dealers,
and other financial organizations. Such loans, if and when made, may not exceed
one-third of Delaware Diversified Floating Rate Funds total assets. Loans of
securities by Delaware Diversified Floating Rate Fund will be collateralized by
cash, letters of credit or U.S. government securities, which will be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities. From time to time, Delaware Diversified Floating Rate
Fund may return a part of the interest earned from the investment of collateral
received for securities loaned to the borrower and/or a third party, which is
unaffiliated with the Fund, and which is acting as a finder.
In
lending its portfolio securities, Delaware Diversified Floating Rate Fund can
increase its income by continuing to receive interest on the loaned securities
as well as by either investing the cash collateral in short-term instruments or
obtaining yield in the form of interest paid by the borrower when government
securities are used as collateral. Requirements of the SEC, which may be subject
to future modifications, currently provide that the following conditions must be
met whenever portfolio securities are loaned: (i) the Fund must receive at least
102% cash collateral or equivalent securities from the borrower; (ii) the
borrower must increase such collateral whenever the market value of the loaned
securities rises above the level of such collateral; (iii) the Fund must be able
to terminate the loan at any time; (iv) the Fund must receive reasonable
interest on the loan, as well as an amount equal to any dividends, interest or
other distributions on the loaned securities, and any increase in market value;
(v) the Fund may pay only reasonable custodian fees in connection with the loan;
and (vi) voting rights on the loaned securities may pass to the borrower;
however, if a material event adversely affecting the investment occurs, the
Funds Board must terminate the loan and regain the right to vote the
securities. The risks in lending portfolio securities, as with other extensions
of secured credit, consist of possible delay in receiving additional collateral
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
The
cash collateral received by the Fund in connection with securities lending may
be invested by, or on behalf of, the Fund. The earnings from collateral
investments are typically shared among the Fund, its securities lending agent,
and the borrower. Delaware Diversified Floating Rate Fund may incur investment
losses as a result of investing securities lending collateral.
21
Loans and Other Direct
Indebtedness
Each Fund may purchase loans and
other direct indebtedness. In purchasing a loan, a Fund acquires some or all of
the interest of a bank or other lending institution in a loan to a corporate,
governmental, or other borrower. Many such loans are secured, although some may
be unsecured. Such loans may be in default at the time of purchase. Loans that
are fully secured offer a Fund more protection than an unsecured loan in the
event of non-payment of scheduled interest or principal. However, there is no
assurance that the liquidation of collateral from a secured loan would satisfy
the corporate borrowers obligation, or that the collateral can be liquidated.
These loans are made generally to finance internal growth, mergers,
acquisitions, stock repurchases, leveraged buy-outs, and other corporate
activities. Such loans are typically made by a syndicate of lending
institutions, represented by an agent lending institution that has negotiated
and structured the loan and is responsible for collecting interest, principal,
and other amounts due on its own behalf and on behalf of the others in the
syndicate, and for enforcing its and their other rights against the borrower.
Alternatively, such loans may be structured as a novation, pursuant to which a
Fund would assume all of the rights of the lending institution in a loan or as
an assignment, pursuant to which the Fund would purchase an assignment of a
portion of a lenders interest in a loan either directly from the lender or
through an intermediary.
Each
Fund may also purchase trade or other claims against companies, which generally
represent money owned by the company to a supplier of goods or services. These
claims may also be purchased at a time when the company is in default.
Certain of the loans and the other direct indebtedness acquired by the Funds may
involve revolving credit facilities or other standby financing commitments which
obligate a Fund to pay additional cash on a certain date or on demand. These
commitments may require a Fund to increase its investment in a company at a time
when that Fund might not otherwise decide to do so (including at a time when the
companys financial condition makes it unlikely that such amounts will be
repaid). To the extent that a Fund is committed to advance additional funds, it
will, at all times, hold and maintain cash or other high grade debt obligations
in an amount sufficient to meet such commitments. A Funds ability to receive
payment of principal, interest, and other amounts due in connection with these
investments will depend primarily on the financial condition of the borrower. In
selecting the loans and other direct indebtedness that a Fund will purchase, the
Manager will rely upon its own (and not the original lending institutions)
credit analysis of the borrower. As a Fund may be required to rely upon another
lending institution to collect and pass on to the Fund amounts payable with
respect to the loan and to enforce the Funds rights under the loan and other
direct indebtedness, an insolvency, bankruptcy, or reorganization of the lending
institution may delay or prevent the Fund from receiving such amounts. In such
cases, a Fund will evaluate as well the creditworthiness of the lending
institution and will treat both the borrower and the lending institution as an
issuer of the loan for purposes of compliance with applicable law pertaining
to the diversification of the Funds portfolio investments. The highly leveraged
nature of many such loans and other direct indebtedness may make such loans and
other direct indebtedness especially vulnerable to adverse changes in economic
or market conditions.
Investments in such loans
and other direct indebtedness may involve additional risk to the Funds.
22
Mortgage-Backed Securities
Delaware Diversified Floating Rate Fund and Delaware Core Bond Fund may
each invest in mortgage-backed securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or by government-sponsored
corporations. Those securities include, but are not limited to, Government
National Mortgage Association (GNMA) certificates. Such securities differ from
other fixed income securities in that principal is paid back by the borrower
over the length of the loan rather than returned in a lump sum at maturity. When
prevailing interest rates rise, the value of a GNMA security may decrease as do
other debt securities. When prevailing interest rates decline, however, the
value of GNMA securities may not rise on a comparable basis with other debt
securities because of the prepayment feature of GNMA securities. Additionally,
if a GNMA certificate is purchased at a premium above its principal value
because its fixed rate of interest exceeds the prevailing level of yields, the
decline in price to par may result in a loss of the premium in the event of
prepayment. Funds received from prepayments may be reinvested at the prevailing
interest rates which may be lower than the rate of interest that had previously
been earned.
Delaware
Diversified Floating Rate Fund and Delaware Core Bond Fund also may each invest
in collateralized mortgage obligations (CMOs) and real estate mortgage
investment conduits (REMICs). CMOs are debt securities issued by U.S.
government agencies or by financial institutions and other mortgage lenders and
collateralized by a pool of mortgages held under an indenture. CMOs are issued
in a number of classes or series with different maturities. The classes or
series are retired in sequence as the underlying mortgages are repaid. REMICs,
which were authorized under the Tax Reform Act of 1986, are private entities
formed for the purpose of holding a fixed pool of mortgages secured by an
interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities. To the extent any privately-issued CMOs or
REMICs in which Delaware Diversified Floating Rate Fund and Delaware Core Bond
Fund may invest are considered by the SEC to be investment companies, the Fund
will limit their investments in such securities in a manner consistent with the
provisions of the 1940 Act.
The mortgages
backing these securities include conventional 30-year fixed rate mortgages,
graduated payment mortgages and adjustable rate mortgages. These mortgages may
be supported by various types of insurance, may be backed by GNMA certificates
or other mortgage pass-throughs issued or guaranteed by the U.S. government, its
agencies or instrumentalities. However, the guarantees do not extend to the
mortgage-backed securities value, which is likely to vary inversely with
fluctuations in interest rates. These certificates are in most cases
pass-through instruments, through which the holder receives a share of all
interest and principal payments from the mortgages underlying the certificate.
Because the prepayment characteristics of the underlying mortgages vary, it is
not possible to predict accurately the average life or realized yield of a
particular issue of pass-through certificates. During periods of declining
interest rates, prepayment of mortgages underlying mortgage-backed securities
can be expected to accelerate. When the mortgage obligations are prepaid,
Delaware Diversified Floating Rate Fund and Delaware Core Bond Fund may reinvest
the prepaid amounts in securities, the yield of which reflects interest rates
prevailing at the time. Moreover, prepayments of mortgages which underlie
securities purchased at a premium could result in capital losses.
Certain CMOs and
REMICs may have variable or floating interest rates and others may be stripped.
Stripped mortgage securities have greater market volatility than other types of
mortgage securities in which Delaware Diversified Floating Rate Fund and
Delaware Core Bond Fund may invest.
Stripped mortgage
securities are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. A common type of stripped mortgage security will have one class
receiving some of the interest and most of the principal from the mortgage
assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only class), while the other class will receive
all of the principal (the principal-only class). The yield to maturity on an
interest-only class is extremely sensitive, not only to changes in prevailing
interest rates, but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on Delaware Diversified
Floating Rate Funds or Delaware Core Bond Funds yield to maturity. If the
underlying mortgage assets experience greater than
anticipated prepayments of principal, Delaware Diversified Floating Rate Fund
and Delaware Core Bond Fund may fail to fully recoup their initial investment in
these securities even if the securities are rated in the highest rating
categories.
23
Although stripped mortgage securities are purchased and sold by institutional
investors through several investment banking firms acting as brokers or dealers,
these securities were only recently developed. As a result, established trading
markets have not yet been fully developed and, accordingly, these securities are
generally illiquid and to such extent, together with any other illiquid
investments, will not exceed 15% of Delaware Diversified Floating Rate Funds or
Delaware Core Bond Funds net assets.
CMOs
and REMICs issued by private entities are not government securities and are not
directly guaranteed by any government agency. They are secured by the underlying
collateral of the private issuer. Delaware
Diversified Floating Rate Fund and Delaware Core Bond Fund may invest in
CMOs and REMICs issued by private entities which are not collateralized by
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, and non-agency mortgage-backed securities (Delaware Core Bond
Fund may invest up to 20% of its total assets). Investments in these securities
may be made only if the securities: (i) are rated at the time of purchase in the
four top rating categories by an NRSRO (for example, BBB or better by S&P or
Baa or better by Moodys) and (ii) represent interests in whole-loan mortgages,
multi-family mortgages, commercial mortgages and other mortgage collateral
supported by a first mortgage lien on real estate. Non-agency mortgage-backed
securities are subject to the interest rate and prepayment risks, described
above, to which other CMOs and REMICs issued by private issuers are subject.
Non-agency mortgage-backed securities may also be subject to a greater risk of
loss of interest and principal because they are not collateralized by securities
issued or guaranteed by the U.S. government. In addition, timely information
concerning the loans underlying these securities may not be as readily available
and the market for these securities may be less liquid than other CMOs and
REMICs.
Although the market for the foregoing securities has become increasingly liquid
over the past few years, currently, the market for such securities is
experiencing a period of extreme volatility, which has negatively impacted
market liquidity positions. Initially, the market participants concerns were
focused on the subprime segment of the mortgage-backed securities market.
However, these concerns have since expanded to include a broad range of
mortgaged-backed and asset-backed securities, as well as other fixed income
securities. These securities are more difficult to value and may be hard to
sell. In addition, in general, securities issued by certain private
organizations may not be readily marketable.
Municipal Securities
Municipal securities are issued to
obtain funds for various public purposes, including the construction of a wide
range of public facilities such as bridges, highways, roads, schools, water and
sewer works, and other utilities. Other public purposes for which municipal
securities may be issued include refunding outstanding obligations, obtaining
funds for general operating expenses and obtaining funds to lend to other public
institutions and facilities. In addition, certain debt obligations known as
private activity bonds may be issued by or on behalf of municipalities and
public authorities to obtain funds to provide certain water, sewage and solid
waste facilities, qualified residential rental projects, certain local electric,
gas and other heating or cooling facilities, qualified hazardous waste
facilities, high-speed intercity rail facilities, governmentally owned airports,
docks and wharves and mass commuting facilities, certain qualified mortgages,
student loan and redevelopment bonds and bonds used for certain organizations
exempt from federal income taxation. Certain debt obligations known as
industrial development bonds under prior federal tax law may have been issued
by or on behalf of public authorities to obtain funds to provide certain
privately operated housing facilities, sports facilities, industrial parks,
convention or trade show facilities, airport, mass transit, port or parking
facilities, air or water pollution control facilities, sewage or solid waste
disposal facilities, and certain facilities for water supply. Other private
activity bonds and industrial development bonds issued to finance the
construction, improvement, equipment or repair of privately operated industrial,
distribution, research, or commercial facilities may also be municipal
securities, but the size of such issues is limited under current and prior
federal tax law.
24
Information about the financial condition of issuers of municipal securities may
be less available than about corporations with a class of securities registered
under the Securities Exchange Act of 1934, as amended (the 1934 Act).
Options
Delaware Corporate Bond
Fund and Delaware Extended Duration Bond Fund may purchase call options or put
options and may write put options. Such options may relate to individual fixed
income or equity securities or to a securities index. Delaware Corporate Bond
Fund and Delaware Extended Duration Bond Fund will not engage in option
strategies for speculative purposes. Delaware Diversified Floating Rate Fund and
Delaware Core Bond Fund may purchase call options, write call options on a
covered basis, purchase put options and write put options. Writing put options
will require the Funds to segregate assets sufficient to cover the put while the
option is outstanding.
Purchasing Call Options.
Delaware Corporate Bond Fund, Delaware Extended Duration Bond Fund,
Delaware Diversified Floating Rate Fund, and Delaware Core Bond Fund may
purchase call options to the extent that premiums paid by a Fund do not
aggregate more than 2% of the Fund's total assets. When the Funds purchase a
call option, in return for a premium paid by the Funds to the writer of the
option, the Funds obtain the right to buy the security underlying the option at
a specified exercise price at any time during the term of the option. The writer
of the call option, who receives the premium upon writing the option, has the
obligation, upon exercise of the option, to deliver the underlying security
against payment of the exercise price. The advantage of purchasing call options
is that Delaware Corporate Bond Fund, Delaware Extended Duration Bond Fund, and
Delaware Diversified Floating Rate Fund may alter portfolio characteristics and
modify portfolio maturities without incurring the cost associated with portfolio
transactions.
Delaware Corporate Bond Fund, Delaware Extended Duration Bond Fund, Delaware
Diversified Floating Rate Fund, and Delaware Core Bond Fund may, following the
purchase of a call option, liquidate their position by effecting a closing sale
transaction. This is accomplished by selling an option of the same series as the
option previously purchased. Delaware Corporate Bond Fund, Delaware Extended
Duration Bond Fund, Delaware Diversified Floating Rate Fund, and Delaware Core
Bond Fund will realize a profit from a closing sale transaction if the price
received on the transaction is more than the premium paid to purchase the
original call option; the Funds will realize a loss from a closing sale
transaction if the price received on the transaction is less than the premium
paid to purchase the original call option.
Although Delaware Corporate Bond Fund, Delaware Extended Duration Bond Fund,
Delaware Diversified Floating Rate Fund, and Delaware Core Bond Fund will
generally purchase only those call options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option, or at any particular time, and
for some options no secondary market on an exchange may exist. In such event, it
may not be possible to effect closing transactions in particular options, with
the result that the Funds would have to exercise their options in order to
realize any profit and would incur brokerage commissions upon the exercise of
such options and upon the subsequent disposition of the underlying securities
acquired through the exercise of such options. Further, unless the price of the
underlying security changes sufficiently, a call option purchased by the Funds
may expire without any value to the Funds.
Purchasing Put Options on Individual
Securities.
Delaware Corporate Bond
Fund, Delaware Extended Duration Bond Fund, Delaware Diversified Floating Rate
Fund, and Delaware Core Bond Fund may each invest up to 2% of their total assets
in the purchase of put options. The Funds will, at all times during which they
hold a put option, own the security covered by such option.
A put
option purchased by Delaware Corporate Bond Fund, Delaware Extended Duration
Bond Fund, Delaware Diversified Floating Rate Fund, and Delaware Core Bond Fund
gives the Funds the right to sell one of their securities for an agreed price up
to an agreed date. The Funds intend to purchase put options in order to protect
against a decline in the market value of the underlying security below the
exercise price less the premium paid for the option ("protective puts"). The
ability to purchase put options will allow the Funds to protect unrealized gain
in an appreciated security in their portfolios without actually selling the
security. If the security does not drop in value, Delaware Corporate Bond Fund,
Delaware Extended Duration Bond Fund, Delaware Diversified Floating Rate Fund,
and Delaware Core Bond Fund will lose the value of the premium paid.
25
Delaware Corporate Bond Fund, Delaware Extended Duration Bond Fund, Delaware
Diversified Floating Rate Fund, and Delaware Core Bond Fund may sell a put
option that they have previously purchased prior to the sale of the securities
underlying such option. Such sale will result in a net gain or loss depending on
whether the amount received on the sale is more or less than the premium and
other transaction costs paid on the put option that is sold. Additionally, the
Funds may enter into closing sale transactions. A closing sale transaction is
one in which the Funds, when they are the holder of an outstanding option,
liquidate their position by selling an option of the same series as the option
previously purchased.
Covered Call Writing.
Delaware Diversified
Floating Rate Fund and Delaware Core Bond Fund may each write covered call
options from time to time on such portion of their securities as the Manager
determines is appropriate given the limited circumstances under which the Funds
intend to engage in this activity. A call option gives the purchaser of such
option the right to buy and the writer (in this case Delaware Diversified
Floating Rate Fund and Delaware Core Bond Fund) the obligation to sell the
underlying security at the exercise price during the option period. The
advantage is that the writer receives a premium and the purchaser may hedge
against an increase in the price of the securities it ultimately wishes to buy.
If the security rises in value, however, Delaware Diversified Floating Rate Fund
and Delaware Core Bond Fund may not fully participate in the market
appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
With
respect to options on actual portfolio securities owned by Delaware Diversified
Floating Rate Fund and Delaware Core Bond Fund, the Funds may enter into closing
purchase transactions. A closing purchase transaction is one in which Delaware
Diversified Floating Rate Fund and Delaware Core Bond Fund, when obligated as a
writer of an option, terminate their obligation by purchasing an option of the
same series as the option previously written.
Consistent with the limited purposes for which Delaware Diversified Floating
Rate Fund and Delaware Core Bond Fund intend to engage in the writing of covered
calls, closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Funds to write another call option on the underlying security with either a
different exercise price or expiration date or both.
Delaware Diversified Floating Rate Fund and Delaware Core Bond Fund may realize
a net gain or loss from a closing purchase transaction depending upon whether
the net amount of the original premium received on the call option is more or
less than the cost of effecting the closing purchase transaction. Any loss
incurred in a closing purchase transaction may be partially or entirely offset
by the premium received from a sale of a different call option on the same
underlying security. Such a loss may also be wholly or partially offset by
unrealized appreciation in the market value of the underlying security.
Conversely, a gain resulting from a closing purchase transaction could be offset
in whole or in part by a decline in the market value of the underlying security.
If a
call option expires unexercised, Delaware Diversified Floating Rate Fund and
Delaware Core Bond Fund will realize a short-term capital gain in the amount of
the premium on the option, less the commission paid. Such a gain, however, may
be offset by depreciation in the market value of the underlying security during
the option period. If a call option is exercised, Delaware Diversified Floating
Rate Fund and Delaware Core Bond Fund will realize a gain or loss from the sale
of the underlying security equal to the difference between the cost of the
underlying security and the proceeds of the sale of the security, plus the
amount of the premium on the option, less the commission paid. The market value
of a call option generally reflects the market price of an underlying security.
Other principal factors affecting market value include supply and demand,
interest rates, the price volatility of the underlying security and the time
remaining until the expiration date.
26
Delaware Diversified Floating Rate Fund and Delaware Core Bond Fund will each
write call options only on a covered basis, which means that the Funds will own
the underlying security subject to a call option at all times during the option
period. Unless a closing purchase transaction is effected, the Funds would be
required to continue to hold a security that they might otherwise wish to sell,
or deliver a security they would want to hold. Options written by Delaware
Diversified Floating Rate Fund and Delaware Core Bond Fund will normally have
expiration dates between one and nine months from the date written. The exercise
price of a call option may be below, equal to, or above the current market value
of the underlying security at the time the option is written.
Writing Put Options - Delaware Diversified Floating Rate Fund and
Delaware Core Bond Fund
.
A put option written by Delaware
Diversified Floating Rate Fund and Delaware Core Bond Fund obligates them to buy
the security underlying the option at the exercise price during the option
period, and the purchaser of the option has the right to sell the security to
the Funds. During the option period, Delaware Diversified Floating Rate Fund and
Delaware Core Bond Fund, as writer of the put option, may be assigned an
exercise notice by the broker/dealer through whom the option was sold, requiring
the Funds to make payment of the exercise price against delivery of the
underlying security. The obligation terminates upon expiration of the put option
or at such earlier time at which the writer effects a closing purchase
transaction. Delaware Diversified Floating Rate Fund and Delaware Core Bond Fund
may each write put options only if the Fund will maintain in a segregated
account with its custodian bank, cash, U.S. government securities or other
assets in an amount not less than the exercise price of the option at all times
during the option period. The amount of cash, U.S. government securities or
other assets held in the segregated account will be adjusted on a daily basis to
reflect changes in the market value of the securities covered by the put option
written by Delaware Diversified Floating Rate Fund or Delaware Core Bond Fund.
Consistent with the limited purposes for which Delaware Diversified Floating
Rate Fund and Delaware Core Bond Fund intend to engage in the writing of put
options, such put options will generally be written in circumstances where the
Manager wishes to purchase the underlying security for the Funds at a price
lower than the current market price of the security. In such event, Delaware
Diversified Floating Rate Fund and Delaware Core Bond Fund would write a put
option at an exercise price which, reduced by the premium received on the
option, reflects the lower price it is willing to pay. Following the writing of
a put option, Delaware Diversified Floating Rate Fund or Delaware Core Bond Fund
may wish to terminate the obligation to buy the security underlying the option
by effecting a closing purchase transaction. This is accomplished by buying an
option of the same series as the option previously written. Delaware Diversified
Floating Rate Fund and Delaware Core Bond Fund may not, however, effect such a
closing transaction after they have been notified of the exercise of the option.
Writing Put Options - Delaware Corporate Bond Fund and Delaware
Extended Duration Bond Fund.
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund may write
put options on a securities index. A securities index assigns relative values to
the securities included in the index with the index fluctuating with changes in
the market values of the underlying securities.
Options on securities indices are similar to options on stocks but have
different delivery requirements. Stock options provide the right to take or make
delivery of the underlying stock at a specified price. A securities index option
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the amount by which the fixed exercise price of the option exceeds the
closing value of the underlying index on the date of exercise, multiplied by
(ii) a fixed "index multiplier." Receipt of this cash amount will depend upon
the closing level of the securities index upon which the option is based being
less than the exercise price of the option. The amount of cash received will be
equal to such difference between the closing price of the index and exercise
price of the option expressed in dollars times a specified multiple. The writer
of the option is obligated, in return for the premium received, to make delivery
of this amount. Gain or loss to a Fund on transactions in securities index
options will depend on price movements in the market generally (or in a
particular industry or segment of the market) that the index tracks, rather than
price movements of individual securities.
27
As
with other options, a Fund may offset its position in a securities index option
prior to expiration by entering into a closing transaction on an exchange or the
Fund may let the option expire unexercised.
Positions in securities index options may be closed out only on an exchange that
provides a secondary market. There can be no assurance that a liquid secondary
market will exist for any particular securities index option. Thus, it may not
be possible to close such an option. The inability to close options positions
could have an adverse impact on a Fund's ability to effectively hedge its
securities. A Fund will enter into an option position only if there appears to
be a liquid secondary market for such options.
The
Funds will not engage in transactions in options on securities indices for
speculative purposes but only to protect appreciation attained, to offset
capital losses and to take advantage of the liquidity available in the option
markets. Accordingly, the Funds will not engage in put options on securities
indices that have unmanaged loss exposure.
Portfolio Loan
Transactions
Each Fund may loan up to 25% of its
assets to qualified broker/dealers or institutional investors for their use
relating to short sales or other security transactions.
It is
the understanding of the Manager that the staff of the SEC permits portfolio
lending by registered investment companies if certain conditions are met. These
conditions are as follows: (1) each transaction must have 100% collateral in the
form of cash, short-term U.S. government securities, or irrevocable letters of
credit payable by banks acceptable to the Fund involved from the borrower; (2)
this collateral must be valued daily and should the market value of the loaned
securities increase, the borrower must furnish additional collateral to the
Fund; (3) the Fund must be able to terminate any loan after notice, at any time;
(4) the Fund must receive reasonable interest on any loan, and any dividends,
interest or other distributions on the lent securities, and any increase in the
market value of such securities; (5) the Fund may pay reasonable custodian fees
in connection with the loan; (6) the voting rights on the lent securities may
pass to the borrower; however, if the Trustees of the Trust know that a material
event will occur affecting an investment loan, they must either terminate the
loan in order to vote the proxy or enter into an alternative arrangement with
the borrower to enable the Trustees to vote the proxy.
The
major risk to which a Fund would be exposed on a loan transaction is the risk
that the borrower would go bankrupt at a time when the value of the security
goes up. Therefore, each Fund will only enter into loan arrangements after a
review of all pertinent facts by the Manager, under the supervision of the
Board, including the creditworthiness of the borrowing broker, dealer or
institution and then only if the consideration to be received from such loans
would justify the risk. Creditworthiness will be monitored on an ongoing basis
by the Manager.
Repurchase Agreements
The Funds are permitted to invest in
repurchase agreements, but they normally do so only to invest cash balances. A
repurchase agreement is a short-term investment by which the purchaser acquires
ownership of a debt security and the seller agrees to repurchase the obligation
at a future time and set price, thereby determining the yield during the
purchasers holding period. Should an issuer of a repurchase agreement fail to
repurchase the underlying security, the loss to a Fund, if any, would be the
difference between the repurchase price and the market value of the security.
Each Fund will limit its investments in repurchase agreements to those which the
Manager determines present minimal credit risks and which are of high quality.
In addition, each Fund must have collateral of 102% of the repurchase price,
including the portion representing the Funds yield under such agreements, which
is monitored on a daily basis.
The
funds in the Delaware Investments
®
family (each a Delaware
Investments
®
Fund and collectively, the Delaware
Investments
®
Funds) have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow certain
funds jointly to invest cash balances. The Funds may invest cash balances in a
joint repurchase agreement in accordance with the terms of the Order and subject
generally to the conditions described above.
28
Restricted/Illiquid
Securities
The
Funds may purchase privately-placed debt and other securities whose resale is
restricted under applicable securities laws. Such restricted securities
generally offer a higher return than comparable registered securities but
involve some additional risk since they can be resold only in
privately-negotiated transactions or after registration under applicable
securities laws. The registration process may involve delays which could result
in the Funds obtaining a less favorable price on a resale. Each Fund will not
purchase illiquid assets if more than 15% of its respective net assets would
then consist of such illiquid securities.
Illiquid securities, for purposes of this policy, include repurchase agreements
maturing in more than seven days.
Each
Fund may invest in restricted securities, including securities eligible for
resale without registration pursuant to Rule 144A (Rule 144A Securities) under
the 1933 Act. Rule 144A exempts many privately placed and legally restricted
securities from the registration requirements of the 1933 Act and permits such
securities to be freely traded among certain institutional buyers such as the
Funds.
While
maintaining oversight, the Board has delegated to the Manager the day-to-day
functions of determining whether or not individual Rule 144A Securities are
liquid for purposes of a Funds limitation on investments in illiquid assets.
The Board has instructed the Manager to consider the following factors in
determining the liquidity of a Rule 144A Security: (i) the frequency of trades
and trading volume for the security; (ii) whether at least three dealers are
willing to purchase or sell the security and the number of potential purchasers;
(iii) whether at least two dealers are making a market in the security; and (iv)
the nature of the security and the nature of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer).
If
the Manager determines that a Rule 144A Security which was previously determined
to be liquid is no longer liquid and, as a result, a Funds holdings of illiquid
securities exceed the Funds limit on investment in such securities, the Manager
will determine what action shall be taken to ensure that the Fund continues to
adhere to such limitation.
Delaware Diversified Floating Rate Fund and Delaware Core Bond Fund may each
purchase privately placed securities whose resale is restricted under applicable
securities laws. Such restricted securities generally offer a higher return
potential than comparable registered securities but involve some additional risk
since they can be resold only in privately negotiated transactions or after
registration under applicable securities laws. The registration process may
involve delays which would result in Delaware Diversified Floating Rate Fund and
Delaware Core Bond Fund obtaining a less favorable price on a resale.
Roll Transactions
Delaware Diversified Floating Rate
Fund may engage in roll transactions. A roll transaction is the sale of
securities together with a commitment (for which Delaware Diversified Floating
Rate Fund may receive a fee) to purchase similar, but not identical, securities
at a future date. Under the 1940 Act, these transactions may be considered
borrowings by the Fund; accordingly, Delaware Diversified Floating Rate Fund
will limit their use of these transactions, together with any other borrowings,
to no more than one-third of each of their total assets. Delaware Diversified
Floating Rate Fund will segregate liquid assets such as cash, U.S. government
securities, or other high-grade debt obligations in an amount sufficient to meet
their payment obligations in these transactions. Although these transactions
will not be entered into for leveraging purposes, to the extent Delaware
Diversified Floating Rate Funds aggregate commitments under these transactions
exceed its holdings of cash and securities that do not fluctuate in value (such
as short-term money market instruments), the Fund temporarily will be in a
leveraged position (
i.e.
, it will have an amount greater than its net assets subject
to market risk). Should the market value of the Funds portfolio securities
decline while it is in a leveraged position, greater depreciation of its net
assets would likely occur than were it not in such a position. As the Funds
aggregate commitments under these transactions increase, its leverage risk
similarly increases.
29
Short-Term Investments
The short-term investments in which
the Funds may invest include, but are not limited to:
(1)
Time deposits, certificates of deposit (including marketable variable rate
certificates of deposit) and bankers acceptances issued by a U.S. commercial
bank. Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits maturing in more than seven days will not be purchased by the Funds,
and time deposits maturing from two business days through seven calendar days
will not exceed 15% of the total assets of a Fund. Certificates of deposit are
negotiable short-term obligations issued by commercial banks against funds
deposited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A bankers
acceptance is a time draft drawn on a commercial bank by a borrower usually in
connection with an international commercial transaction (to finance the import,
export, transfer or storage of goods).
The
Funds will not invest in any security issued by a commercial bank unless (i) the
bank has total assets of at least $1 billion or, in the case of a bank which
does not have total assets of at least $1 billion, the aggregate investment made
in any one such bank is limited to $100,000 and the principal amount of such
investment is insured in full by the Federal Deposit Insurance Corporation, (ii)
it is a member of the Federal Deposit Insurance Corporation, and (iii) the bank
or its securities have received the highest quality rating by a
nationally-recognized statistical rating organization;
(2)
Commercial paper with the highest quality rating by a nationally-recognized
statistical rating organization (e.g., A-1 by S&P or Prime-1 by Moodys) or,
if not so rated, of comparable quality as determined by the Manager;
(3)
Short-term corporate obligations with the highest quality rating by a
nationally-recognized statistical rating organization (e.g., AAA by S&P or
Aaa by Moodys) or, if not so rated, of comparable quality as determined by the
Manager;
(4)
U.S.
government securities (see U.S. Government Securities); and
(5)
Repurchase agreements collateralized by securities listed above.
Unseasoned Companies
Delaware Corporate Bond Fund,
Delaware Extended Duration Bond Fund, and Delaware High-Yield Opportunities Fund
may invest in relatively new or unseasoned companies which are in their early
stages of development, or small companies positioned in new and emerging
industries where the opportunity for rapid growth is expected to be above
average. Securities of unseasoned companies present greater risks than
securities of larger, more established companies. The companies in which a Fund
may invest may have relatively small revenues, limited product lines, and may
have a small share of the market for their products or services. Small companies
may lack depth of management, they may be unable to internally generate funds
necessary for growth or potential development or to generate such funds through
external financing or favorable terms, or they may be developing or marketing
new products or services for which markets are not yet established and may never
become established. Due to these and other factors, small companies may suffer
significant losses as well as realize substantial growth, and investments in
such companies tend to be volatile and are therefore speculative.
U.S. Government
Securities
U.S. Treasury securities are backed
by the full faith and credit of the United States. Securities issued or
guaranteed by federal agencies and U.S. government sponsored instrumentalities
may or may not be backed by the full faith and credit of the United States. In
the case of securities not backed by the full faith and credit of the United
States, investors in such securities look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
and may not be able to assert a claim against the United States itself in the
event the agency or instrumentality does not meet its commitment. Agencies which
are backed by the full faith and credit of the United States include the
Export-Import Bank, Farmers Home Administration, Federal Financing Bank, the Federal Housing
Administration, the Maritime Administration, the Small Business Administration,
and others. Certain agencies and instrumentalities, such as the Government
National Mortgage Association (GNMA), are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
indefinite and unlimited drawings on the Treasury, if needed to service its
debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association (FNMA), are
not guaranteed by the United States, but those institutions are protected by the
discretionary authority for the U.S. Treasury to purchase certain amounts of
their securities to assist the institutions in meeting their debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System,
the Tennessee Valley Authority and the Federal Home Loan Mortgage Corporation
(FHLMC), are federally chartered institutions under U.S. government
supervision, but their debt securities are backed only by the creditworthiness
of those institutions, not the U.S. government.
30
An
instrumentality of a U.S. government agency is a government agency organized
under Federal charter with government supervision. Instrumentalities issuing or
guaranteeing securities include, among others, Federal Home Loan Banks, the
Federal Land Banks, Central Bank for Cooperatives, Federal Intermediate Credit
Banks and the FNMA.
The maturities of such securities usually
range from three months to 30 years. While such securities are guaranteed as to
principal and interest by the U.S. government or its instrumentalities, their
market values may fluctuate and are not guaranteed, which may, along with the
other securities in a Funds portfolio, cause a Class daily net asset value to
fluctuate.
In September 2008, the U.S. Treasury
Department and the Federal Housing Finance Administration (FHFA) announced
that FNMA and FHLMC would be placed into a conservatorship under FHFA. The
effect that this conservatorship will have on these companies debt and equity
securities is unclear.
Variable and Floating
Rate Notes
Variable rate master demand notes, in which Delaware Diversified Floating
Rate Fund may invest, are unsecured demand notes that permit the indebtedness
thereunder to vary and provide for periodic adjustments in the interest rate
according to the terms of the instrument. Delaware Diversified Floating Rate
Fund will not invest over 5% of its assets in variable rate master demand notes.
Because master demand notes are direct lending arrangements between the Fund and
the issuer, they are not normally traded. Although there is no secondary market
in the notes, Delaware Diversified Floating Rate Fund may demand payment of
principal and accrued interest at any time. While the notes are not typically
rated by credit rating agencies, issuers of variable amount master demand notes
(which are normally manufacturing, retail, financial, and other business
concerns) must satisfy the same criteria as set forth above for commercial
paper. In determining average weighted portfolio maturity, a variable amount
master demand note will be deemed to have a maturity equal to the period of time
remaining until the principal amount can be recovered from the issuer through
demand.
When-Issued and
Delayed Delivery Securities
Each Fund may purchase securities on a when-issued or delayed delivery
basis. In such transactions, instruments are purchased with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous yield or price at the time of the transaction. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. A Fund will designate cash or securities in amounts
sufficient to cover its obligations and will value the designated assets daily.
The payment obligation and the interest rates that will be received are each
fixed at the time the Fund enters into the commitment and no interest accrues to
the Fund until settlement. Thus, it is possible that the market value at the
time of settlement could be higher or lower than the purchase price if the
general level of interest rates has changed.
Zero Coupon and Pay-In-Kind
Bonds
The credit risk
factors pertaining to lower rated securities also apply to lower rated zero
coupon, deferred interest and pay-in-kind bonds. These bonds carry an additional
risk in that, unlike bonds that pay interest throughout the period to maturity,
a Fund will realize no cash until the cash payment date and, if the issuer
defaults, the Fund may obtain no return
at all on its investment. Zero coupon, deferred interest and pay-in-kind bonds
involve additional special considerations.
31
Zero
coupon or deferred interest securities are debt obligations that do not entitle
the holder to any periodic payments of interest prior to maturity or a specified
date when the securities begin paying current interest (the cash payment date)
and therefore are generally issued and traded at a discount from their face
amounts or par value. The discount varies depending on the time remaining until
maturity or cash payment date, prevailing interest rates, liquidity of the
security and the perceived credit quality of the issuer. The discount, in the
absence of financial difficulties of the issuer, typically decreases as the
final maturity or cash payment date of the security approaches. The market
prices of zero coupon securities are generally more volatile than the market
prices of securities that pay interest periodically and are likely to respond to
changes in interest rates to a greater degree than do non-zero coupon or
deferred interest securities having similar maturities and credit quality.
Current federal income tax law requires that a holder of a zero coupon security
report as income each year the portion of the original issue discount on the
security that accrues that year, even though the holder receives no cash
payments of interest during the year.
Pay-in-kind bonds are securities that pay
interest through the issuance of additional bonds. The Fund will be deemed to
receive interest over the life of these bonds and be treated as if interest were
paid on a current basis for federal income tax purposes, although no cash
interest payments are received by the Fund until the cash payment date or until
the bonds mature. Accordingly, during periods when the Fund receive no cash
interest payments on its zero coupon securities or deferred interest or
pay-in-kind bonds, it may be required to dispose of portfolio securities to meet
the distribution requirements and these sales may be subject to the risk factors
discussed above. The Fund is not limited in the amount of its assets that may be
invested in these types of securities.
Special Risks related
to Cybersecurity Issues
As an open-end management investment company, the Trust has delegated its
operational activities to third-party service providers, subject to the
oversight of the Board. Because the Trust operates its business through
third-party service providers, it does not itself have any operational or
security systems or infrastructure that is potentially subject to cyber attacks.
The third-party service providers that facilitate the Trusts business
activities, including, but not limited to, fund management, custody of Trust
assets, fund accounting and financial administration, and transfer agent
services, could be sources of operational and informational security risk to the
Trust and its shareholders, including from breakdowns or failures of the
third-party service providers own systems or capacity constraints. A failure or
breach of the operational or security systems or infrastructure of the Trusts
third-party service providers could disrupt the Trusts operations, result in
the disclosure or misuse of confidential or proprietary information, and cause
losses. Although the Trust and its third-party service providers have business
continuity plans and other safeguards in place, the operations of the Trusts
third-party service providers may be adversely affected by significant
disruption of their operating systems or physical infrastructure that support
the Trust and its shareholders.
The proliferation of new technologies,
the use of the Internet and telecommunications technologies to conduct business,
as well as the increased sophistication and activities of organized crime,
hackers, terrorists, activists, and others, have significantly increased the
information security risks to which the Trusts third-party service providers
are subject. The third-party service providers rely on digital technologies,
computer and email systems, software, and networks to conduct their business and
the business of the Trust. The Trusts third-party service providers have robust
information security procedures; however, their technologies may become the
target of cyber attacks or information security breaches that could result in
the unauthorized release, gathering, monitoring, misuse, loss or destruction of
the Trusts or its shareholders confidential and other information, or
otherwise disrupt the business operations of the Trust or its third-party
service providers. Although to date the Trust has not experienced any material
losses relating to cyber attacks or other information security breaches, there
can be no assurance that the Trust or its third-party service providers will not
suffer such losses in the future.
32
Disruptions or failures in the physical infrastructure or operating
systems that support the Trusts third-party service providers, or cyber attacks
or security breaches of the networks, systems, or devices that the Trusts
third-party service providers use to service the Trusts operations, could
result in financial losses, the inability of Trust shareholders to transact
business, violations of applicable privacy and other laws, regulatory fines,
penalties, reputational damage, reimbursement or other compensation costs,
and/or additional compliance costs. The business continuity policies and
procedures that the Trust and its third-party service providers have established
seek to identify and mitigate the types of risk to which the Trust and its
third-party service providers are subject. As with any risk management system,
there are inherent limitations to these business continuity policies and
procedures as there may exist, or develop in the future, risks that have not
been anticipated or identified.
33
DISCLOSURE OF PORTFOLIO
HOLDINGS INFORMATION
|
Each
Fund has adopted a policy generally prohibiting the disclosure of portfolio
holdings information to any person until after 30 calendar days have passed. The
Trust posts a list of each Funds portfolio holdings monthly, with a 30-day lag,
on the Funds web site, delawareinvestments.com. In addition, on a 10-day lag,
we also make available on the web site a month-end summary listing of the number
of each Funds securities, country and asset allocations, and top 10 securities
and sectors by percentage of holdings for each Fund. This information is
available publicly to any and all shareholders free of charge once posted on the
web site by calling 800 523-1918.
Other entities, including institutional
investors and intermediaries that distribute the Funds shares, are generally
treated similarly and are not provided with the Funds portfolio holdings in
advance of when they are generally available to the public.
The Funds may, from time to time, provide
statistical data derived from publicly available information to third parties,
such as shareholders, prospective shareholders, financial intermediaries,
consultants, and ratings and ranking organizations.
Third-party service providers and
affiliated persons of the Funds are provided with the Funds portfolio holdings
only to the extent necessary to perform services under agreements relating to
the Funds. In accordance with the policy, third-party service providers who
receive non-public portfolio holdings information on an ongoing basis are: the
Managers affiliates (Delaware Management Business Trust, Delaware Service
Company, Inc., and the Distributor) and the Funds independent registered public
accounting firm, custodian, legal counsel, financial printer (DG3), and proxy
voting service. These entities are obligated to keep such information
confidential.
Third-party rating and ranking
organizations and consultants who have signed agreements (Non-Disclosure
Agreements) with the Funds or the Manager may receive portfolio holdings
information more quickly than the 30-day lag. The Non-Disclosure Agreements
require that the receiving entity hold the information in the strictest
confidence and prohibit the receiving entity from disclosing the information or
trading on the information (either in Fund shares or in shares of the Funds
portfolio securities). In addition, the receiving party must agree to provide
copies of any research or reports generated using the portfolio holdings
information in order to allow for monitoring of use of the information. Neither
the Funds, the Manager, nor any affiliate receive any compensation or
consideration with respect to these agreements.
To protect shareholders interests and to
avoid conflicts of interest, Non-Disclosure Agreements must be approved by a
member of the Managers Legal Department and Compliance Department and any
deviation in the use of the portfolio holdings information by the receiving
party must be approved in writing by the Funds Chief Compliance Officer prior
to such use.
The Board will be notified of any
substantial change to the foregoing procedures. The Board also receives an
annual report from the Trusts Chief Compliance Officer which, among other
things, addresses the operation of the Trusts procedures concerning the
disclosure of portfolio holdings information.
34
The
business and affairs of the Trust are managed under the direction of its Board.
Certain officers and Trustees of the Trust hold identical positions in each of
the other Delaware Investments
®
Funds. As of October 31, 2012 the
officers and Trustees of the Trust directly owned less than 1% of the
outstanding shares of each Class of each Fund. The Trusts Trustees and
principal officers are noted below along with their birthdates and their
business experience for the past five years. The Trustees serve for indefinite
terms until their resignation, death, or removal.
|
|
|
|
Number
of
|
|
|
|
|
|
Funds
in
|
|
|
|
|
|
Fund
Complex
|
|
Name, Address,
and
|
Position(s)
Held
|
Length of
Time
|
Principal
Occupation(s)
|
Overseen
|
Other
Directorships
|
Birthdate
|
with the
Trust
|
Served
|
During Past 5
Years
|
by
Trustee
|
Held by
Trustee
|
Interested
Trustee
|
|
|
|
|
|
Patrick P.
Coyne
1
2005
Market Street
Philadelphia, PA 19103
April 1963
|
Chairman,
President, Chief
Executive
Officer,
and Trustee
|
Chairman and
Trustee since
August 16,
2006
President and
Chief Executive
Officer since
August 1, 2006
|
Patrick P. Coyne has served in various
executive capacities at different times at Delaware
Investments
2
|
71
|
Director and Audit
Committee Member
Kaydon Corp.
Board of Governors
Member
Investment Company
Institute (ICI)
Finance Committee
Member St. John
Vianney Roman
Catholic Church
Board of Trustees
Agnes Irwin School
Member of
Investment
Committee Cradle
of
Liberty Council,
BSA
(20072010)
|
35
|
|
|
|
Number
of
|
|
|
|
|
|
Funds
in
|
|
|
|
|
|
Fund
Complex
|
|
Name, Address,
and
|
Position(s)
Held
|
Length of
Time
|
Principal
Occupation(s)
|
Overseen
|
Other
Directorships
|
Birth date
|
with the
Trust
|
Served
|
During Past 5
Years
|
by
Trustee
|
Held by
Trustee
|
Interested
Trustee
|
Thomas L.
Bennett
2005 Market
Street
Philadelphia, PA 19103
October 1947
|
Trustee
|
Since March
2005
|
Private Investor
(March 2004Present)
Investment Manager
Morgan Stanley & Co.
(January 1984March 2004)
|
71
|
Chairman of
Investment
Committee
Pennsylvania
Academy of Fine
Arts
Investment
Committee
and
Governance
Committee Member
Pennsylvania
Horticultural Society
Director Bryn
Mawr
Bank Corp.
(BMTC)
(20072011)
|
John A.
Fry
2005 Market Street
Philadelphia, PA 19103
May 1960
|
Trustee
|
Since January
2001
|
President Drexel
University
(August 2010Present)
President
Franklin & Marshall
College
(July 2002July 2010)
|
71
|
Board of Governors
Member
NASDAQ OMX
PHLX LLC
Director and Audit
Committee Member
Community Health
Systems
Director U.S.
SQUASH
Director Ecore
International
(20092010)
Director Allied
Barton Securities
Holdings
(20052008)
|
Anthony D.
Knerr
2005 Market Street
Philadelphia, PA 19103
December 1938
|
Trustee
|
Since April
1990
|
Managing Director Anthony
Knerr &
Associates (Strategic
Consulting)
(1990Present)
|
71
|
None
|
Lucinda S.
Landreth
2005 Market
Street
Philadelphia, PA 19103
June 1947
|
Trustee
|
Since March
2005
|
Private Investor
(2004-Present)
Chief Investment Officer
Assurant, Inc.
(Insurance)
(20022004)
|
71
|
None
|
36
|
|
|
|
Number
of
|
|
|
|
|
|
Funds
in
|
|
|
|
|
|
Fund
Complex
|
|
Name, Address,
and
|
Position(s)
Held
|
Length of
Time
|
Principal
Occupation(s)
|
Overseen
|
Other
Directorships
|
Birth date
|
with the
Trust
|
Served
|
During Past 5
Years
|
by
Trustee
|
Held by
Trustee
|
Frances A.
Sevilla-
Sacasa
2005
Market Street
Philadelphia, PA 19103
January 1956
|
Trustee
|
Since
September
2011
|
Chief Executive Officer
Banco Itaú Europa
International
(since April
2012)
Executive Advisor to
Dean
(August 2011March 2012)
and Interim Dean
(January
2011July 2011)
University of Miami
School of Business
Administration
President U.S. Trust,
Bank of America Private
Wealth Management
(Private Banking)
(July 2007December 2008)
President and Director
(November 2005
June
2007) and
Chief Executive Officer
(April 2007June 2007)
U.S. Trust Company
(Private Banking)
|
71
|
Trust Manager
Camden Property
Trust
(since August 2011)
Board of Trustees
Thunderbird
School of Global
Management
(20072011)
Board of Trustees
Carrollton School
of the Sacred Heart
(since 2001)
Board Member
Foreign
Policy
Association
(since 2006)
Board of Trustees
Georgetown
Preparatory School
(20052011)
Board of
Governors
Miami City Ballet
(20002011)
Board of Trustees
St. Thomas
University
(20052011)
|
37
|
|
|
|
Number
of
|
|
|
|
|
|
Funds
in
|
|
|
|
|
|
Fund
Complex
|
|
Name, Address,
and
|
Position(s)
Held
|
Length of
Time
|
Principal
Occupation(s)
|
Overseen
|
Other
Directorships
|
Birth date
|
with the
Trust
|
Served
|
During Past 5
Years
|
by
Trustee
|
Held by
Trustee
|
Janet L.
Yeomans
2005 Market
Street
Philadelphia, PA
19103
July 1948
|
Trustee
|
Since April
1999
|
Vice President and Treasurer
(January
2006July 2012)
Vice President Mergers &
Acquisitions
(January 2003January 2006),
and Vice President and
Treasurer
(July 1995January 2003)
3M Corporation
|
71
|
Director, Audit
Committee
Member, and
Investment
Committee
Member
Okabena
Company
Chair 3M
Investment
Management
Company
(January 2005-
July 2012)
|
J. Richard
Zecher
2005 Market
Street
Philadelphia, PA
19103
July 1940
|
Trustee
|
Since March
2005
|
Founder
Investor
Analytics
(Risk Management)
(May 1999Present)
Founder
P/E
Investments
(Hedge Fund)
(September 1996Present)
|
71
|
Director and
Compensation
Committee
Member
Investor Analytics
Director
Sutton
LLC
Director
Oxigene,
Inc.
(20032008)
|
38
|
|
|
|
Number
of
|
|
|
|
|
|
Funds
in
|
|
|
|
|
|
Fund
Complex
|
|
Name, Address,
and
|
Position(s)
Held
|
Length of
Time
|
Principal
Occupation(s)
|
Overseen
|
Other
Directorships
|
Birth date
|
with the
Trust
|
Served
|
During Past 5
Years
|
by
Trustee
|
Held by
Trustee
|
Officers
|
David F.
Connor
2005 Market
Street
Philadelphia, PA
19103
December 1963
|
Vice President,
Deputy General
Counsel, and
Secretary
|
Vice
President
since
September
2000 and
Secretary
since October
2005
|
David F. Connor has served as Vice President
and Deputy General Counsel at Delaware Investments since 2000.
|
71
|
None
3
|
Daniel V.
Geatens
2005 Market
Street
Philadelphia, PA
19103
October 1972
|
Vice President
and Treasurer
|
Treasurer
since October
2007
|
Daniel V. Geatens has served in various
capacities at different times at Delaware Investments.
|
71
|
None
3
|
David P.
OConnor
2005 Market
Street
Philadelphia, PA
19103
February 1966
|
Executive Vice
President,
General
Counsel,
and Chief Legal
Officer
|
Executive
Vice
President
since
February
2012; Senior
Vice
President
October
2005
February
2012;
General
Counsel, and
Chief
Legal
Officer since
October 2005
|
David P. OConnor has served in various
executive and legal capacities at different times at Delaware Investments.
|
71
|
None
3
|
Richard
Salus
2005 Market Street
Philadelphia, PA
19103
October 1963
|
Senior Vice
President and
Chief
Financial
Officer
|
Chief
Financial
Officer since
November
2006
|
Richard Salus has served
in various executive capacities at different times at Delaware
Investments.
|
71
|
None
3
|
1
Patrick P.
Coyne is considered to be an Interested Trustee because he is an
executive officer of the Funds Manager.
2
Delaware
Investments is the marketing name for Delaware Management Holdings, Inc.
and its subsidiaries, including the Manager, Distributor, and transfer
agent.
3
David F. Connor, Daniel V. Geatens, David P.
OConnor, and Richard Salus serve in similar capacities for the six
portfolios of the Optimum Fund Trust, which have the same investment
manager, principal underwriter, and transfer agent as the
Funds.
|
39
The
following table shows each Trustees ownership of shares of the Funds and of
shares of all Delaware Investments
®
Funds as of December 31, 2012.
|
|
Aggregate Dollar Range of Equity Securities
in All
|
|
Dollar Range of Equity
Securities
|
Registered Investment Companies Overseen
by
|
Name
|
in the Funds
|
Trustee in Family of Investment
Companies
|
Interested Trustee
|
|
|
Patrick P. Coyne
|
None
|
Over $100,000
|
Independent Trustees
|
|
|
Thomas L. Bennett
|
None
|
$50,001-$100,000
|
John A.
Fry
|
None
|
Over
$100,000
|
Anthony D. Knerr
|
None
|
$50,001-$100,000
|
Lucinda
S. Landreth
|
$10,001-$50,000
|
Over $100,000
|
|
(Delaware
High-Yield
|
|
|
Opportunities
Fund)
|
|
Frances A. Sevilla-
|
None
|
None
|
Sacasa
|
|
|
Janet L.
Yeomans
|
None
|
Over
$100,000
|
J. Richard Zecher
|
None
|
Over $100,000
|
40
The
following table describes the aggregate compensation received by each Trustee
from the Trust and the total compensation received from the Delaware
Investments
®
Funds for which he or she served as a Trustee for the
fiscal year ended July 31, 2012. Only the Trustees of the Trust who are not
interested persons as defined by the 1940 Act (the Independent Trustees)
receive compensation from the Trust.
|
|
|
Total
|
|
|
|
Compensation
|
|
|
Pension or
|
from the
|
|
|
Retirement
|
Investment
|
|
Aggregate
|
Benefits Accrued
|
Companies in
|
|
Compensation
|
as Part of Fund
|
Delaware
|
Trustee
|
from the Trust
|
Expenses
|
Investments
1
|
Thomas L. Bennett
|
$14,817
|
None
|
$224,271
|
John A. Fry
|
$12,421
|
None
|
$187,500
|
Anthony D. Knerr
|
$18,088
|
None
|
$273,938
|
Lucinda S. Landreth
|
$14,816
|
None
|
$223,854
|
Ann
R. Leven
2
|
$12,573
|
None
|
$190,938
|
Thomas F. Madison
2
|
$2,287
|
None
|
$36,438
|
Frances A.
Sevilla-Sacasa
2
|
$11,988
|
None
|
$180,000
|
Janet L. Yeomans
|
$15,596
|
None
|
$236,438
|
J. Richard Zecher
|
$13,908
|
None
|
$210,104
|
1
|
|
Effective January 1, 2012, each Independent
Trustee/Director will receive an annual retainer fee of $135,000 for serving as a Trustee/Director for all 30 investment companies
in the Delaware Investments
®
family, plus
$10,000 per meeting for attending each Board Meeting in person held on behalf of all investment companies in the complex.
Each Trustee shall also receive a $5,000 fee for attending telephonic meetings on behalf of the investment companies in the
complex. Members of the Nominating and Corporate Governance Committee, Audit Committee, and Investments Committee receive
additional compensation of $2,500 for each Committee meeting attended. In addition, the chairperson of the Audit Committee
receives an annual retainer of $25,000, the chairperson of the Investments Committee receives an annual retainer of $20,000,
and the chairperson of the Nominating and Corporate Governance Committee receives an annual retainer of $20,000. The Lead/Coordinating
Trustee/Director of the Delaware Investments
®
Funds
receives an additional annual retainer of $40,000.
|
2
|
|
Ms. Leven retired from the Board effective September
1, 2012. Mr. Madison retired from the Board effective September 1, 2011. Ms. Sevilla-Sacasa was elected to the Board effective
September 1, 2011.
|
Board Leadership
Structure
Common Board of Trustees/Directors:
The business of the Trust is managed under the direction of its Board.
The Trustees also serve on the Boards of all the other investment companies that
comprise the Delaware Investments
®
Family of Funds. The Trustees
believe that having a common Board for all funds in the complex is efficient and
enhances the ability of the Board to address its responsibilities to each fund
in the complex. The Trustees believe that the common board structure allows the
Trustees to leverage their individual expertise and that their judgment is
enhanced by being Trustees of all of the funds in the complex.
Board Chairman:
Mr. Coyne, who is an Interested Trustee, serves as the Chairman of the
Board. The Board believes that having a representative of Fund management as its
Chairman is beneficial to the Trust. Mr. Coyne is President of the Manager and
its other service provider affiliates and oversees the day-to-day investment and
business affairs affecting the Manager and the Trust. Accordingly, his
participation in the Boards deliberations helps assure that the Boards
decisions are informed and appropriate. Mr. Coynes presence on the Board
ensures that the Boards decisions are accurately communicated to and
implemented by Fund management.
Coordinating Trustee:
The Independent Trustees designate one of their members to serve as
Coordinating Trustee. The Coordinating Trustee, in consultation with Fund
management, legal counsel, and the other Trustees, proposes Board agenda topics,
actively participates in developing Board meeting agendas, and ensures that
appropriate and timely information is provided to the Board in connection with
Board meetings. The Coordinating Trustee also conducts meetings of the
Independent Trustees. The Coordinating Trustee also generally serves as a
liaison among outside Trustees, the Chairman, Fund officers, and legal counsel,
and is an
ex officio
member of the Nominating and Corporate Governance
Committee.
41
Size and
composition of Board:
The Board is
currently comprised of eight Trustees. The Trustees believe that the current
size of the Board is conducive to Board interaction, dialogue and debate,
resulting in an effective decision-making body. The Board is comprised of
Trustees with a variety of professional backgrounds. The Board believes that the
skill sets of its members are complementary and add to the overall effectiveness
of the Board. The Trustees regard diversity as an important consideration in the
present composition of the Board and the selection of qualified candidates to
fill vacancies on the Board.
Committees:
The Board has
established several committees, each of which focuses on a particular
substantive area and provides reports and recommendations to the full
Board.
The
committee structure enables the Board to manage efficiently and effectively the
large volume of information relevant to the Boards oversight of the
Trust.
The
committees benefit from the professional expertise of their
members.
At
the same time, membership on a committee enhances the expertise of its members
and benefits the overall effectiveness of the Board.
The Board has the following committees:
Audit Committee:
This committee monitors accounting and financial reporting policies, practices
and internal controls for the Trust. It also oversees the quality and
objectivity of the Trusts financial statements and the independent audit
thereof, and acts as a liaison between the Trusts independent registered public
accounting firm and the full Boards. The Trusts Audit Committee consists of the
following Independent Trustees: Janet L. Yeomans, Chairperson; Thomas L.
Bennett; John A. Fry; and Frances A. Sevilla-Sacasa. The Audit Committee held
five meetings during the Trusts last fiscal year.
Nominating and Corporate Governance
Committee:
This committee
recommends Board nominees, fills Board vacancies that arise in between meetings
of shareholders, and considers the qualifications and independence of Board
members. The committee also monitors the performance of counsel for the
Independent Trustees. The committee will consider shareholder recommendations
for nomination to the Board only in the event that there is a vacancy on the
Board. Shareholders who wish to submit recommendations for nominations to the
Board to fill a vacancy must submit their recommendations in writing to the
Nominating and Corporate Governance Committee, c/o Delaware
Investments
®
Funds at 2005 Market Street, Philadelphia, Pennsylvania
19103-7094. Shareholders should include appropriate information on the
background and qualifications of any persons recommended (e.g., a resume), as
well as the candidates contact information and a written consent from the
candidate to serve if nominated and elected. Shareholder recommendations for
nominations to the Board will be accepted on an ongoing basis and such
recommendations will be kept on file for consideration when there is a vacancy
on the Board. The committee consists of the following three Independent
Trustees: Lucinda S. Landreth, Chairperson; Thomas L. Bennett; and Anthony D.
Knerr (ex officio). The Nominating and Corporate Governance Committee held six
meetings during the Trusts last fiscal year.
In reaching its determination that an individual should serve or continue
to serve as a Trustee of the Trust, the committee considers, in light of the
Trusts business and structure, the individuals experience, qualifications,
attributes and skills (the Selection Factors). No one Selection Factor is
determinative, but some of the relevant factors that have been considered
include: (i) the Trustees business and professional experience and
accomplishments, including prior experience in the financial services industry
or on other boards; (ii) the ability to work effectively and collegially with
other people; and (iii) how the Trustees background and attributes contribute
to the overall mix of skills and experience on the Board as a whole. Below is a
brief summary of the Selection Factors that relate to each Trustee as of the
date of this SAI.
Thomas L. Bennett
Mr. Bennett has over thirty years of experience in the investment
management industry, particularly with fixed income portfolio management and
credit analysis. He has served in senior management for a number of money
management firms. Mr. Bennett has also served as a board member of another
investment company, an educational institution, non-profit organizations and
for-profit companies. He has an M.B.A. from the University of Cincinnati and is
a Chartered Financial Analyst. Mr. Bennett has served on the Board since March
2005.
42
John A.
Fry
Mr. Fry has over twenty-five years
of experience in higher education. He has served in senior management for three
major institutions of higher learning. Mr. Fry has also served as a board member
of many non-profit organizations and several for-profit companies. Mr. Fry has
extensive experience in overseeing areas such as finance, investments, risk
management, internal audit and information technology. He holds a B.A. degree in
American Civilization from Lafayette College and an M.B.A from New York
University. Mr. Fry has served on the Board since January 2001
.
Anthony D. Knerr
Currently the Coordinating Trustee, Dr. Knerr has over forty years of
experience in higher education. He has served in senior executive positions at
two major universities where he was responsible for overseeing finances,
investments, internal audit, risk management and related functions. He founded
an international strategy consulting firm that has assisted universities and
other non-profit institutions on a wide range of strategic, business, and
financial issues. He has also served as an officer and board member of numerous
nonprofit organizations and has taught at several universities. He received his
Ph.D. from New York University and his M.A. and B.A. from Yale University. Dr.
Knerr has served on the Board since April 1990.
Lucinda S. Landreth
Ms. Landreth has over thirty-five years of experience in the
investment management industry, particularly with equity management and
analysis. She has served as Chief Investment Officer for a variety of money
management firms including a bank, a broker, and an insurance company. Ms.
Landreth has advised mutual funds, pension funds, and family wealth managers and
has served on the board and executive committees of her college, two foundations
and several non-profit institutions. In addition to her B.A., she is a Chartered
Financial Analyst. Ms. Landreth has served on the Board since March
2005.
Frances A. Sevilla-Sacasa
Ms. Sevilla-Sacasa has over thirty years of experience in
banking and wealth management. In electing her in 2011, the Independent Trustees
of the Trust found that her extensive international wealth management
experience, in particular, complemented the skills of existing Board members and
also reflected the increasing importance of international investment management
not only for dollar denominated investors but also for investors outside the
U.S. The Independent Trustees also found that Ms. Sevilla-Sacasa's management
responsibilities as the former President and Chief Executive Officer of a major
trust and wealth management company would add a helpful oversight skill to the
Board's expertise, and her extensive non-profit Board experience gave them
confidence that she would make a meaningful, experienced contribution to the
Board of Trustees. Finally, in electing Ms. Sevilla-Sacasa to the Board, the
Independent Trustees valued her perceived dedication to client service as a
result of her overall career experience. Ms. Sevilla-Sacasa holds B.A. and
M.B.A. degrees. Ms. Sevilla-Sacasa has served on the Board since September 2011.
Janet L. Yeomans
Ms. Yeomans has over twenty-eight years of business experience with a large
global diversified manufacturing company, including service as Treasurer for
this company. In this role, Ms. Yeomans has significant broad-based financial
experience, including global financial risk management and mergers and
acquisitions. She has also served as a board member of a for-profit company. She
holds degrees in Mathematics and Physics from Connecticut College, an M.S. in
mathematices from Illinois Institute of Technology, and an M.B.A. from the
University of Chicago. Ms. Yeomans has served on the Board since April 1999.
J. Richard Zecher
Mr. Zecher has over thirty-five years of experience in the investment
management industry. He founded a hedge fund investment advisory firm and a risk
management consulting company. He also served as Treasurer of a money center New
York bank. Prior thereto, Mr. Zecher was the Chief Economist at the Securities
and Exchange Commission. Mr. Zecher has served as a board member and board
committee member of a for-profit company. He holds degrees in Economics from The
Ohio State University. Mr. Zecher has served on the Board since March
2005.
Patrick P. Coyne
Mr. Coyne has over twenty-five years of experience in the investment
management industry. Mr. Coyne has managed funds, investment teams and fixed
income trading operations. He has held executive management positions at
Delaware Investments for several years, serving as the firms Chief Investment
Officer for fixed income investments, as Chief Investment Officer for equity
investments and, since 2006, as President of Delaware Investments. Mr. Coyne has
served as a board member of non-profit organizations and for-profit companies,
and currently serves on the Board of Governors of the Investment Company
Institute. He holds a B.A. degree from Harvard University and an M.B.A. from The
Wharton School of the University of Pennsylvania. Mr. Coyne has served on the
Board since August 2006.
43
Independent
Trustee Committee:
This committee
develops and recommends to the Board a set of corporate governance principles
and oversees the evaluation of the Board, its committees, and its activities.
The committee is comprised of all of the Trusts Independent Trustees. The
Independent Trustee Committee held four meetings during the Trusts last fiscal
year.
Investments Committee:
The primary purposes of the Investments Committee are to: (i) assist the
Board at its request in its oversight of the investment advisory services
provided to the Trust by the Manager as well as any sub-advisors; (ii) review
all proposed advisory and sub-advisory agreements for new funds or proposed
amendments to existing agreements and to recommend what action the full Board
and the Independent Trustees should take regarding the approval of all such
proposed agreements; and (iii) review reports supplied by the Manager regarding
investment performance, portfolio risk and expenses and to suggest changes to
such reports. The Investments Committee consists of the following four
Independent Trustees: J. Richard Zecher, Chairperson; John A. Fry; Janet
Yeomans; and Frances A. Sevilla-Secasa. The Investments Committee held four
meetings during the Trusts last fiscal year.
Board role in risk oversight:
The Board performs a risk oversight function for the Trust
consisting, among other things, of the following activities: (1) receiving and
reviewing reports related to the performance and operations of the Trust; (2)
reviewing, approving, or modifying as applicable, the compliance policies and
procedures of the Trust; (3) meeting with portfolio management teams to review
investment strategies, techniques and the processes used to manage related
risks; (4) addressing security valuation risk in connection with its review of
fair valuation decisions made by Fund management pursuant to Board-approved
procedures; (5) meeting with representatives of key service providers, including
the Manager, the Distributor, the Transfer Agent, the custodian and the
independent public accounting firm of the Trust, to review and discuss the
activities of the Trusts series and to provide direction with respect thereto;
(6) engaging the services of the Trusts Chief Compliance Officer to test the
compliance procedures of the Trust and its service providers; and (7) requiring
managements periodic presentations on specified risk topics.
The Trustees perform this risk oversight function throughout the year in
connection with each quarterly Board meeting. The Trustees/Directors routinely
discuss certain risk management topics with Fund management at the Board level
and also through the standing committees of the Board. In addition to these
recurring risk management discussions, Fund management raises other specific
risk management issues relating to the Fund with the Trustees/Directors at Board
and committee meetings. When discussing new product initiatives with the Board,
Fund management also discusses risk either the risks associated with the new
proposals or the risks that the proposals are designed to mitigate. Fund
management also provides periodic presentations to the Board to give the
Trustees a general overview of how the Manager and its affiliates identify and
manage risks pertinent to the Trust.
The Audit Committee looks at specific risk management issues on an
ongoing basis. The Audit Committee is responsible for certain aspects of risk
oversight relating to financial statements, the valuation of the Trusts assets,
and certain compliance matters. In addition, the Audit Committee meets with the
Managers internal audit and risk management personnel on a quarterly basis to
review the reports on their examinations of functions and processes affecting
the Trust.
The Boards other committees also play a role in assessing and managing
risk. The Nominating and Corporate Governance Committee and the Independent
Trustee Committee play a role in managing governance risk by developing and
recommending to the Board corporate governance principles and, in the case of
the Independent Trustee Committee, by overseeing the evaluation of the Board,
its committees and its activities. The Investments Committee plays a significant
role in assessing and managing risk through its oversight of investment
performance, investment process, investment risk controls and Fund
expenses.
44
Because risk is
inherent in the operation of any business endeavor, and particularly in
connection with the making of financial investments, there can be no assurance
that the Boards approach to risk oversight will be able to minimize or even
mitigate any particular risk. Each Fund is designed for investors that are
prepared to accept investment risk, including the possibility that as yet
unforeseen risks may emerge in the future.
Code of Ethics
The Trust, the Manager, and the
Distributor have adopted Codes of Ethics in compliance with the requirements of
Rule 17j-1 under the 1940 Act, which govern personal securities transactions.
Under the Codes of Ethics, persons subject to the Codes are permitted to engage
in personal securities transactions, including securities that may be purchased
or held by the Funds, subject to the requirements set forth in Rule 17j-1 under
the 1940 Act and certain other procedures set forth in the applicable Code of
Ethics. The Codes of Ethics are on public file with, and are available from, the
SEC.
Proxy Voting Policy
The Trust has formally delegated to the
Manager the responsibility for making all proxy voting decisions in relation to
portfolio securities held by the Fund. If and when proxies need to be voted on
behalf of the Funds, the Manager will vote such proxies pursuant to its Proxy
Voting Policies and Procedures (the Procedures). The Manager has established a
Proxy Voting Committee (the Committee), which is responsible for overseeing
the Managers proxy voting process for the Funds. One of the main
responsibilities of the Committee is to review and approve the Procedures to
ensure that the Procedures are designed to allow the Manager to vote proxies in
a manner consistent with the goal of voting in the best interests of the
Funds.
In order to facilitate the actual process of voting proxies, the Manager
has contracted with Institutional Shareholder Services (ISS), a wholly owned
subsidiary of RiskMetrics Group (RiskMetrics), which is a subsidiary of MSCI
Inc.), to analyze proxy statements on behalf of the Funds and the Managers
other clients and vote proxies generally in accordance with the Procedures. The
Committee is responsible for overseeing ISS/RiskMetricss proxy voting
activities. If a proxy has been voted for the Funds, ISS/RiskMetrics will create
a record of the vote. By no later than August 31 of each year, information (if
any) regarding how the Funds voted proxies relating to portfolio securities
during the most recently disclosed 12-month period ended June 30 is available
without charge (i) through the Trusts website at delawareinvestments.com; and
(ii) on the Commissions website, at sec.gov.
The Procedures contain a general guideline stating that recommendations
of company management on an issue (particularly routine issues) should be given
a fair amount of weight in determining how proxy issues should be voted.
However, the Manager will normally vote against managements position when it
runs counter to its specific Proxy Voting Guidelines (the Guidelines), and the
Manager will also vote against managements recommendation when it believes that
such position is not in the best interests of the Funds.
As stated above, the Procedures also list specific Guidelines on how to
vote proxies on behalf of the Funds. Some examples of the Guidelines are as
follows: (i) generally vote for shareholder proposals asking that a majority or
more of directors be independent; (ii) generally vote against proposals to
require a supermajority shareholder vote; (iii) votes on mergers and
acquisitions should be considered on a case-by-case basis, determining whether
the transaction enhances shareholder value; (iv) generally vote against
proposals at companies with more than one class of common stock to increase the
number of authorized shares of the class that has superior voting rights; (v)
generally vote re-incorporation proposals on a case-by-case basis; (vi) votes
with respect to equity-based compensation plans are generally determined on a
case-by-case basis; and (vii) generally vote for proposals requesting reports on
the level of greenhouse gas emissions from a companys operations and products.
45
Because the Trust has delegated proxy voting to the Manager, the Funds
are not expected to encounter any conflict of interest issues regarding proxy
voting and therefore does not have procedures regarding this matter. However,
the Manager does have a section in its Procedures that addresses the possibility
of conflicts of interest. Most proxies that the Manager receives on behalf of
the Funds are voted by ISS/RiskMetrics in accordance with the Procedures.
Because almost all Funds proxies are voted by ISS/RiskMetrics pursuant to the
pre-determined Procedures, it normally will not be necessary for the Manager to
make an actual determination of how to vote a particular proxy, thereby largely
eliminating conflicts of interest for the Manager during the proxy voting
process. In the very limited instances where the Manager is considering voting a
proxy contrary to ISS/RiskMetricss recommendation, the Committee will first
assess the issue to see if there is any possible conflict of interest involving
the Manager or affiliated persons of the Manager. If a member of the Committee
has actual knowledge of a conflict of interest, the Committee will normally use
another independent third party to do additional research on the particular
proxy issue in order to make a recommendation to the Committee on how to vote
the proxy in the best interests of the Funds. The Committee will then review the
proxy voting materials and recommendation provided by ISS/RiskMetrics and the
independent third party to determine how to vote the issue in a manner that the
Committee believes is consistent with the Procedures and in the best interests
of the Funds.
INVESTMENT
MANAGER AND OTHER SERVICE PROVIDERS
|
Investment Manager
The Manager, located at 2005 Market
Street, Philadelphia, PA 19103-7094, furnishes investment management services to
the Funds, subject to the supervision and direction of the Board. The Manager
also provides investment management services to all of the other Delaware
Investments® Funds. Affiliates of the Manager also manage other investment
accounts. While investment decisions for the Funds are made independently from
those of the other funds and accounts, investment decisions for such other funds
and accounts may be made at the same time as investment decisions for the Funds.
The Manager pays the salaries of all Trustees, officers, and employees who are
affiliated with both the Manager and the Trust.
As of September
30, 2012, the Manager and its affiliates within Delaware Investments were
managing in the aggregate more than $175 billion in assets in various
institutional or separately managed, investment company, and insurance accounts.
The Manager is a series of Delaware Management Business Trust, which is a
subsidiary of Delaware Management Holdings, Inc. (DMHI). DMHI is a subsidiary,
and subject to the ultimate control, of Macquarie Group Ltd. Macquarie).
Macquarie is a Sydney, Australia-headquartered global provider of banking,
financial, advisory, investment and funds management services. Delaware
Investments is the marketing name for DMHI and its subsidiaries. The Manager and
its affiliates own the name Delaware Group. Under certain circumstances,
including the termination of the Trusts advisory relationship with the Manager
or its distribution relationship with the Distributor, the Manager and its
affiliates could cause the Trust to remove the words Delaware Group from its
name.
The Investment
Management Agreement for the Funds is dated January 4, 2010. The Investment
Management Agreement had an initial term of two years and may be renewed each
year only so long as such renewal and continuance are specifically approved at
least annually by the Board or by vote of a majority of the outstanding voting
securities of each Fund, and only if the terms of, and the renewal thereof, have
been approved by the vote of a majority of the Independent Trustees of the Trust
who are not parties thereto or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval. The
Investment Management Agreement is terminable without penalty on 60-days notice
by the Trustees of the Trust or by the Manager. The Investment Management
Agreement will terminate automatically in the event of its assignment.
46
As compensation
for the services rendered under the Investment Management Agreement, the Funds
shall pay the Manager an annual management fee as a percentage of average daily
net assets equal to:
|
Management Fee Schedule
|
|
(as a percentage of
average daily net assets)
|
Fund
Name
|
Annual Rate
|
Delaware Corporate Bond Fund
|
0.50% on first $500 million
|
|
0.475% on next $500 million
|
|
0.45% on next $1.5 billion
|
|
0.425% on assets in excess of $2.5
billion
|
Delaware Extended Duration Bond Fund
|
0.55% on first $500 million
|
|
0.50% on next $500 million
|
|
0.45% on next $1.5 billion
|
|
0.425% on assets in excess of $2.5
billion
|
Delaware High-Yield Opportunities Fund
|
0.65% on first $500 million
|
|
0.60% on next $500 million
|
|
0.55% on next $1.5 billion
|
|
0.50% on assets in excess of $2.5
billion
|
Delaware Diversified Floating Rate Fund
|
0.50% on the first $500 million
|
|
0.475% on the next $500 million
|
|
0.45% on the next $1.5 billion
|
|
0.425% on assets in excess of $2.5
billion.
|
Delaware Core Bond Fund
|
0.50% on the first $500 million
|
|
0.475% on the next $500 million
|
|
0.45% on the next $1.5 billion
|
|
0.425% on assets in excess of $2.5
billion.
|
During the past
three fiscal years, the Funds paid the following investment management fees:
Fund
|
July
31, 2012
|
July
31, 2011
|
July
31, 2010
|
Delaware Corporate Bond Fund
|
$5,200,289
earned
|
$4,832,147 earned
|
$3,977,258 earned
|
|
$4,991,188
paid
|
$1,963,690 paid
|
$3,049,395 paid
|
|
$209,101
waived
|
$2,868,457 waived
|
$927,863 waived
|
Delaware Extended Duration Bond Fund
|
$3,562,267
earned
|
$2,364,891 earned
|
$1,625,747 earned
|
|
$3,183,690
paid
|
$1,869,950 paid
|
$1,041,794 paid
|
|
$378,577
waived
|
$494,941 waived
|
$583,953 waived
|
Delaware High-Yield Opportunities Fund
|
$3,422,038
earned
|
$3,393,472 earned
|
$2,845,691 earned
|
|
$3,059,304
paid
|
$1,458,070 paid
|
$2,234,082 paid
|
|
$362,734
waived
|
$1,935,402 waived
|
$611,609 waived
|
Delaware
Diversified Floating Rate Fund
|
$506,878
earned
|
$256,664 earned
|
$11,980 earned
|
|
$489,399
paid
|
$131,904 paid
|
none
|
|
$17,479
waived
|
$124,760 waived
|
$11,980 waived
|
Delaware
Core Bond Fund
|
$138,472
earned
|
$111,614 earned
|
$57,567 earned
|
|
$30,105
paid
|
none
|
none
|
|
$108,367
waived
|
$111,614 waived
|
$57,567
waived
|
Except for those expenses borne by the Manager under the Investment
Management Agreements and the Distributor under the Distribution Agreement, each
Fund is responsible for all of its own expenses. Among others, such expenses
include the Funds proportionate share of certain administrative expenses;
investment management fees; transfer and dividend disbursing fees and costs;
accounting services; custodian expenses; federal and state securities
registration fees; proxy costs; and the costs of preparing prospectuses and
reports sent to shareholders.
47
Distributor
The Distributor, Delaware Distributors,
L.P., located at 2005 Market Street, Philadelphia, PA 19103-7094, serves
as the national distributor of the Trusts shares under a Distribution Agreement
dated May 15, 2003, as amended. The Distributor is an affiliate of the Manager
and bears all of the costs of promotion and distribution, except for payments by
the Retail Classes under their respective Rule 12b-1 Plans. The Distributor is
an indirect subsidiary of DMHI, and, therefore, of Macquarie. The Distributor
has agreed to use its best efforts to sell shares of the Funds. See the
Prospectuses for information on how to invest. Shares of the Funds are offered
on a continuous basis by the Distributor and may be purchased through authorized
investment dealers or directly by contacting the Distributor or the Trust. The
Distributor also serves as national distributor for the other Delaware
Investments
®
Funds. The Board annually reviews fees paid to the
Distributor.
During the Funds last three fiscal years, the Distributor received net
commissions from each Fund on behalf of its respective Class A shares, after
re-allowances to dealers, as follows:
Delaware Corporate Bond
Fund Class A Shares
|
|
Total Amount
|
Amounts
|
Net
|
|
of Underwriting
|
Re-allowed
|
Commission
|
Fiscal
Year Ended
|
Commissions
|
to
Dealers
|
to
Distributor
|
7/31/12
|
$1,588,319
|
$1,390,802
|
$197,517
|
7/31/11
|
$675,535
|
$594,322
|
$81,213
|
7/31/10
|
$859,569
|
$752,598
|
$106,971
|
Delaware Extended
Duration Bond Fund Class A Shares
|
|
Total Amount
|
Amounts
|
Net
|
|
of Underwriting
|
Re-allowed
|
Commission
|
Fiscal
Year Ended
|
Commissions
|
to Dealers
|
to
Distributor
|
7/31/12
|
$933,883
|
$819,605
|
$114,278
|
7/31/11
|
$379,215
|
$347,352
|
$31,863
|
7/31/10
|
$217,522
|
$190,324
|
$27,198
|
Delaware High-Yield
Opportunities Class A Shares
|
|
Total Amount
|
Amounts
|
Net
|
|
of Underwriting
|
Re-allowed
|
Commission
|
Fiscal
Year Ended
|
Commissions
|
to
Dealers
|
to
Distributor
|
7/31/12
|
$773,107
|
$680,370
|
$92,737
|
7/31/11
|
$712,423
|
$623,957
|
$88,466
|
7/31/10
|
$335,678
|
$292,967
|
$42,711
|
48
Delaware Diversified
Floating Rate Fund Class A Shares
|
|
Total Amount
|
Amounts
|
Net
|
|
of Underwriting
|
Re-allowed
|
Commission
|
Fiscal
Year Ended
|
Commissions
|
to
Dealers
|
to
Distributor
|
7/31/12
|
$22,666
|
$18,984
|
$3,682
|
7/31/11
|
$62,761
|
$53,204
|
$9,557
|
7/31/10
|
$2,813
|
$2,392
|
$421
|
Delaware Core Bond Fund
Class A Shares
|
|
Total Amount
|
Amounts
|
Net
|
|
of Underwriting
|
Re-allowed
|
Commission
|
Fiscal
Year Ended
|
Commissions
|
to
Dealers
|
to
Distributor
|
7/31/12
|
$18,354
|
$15,198
|
$3,156
|
7/31/11
|
$9,956
|
$8,766
|
$1,190
|
7/31/10
|
$3,789
|
$3,301
|
$488
|
During the Funds
last three fiscal years, the Distributor received, in the aggregate, limited
contingent deferred sales charge (Limited CDSC) payments with respect to Class
A shares of the Funds as follows:
|
|
|
|
Delaware
|
|
|
|
Delaware
|
|
Diversified
|
|
|
Delaware High-Yield
|
Corporate
|
Delaware Extended
|
Floating Rate
|
Delaware
Core
|
|
Opportunities Fund
|
Bond Fund
|
Duration Bond Fund
|
Fund
|
Bond
Fund
|
Fiscal
Year Ended
|
Class
A Shares
|
Class
A Shares
|
Class
A Shares
|
Class A Shares
|
Class
A Shares
|
7/31/12
|
$4,285
|
$2
|
$442
|
$7,274
|
$0
|
7/31/11
|
$16
|
$0
|
$0
|
$750
|
$0
|
7/31/10
|
$0
|
$0
|
$0
|
$0
|
$0
|
During the Funds last three fiscal years, the Distributor received, in
the aggregate, contingent deferred sales charge (CDSC) payments with respect
to Class B shares of the Funds as follows:
|
|
Delaware
|
|
|
Delaware High-Yield
|
Corporate
|
Delaware
Extended
|
Fiscal Year
|
Opportunities Fund
|
Bond Fund
|
Duration Bond
Fund
|
Ended
|
Class
B Shares
|
Class
B Shares
|
Class
B Shares
|
7/31/12
|
$2,461
|
$2,520
|
$620
|
7/31/11
|
$3,693
|
$8,206
|
$1,750
|
7/31/10
|
$11,576
|
$14,179
|
$3,415
|
49
During the Funds
last three fiscal years, the Distributor received, in the aggregate, CDSC
payments with respect to Class C shares of each Fund as follows:
|
|
Delaware
|
|
|
|
|
Delaware High-Yield
|
Corporate
|
Delaware Extended
|
Delaware Diversified
|
Delaware Core Bond
|
Fiscal Year
|
Opportunities Fund
|
Bond Fund
|
Duration Bond Fund
|
Floating Rate Fund
|
Fund
|
Ended
|
Class
C Shares
|
Class
C Shares
|
Class
C Shares
|
Class
C Shares
|
Class
C Shares
|
7/31/12
|
$6,263
|
$7,704
|
$5,936
|
$3,772
|
$9
|
7/31/11
|
$5,759
|
$8,011
|
$5,712
|
$5,234
|
$16
|
7/31/10
|
$5,397
|
$22,155
|
$6,160
|
N/A
|
N/A
|
Transfer Agent
Delaware Service Company, Inc. (DSC),
an affiliate of the Manager, is located at 2005 Market Street, Philadelphia, PA
19103-7094, and serves as the Funds shareholder servicing, dividend disbursing,
and transfer agent (the Transfer Agent) pursuant to a Shareholder Services
Agreement. The Transfer Agent is an indirect subsidiary of DMHI and, therefore,
of Macquarie. The Transfer Agent also acts as shareholder servicing, dividend
disbursing, and transfer agent for other Delaware Investments
®
Funds.
The Transfer Agent is paid a fee by the Funds for providing these services
consisting of an asset-based fee and certain out-of-pocket expenses. The
Transfer Agent will bill, and the Funds will pay, such compensation monthly.
Omnibus and networking fees charged by financial intermediaries and sub-transfer
agency fees are passed on to and paid directly by the Funds. The Transfer
Agents compensation is fixed each year and approved by the Board, including a
majority of the Independent Trustees.
Each Fund has authorized, in addition to the Transfer Agent, one or more
brokers to accept on its behalf purchase and redemption orders. Such brokers are
authorized to designate other intermediaries to accept purchase and redemption
orders on behalf of each Fund. For purposes of pricing, each Fund will be deemed
to have received a purchase or redemption order when an authorized broker or, if
applicable, a brokers authorized designee, accepts the order.
BNY Mellon Investment Servicing (US) Inc. (BNYMIS) provides
sub-transfer agency services to the Funds. In connection with these services,
BNYMIS administers the overnight investment of cash pending investment in the
Funds or payment of redemptions. The proceeds of this investment program are
used to offset the Funds transfer agency expenses.
Fund
Accountants
The Bank of New York Mellon (BNY
Mellon), One Wall Street, New York, NY 10286-0001, provides fund accounting and
financial administration services to the Funds. Those services include
performing functions related to calculating the Funds NAVs and providing
financial reporting information, regulatory compliance testing and other related
accounting services. For these services, the Funds pay BNY Mellon an asset-based
fee, subject to certain fee minimums plus certain out-of-pocket expenses and
transactional charges. DSC provides fund accounting and financial administration
oversight services to the Funds. Those services include overseeing the Funds
pricing process, the calculation and payment of fund expenses, and financial
reporting in shareholder reports, registration statements and other regulatory
filings. DSC also manages the process for the payment of dividends and
distributions and the dissemination of Fund NAVs and performance data. For these
services, the Funds pay DSC an asset-based fee, plus certain out-of-pocket
expenses and transactional charges. The fees payable to BNY Mellon and DSC under
the service agreements described above will be allocated among all funds in the
Delaware Investments
®
Family of Funds on a relative NAV basis.
During the fiscal years ended July 31, 2010, 2011, and 2012, the Funds
paid the following amounts to BNY Mellon for fund accounting and financial
administration services: $542,614, $694,955, and $821,079, respectively.
During the fiscal years ended July 31, 2010, 2011, and 2012, the Funds
paid the following amounts to DSC for fund accounting and financial
administration oversight services: $77,924, $100,128, and $117,932,
respectively.
50
Custodian
BNY Mellon is custodian of the Funds securities and cash. As custodian
for the Funds, BNY Mellon maintains a separate account or accounts for the
Funds; receives, holds, and releases portfolio securities on account of the
Funds; receives and disburses money on behalf of the Funds; and collects and
receives income and other payments and distributions on account of the Funds
portfolio securities. BNY Mellon also serves as the Funds custodian for their
investments in foreign securities.
Legal Counsel
Stradley Ronon Stevens & Young, LLP
serves as the Trusts legal counsel.
51
Other Accounts
Managed
The following chart lists certain
information about types of other accounts for which each portfolio manager is
primarily responsible as of July 31, 2012 unless otherwise noted. Any accounts
managed in a personal capacity appear under Other Accounts along with the
other accounts managed on a professional basis. The personal account information
is current as of June 30, 2012.
|
|
|
|
Total
Assets
|
|
|
|
|
in Accounts
with
|
|
No. of
|
Total
Assets
|
No. of Accounts
with
|
Performance-Based
|
|
Accounts
|
in Accounts
Fee
|
Performance-Based Fees
|
Fee
|
Roger A. Early
|
|
|
|
|
Registered Investment
|
17
|
$24.4 billion
|
0
|
$0
|
Companies
|
Other
Pooled
|
0
|
0
|
0
|
$0
|
Investment Vehicles
|
Other
Accounts
|
44
|
$6.2 billion
|
2
|
$787.8 million
|
Kevin P. Loome
|
|
|
|
|
Registered Investment
|
18
|
$18.0 billion
|
0
|
$0
|
Companies
|
Other
Pooled
|
0
|
$0
|
0
|
$0
|
Investment Vehicles
|
Other
Accounts
|
10
|
$2.4
billion
|
0
|
$0
|
Paul Grillo
|
|
|
|
|
Registered Investment
|
21
|
$23.2 billion
|
0
|
$0
|
Companies
|
Other
Pooled
|
0
|
$0
|
0
|
$0
|
Investment Vehicles
|
Other
Accounts
|
20
|
$2.0
billion
|
1
|
$725.8
million
|
Thomas H. Chow
|
|
|
|
|
Registered Investment
|
12
|
$19.8 billion
|
0
|
$0
|
Companies
|
Other
Pooled
|
0
|
$0
|
0
|
$0
|
Investment Vehicles
|
Other
Accounts
|
11
|
$4.1
billion
|
0
|
$0
|
Brian McDonnell
|
|
|
|
|
Registered Investment
|
3
|
$3.7 billion
|
0
|
$0
|
Companies
|
Other
Pooled
|
0
|
$0
|
0
|
$0
|
Investment Vehicles
|
Other
Accounts
|
63
|
$5.2
billion
|
1
|
$725.8
million
|
Adam Brown
|
|
|
|
|
Registered Investment
|
2
|
$152.2 million
|
0
|
$0
|
Companies
|
Other
Pooled
|
0
|
$0
|
0
|
$0
|
Investment Vehicles
|
Other
Accounts
|
12
|
$1.1
billion
|
0
|
$0
|
David Hillmeyer
|
|
|
|
|
Registered Investment
|
6
|
$13.3 billion
|
0
|
$0
|
Companies
|
Other
Pooled
|
0
|
$0
|
0
|
$0
|
Investment Vehicles
|
Other
Accounts
|
11
|
$507.2
million
|
0
|
$0
|
Description of
Material Conflicts of Interest
Individual portfolio managers may
perform investment management services for other funds or accounts similar to
those provided to the Funds and the investment action for such other fund or
account and the Funds may differ. For example, an account or fund may be selling
a security, while another account or fund may be purchasing or holding the same
security. As a result, transactions executed for one fund or account may
adversely affect the value of securities held by another fund, account or the
Funds. Additionally, the management of multiple other funds or accounts and the
Funds may give rise to potential conflicts of interest, as a portfolio manager
must allocate time and effort to multiple other funds or accounts and the Funds.
A portfolio manager may discover an investment opportunity that may be suitable
for more than one account or fund. The investment opportunity may be limited,
however, so that all funds or accounts for which the investment would be
suitable may not be able to participate. The Manager has adopted procedures
designed to allocate investments fairly across multiple funds or
accounts.
52
Two
of the accounts managed by the portfolio managers have performance-based fees.
This compensation structure presents a potential conflict of interest. The
portfolio managers have an incentive to manage these accounts so as to enhance
their performance, to the possible detriment of other accounts for which the
investment manager does not receive a performance-based fee.
A
portfolio managers management of personal accounts also may present certain
conflicts of interest. While the Managers code of ethics is designed to address
these potential conflicts, there is no guarantee that it will do so.
Compensation
Structure
Each portfolio managers
compensation consists of the following:
Base Salary.
Each named
portfolio manager receives a fixed base salary. Salaries are determined by a
comparison to industry data prepared by third parties to ensure that portfolio
manager salaries are in line with salaries paid at peer investment advisory
firms.
Bonus.
An objective
component is added to the bonus for each manager that is reflective of account
performance relative to an appropriate peer group or database. The following
paragraph describes the structure of the non-guaranteed bonus.
Each
portfolio manager is eligible to receive an annual cash bonus, which is based on
quantitative and qualitative factors. There is one pool for bonus payments for
the fixed income department. The amount of the pool for bonus payments is
determined by assets managed (including investment companies, insurance
product-related accounts and other separate accounts), management fees and
related expenses (including fund waiver expenses) for registered investment
companies, pooled vehicles, and managed separate accounts. Generally, 60%-75% of
the bonus is quantitatively determined. For more senior portfolio managers, a
higher percentage of the bonus is quantitatively determined. For investment
companies, each manager is compensated according the Funds Lipper or
Morningstar peer group percentile ranking on a 1-, 3-, and 5-year basis, with
longer-term performance more heavily weighted. For managed separate accounts the
portfolio managers are compensated according to the composite percentile ranking
against the Frank Russell and Callan Associates databases (or similar sources of
relative performance data) on a 1-, 3-, and 5-year basis, with longer term
performance more heavily weighted. There is no objective award for a fund that
falls below the 50th percentile, but incentives reach maximum potential at the
25th-30th percentile. There is a sliding scale for investment companies that are
ranked above the 50th percentile. The remaining 25%-40% portion of the bonus is
discretionary as determined by the Manager and takes into account subjective
factors.
For
new and recently transitioned portfolio managers, the compensation may be
weighted more heavily towards a portfolio managers actual contribution and
ability to influence performance, rather than longer-term performance.
Management intends to move the compensation structure towards longer-term
performance for these portfolio managers over time.
Incentive Unit Plan
-
Portfolio managers may be awarded incentive unit awards (Awards) relating to
the underlying shares of common stock of Delaware Management Holdings, Inc.
issuable pursuant to the terms of the Delaware Investments Incentive Unit Plan
(the Plan) adopted on November 30, 2010. Awards are no longer granted under
the Delaware Investments U.S., Inc. 2009 Incentive Compensation Plan or the
Amended and Restated Delaware Investments U.S., Inc. Incentive Compensation
Plan, which was established in 2001.
The
Plan was adopted in order to: assist the Manager in attracting, retaining, and
rewarding key employees of the company; enable such employees to acquire or
increase an equity interest in the company in order to align the interest of such employees and the Manager; and provide such
employees with incentives to expend their maximum efforts. Subject to the terms
of the Plan and applicable award agreements, Awards typically vest in 25%
increments on a four-year schedule, and shares of common stock underlying the
Awards are issued after vesting. The fair market value of the shares of Delaware
Management Holdings, Inc., is normally determined as of each March 31, June 30,
September 30 and December 31 by an independent appraiser. Generally, a
stockholder may put shares back to the company during the put period
communicated in connection with the applicable valuation.
53
Other Compensation:
Portfolio managers
may also participate in benefit plans and programs available generally to all
employees.
Ownership of
Securities
As of July
31, 2012, the following portfolio managers owned shares of the Funds.
|
Dollar Range of Fund Shares
|
|
Portfolio
Manager
|
Owned
*
|
Fund
|
Kevin P. Loome
|
$500,001 - $1 million
|
Delaware High-Yield Opportunities
Fund
|
1
The ranges for Fund share ownership by portfolio managers are:
$1-$10,000; $10,001-$50,000; $50,001-$100,000;
$100,001-$500,000; $500,001-$1 million; or
over $1 million
TRADING
PRACTICES AND BROKERAGE
|
The
Manager selects broker/dealers to execute transactions on behalf of the Funds
for the purchase or sale of portfolio securities on the basis of its judgment of
their professional capability to provide the service. The primary consideration
in selecting broker/dealers is to seek those broker/dealers who will provide
best execution for the Funds. Best execution refers to many factors, including
the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. Some trades are made on a net basis where the
Funds either buy securities directly from the dealer or sell them to the dealer.
In these instances, there is no direct commission charged but there is a spread
(the difference between the buy and sell price) which is the equivalent of a
commission. When a commission is paid, the Funds pay reasonable brokerage
commission rates based upon the professional knowledge of the Managers trading
department as to rates paid and charged for similar transactions throughout the
securities industry. In some instances, a Fund pays a minimal share transaction
cost when the transaction presents no difficulty.
During the
past three fiscal years, the aggregate dollar amounts of brokerage commissions
paid by the Funds were as follows:
|
7/31/12
|
7/31/11
|
07/31/10
|
Delaware Corporate Bond
Fund
|
$1,257
|
$102
|
$22,041
|
Delaware Extended Duration Bond
Fund
|
$1,286
|
$51
|
$8,007
|
Delaware High-Yield
Opportunities Fund
|
$662
|
$0
|
$11,549
|
Delaware Diversified Floating
Rate Fund*
|
$0
|
$0
|
$0
|
Delaware Core Bond
Fund**
|
$484
|
$0
|
$0
|
Subject to
best execution and Rule 12b-1(h) under the 1940 Act, the Manager may allocate
out of all commission business generated by all of the funds and accounts under
its management, brokerage business to broker/dealers who provide brokerage and
research services. These services include providing advice, either directly or
through publications or writings, as to the value of securities, the
advisability of investing in, purchasing, or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing of
analyses and reports concerning issuers, securities, or industries; providing
information on economic factors and trends; assisting in determining portfolio
strategy; and providing portfolio performance evaluation and technical market
analyses. Such services are used by the Manager in connection with its
investment decision-making process with respect to one or more mutual funds and
separate accounts managed by it, and may not be used, or used exclusively, with
respect to the mutual fund or separate account generating the
brokerage.
54
As
provided in the 1934 Act, as amended, and the Funds Investment Management
Agreement, higher commissions are permitted to be paid to broker/dealers who
provide brokerage and research services than to broker/dealers who do not
provide such services, if such higher commissions are deemed reasonable in
relation to the value of the brokerage and research services provided. Although
transactions directed to broker/dealers who provide such brokerage and research
services may result in the Funds paying higher commissions, the Manager believes
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the Manager that constitute, in some part, brokerage and research services used
by the Manager in connection with its investment decision-making process and
constitute, in some part, services used by the Manager in connection with
administrative or other functions not related to its investment decision-making
process. In such cases, the Manager will make a good faith allocation of
brokerage and research services and will pay out of its own resources for
services used by the Manager in connection with administrative or other
functions not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions that generate
commissions or their equivalent are allocated to broker/dealers who provide
daily portfolio pricing services to each Fund and to other Delaware
Investments
®
Funds. Subject to best execution, commissions allocated
to brokers providing such pricing services may or may not be generated by the
funds receiving the pricing service.
During the fiscal year ended July 31, 2012, the Funds did not engage in any
portfolio transactions resulting in brokerage commissions directed to brokers
for brokerage and research services.
As of
July 31, 2012, the Funds held the following amounts of securities of their
regular broker/dealers, as defined in Rule 10b-1 under the 1940 Act, or such
broker/dealers parents:
Fund
|
Regular
Broker/Dealer
|
Value
|
Delaware Corporate Bond Fund
|
Morgan Stanley Smith Barney
|
$355,019
|
|
Prudential Financial Inc.
|
$292,146
|
Delaware Extended Duration
Bond Fund
|
Bank of America
|
$5,155,617
|
|
Wachovia Bank
|
$3,981,276
|
|
Morgan Stanley Smith
Barney
|
$2,227,689
|
Delaware Diversified Floating Rate
|
Wachovia Bank
|
$956,855
|
Fund
|
Bank of America
|
$409,426
|
|
Morgan Stanley Smith Barney
|
$86,051
|
The
Manager may place a combined order for two or more accounts or funds engaged in
the purchase or sale of the same security if, in its judgment, joint execution
is in the best interest of each participant and will result in best execution.
Transactions involving commingled orders are allocated in a manner deemed
equitable to each account or fund. When a combined order is executed in a series
of transactions at different prices, each account participating in the order may
be allocated an average price obtained from the executing broker. It is believed
that the ability of the accounts to participate in volume transactions will
generally be beneficial to the accounts and funds. Although it is recognized
that, in some cases, the joint execution of orders could adversely affect the
price or volume of the security that a particular account or fund may obtain, it
is the opinion of the Manager and the Board that the advantages of combined
orders outweigh the possible disadvantages of separate transactions.
Consistent with the Financial Industry Regulatory Authority (FINRA), and
subject to seeking best execution, the Manager may place orders with
broker/dealers that have agreed to defray certain Fund expenses such as
custodian fees.
The
Trust has the authority to participate in a commission recapture program. Under
the program and subject to seeking best execution (as described in the first
paragraph in this section), the Funds may direct certain security trades to
brokers who have agreed to rebate a portion of the related brokerage commission
to the Funds in cash. Any such commission rebates will be included as a realized
gain on securities in the appropriate financial statements of the Funds. The
Manager and its affiliates have previously acted and may in the future act as an
investment manager to mutual funds or separate accounts affiliated with the
administrator of the commission recapture program. In addition, affiliates of
the administrator act as consultants in helping institutional clients choose
investment managers and may also participate in other types of businesses and
provide other services in the investment management industry.
55
Capitalization
The Trust currently has authorized,
and allocated to each Class of each Fund, an unlimited number of shares of
beneficial interest with no par value. All shares are, when issued in accordance
with the Trusts registration statement (as amended from time to time),
governing instruments and applicable law, fully paid and nonassessable. Shares
do not have preemptive rights. All shares of a Fund represent an undivided
proportionate interest in the assets of such Fund. Shares of the Institutional
Class may not vote on any matter that affects the Retail Classes Distribution
Plans under Rule 12b-1. Similarly, as a general matter, shareholders of Retail
Classes may vote only on matters affecting their respective Class, including the
Retail Classes Rule 12b-1 Plans that relate to the Class of shares that they
hold. However, a Funds Class B shares may vote on any proposal to increase
materially the fees to be paid by such Fund under the Rule 12b-1 Plan relating
to its Class A shares. Except for the foregoing, each share Class has the same
voting and other rights and preferences as the other Classes of a Fund. General
expenses of each Fund will be allocated on a pro rata basis to the classes
according to asset size, except that expenses of the Retail Classes Rule 12b-1
Plans will be allocated solely to those classes.
Until
September 30, 1996, the Trust operated as Delaware Group Delchester High-Yield
Bond Fund, Inc., and offered one series of shares, the Delchester Fund series.
The Trust began offering the shares of: the Strategic Income Fund on September
30, 1996; the Delaware High-Yield Opportunities Fund on December 27, 1996;
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund on
September 14, 1998; and Delaware Diversified Floating Rate Fund on February 26,
2010. Beginning August 16, 1999, the Delchester Fund changed its name and its
classes names to Delaware Delchester Fund; the Strategic Income Fund changed
its name and its classes names to Delaware Strategic Income Fund; the
High-Yield Opportunities Fund changed its name and its classes names to
Delaware High-Yield Opportunities Fund; the Corporate Bond Fund changed its name
and its classes names to Delaware Corporate Bond Fund; and the Extended
Duration Bond Fund changed its name and its classes names to Delaware Extended
Duration Bond Fund. Effective as of September 29, 1999, the Trust changed its
name from the Delaware Group Income Funds, Inc. to Delaware Group Income Funds.
Class R shares were offered on June 2, 2003. Delaware Strategic Income Fund
merged its shares into Delaware Diversified Income Fund, a series of Delaware
Group Adviser Funds, on March 29, 2004. Effective as of the close of business on
April 17, 2009, Delaware Delchester
®
Fund was reorganized into
Delaware High-Yield Opportunities Fund. The Trust established the Delaware Core
Bond Fund on August 12, 2009.
Noncumulative
Voting
The Trusts shares have
noncumulative voting rights, which means that the holders of more than 50% of
the shares of the Trust voting for the election of Trustees can elect all of the
Trustees if they choose to do so, and, in such event, the holders of the
remaining shares will not be able to elect any Trustees.
As of
May 31, 2007, the Funds ceased to permit new or subsequent investments,
including investments through automatic investment plans and by qualified
retirement plans (such as 401(k) or 457 plans), in Class B shares, except
through reinvestment of dividends or capital gains or permitted exchanges.
Existing shareholders of Class B shares may continue to hold their Class B
shares, reinvest dividends into Class B shares, and exchange their Class B
shares of one Delaware Investments
®
Fund for Class B shares of
another Delaware Investments
®
Fund, as permitted by existing exchange
privileges.
56
For
Class B shares outstanding as of May 31, 2007 and Class B shares acquired upon
reinvestment of dividends or capital gains, all Class B share attributes,
including the CDSC schedules, conversion to Class A schedule, and distribution
and service (12b-1) fees, will continue in their current form. You will be
notified via supplement if there are any changes to these attributes, sales
charges, or fees.
General Information
Shares of the Funds are offered on a
continuous basis by the Distributor and may be purchased through authorized
investment dealers or directly by contacting the Distributor or the Trust. The
Trust reserves the right to suspend sales of Fund shares, and reject any order
for the purchase of Fund shares if, in the opinion of management, such rejection
is in a Funds best interest. The minimum initial investment generally is $1,000
for Class A shares, Class B shares, and Class C shares. Subsequent purchases of
such Classes generally must be at least $100. The initial and subsequent
investment minimums for Class A shares will be waived for purchases by officers,
Trustees, and employees of any Delaware Investments
®
Fund, the
Manager, or any of the Managers affiliates if the purchases are made pursuant
to a payroll deduction program. Shares purchased pursuant to the Uniform Gifts
to Minors Act or Uniform Transfers to Minors Act and shares purchased in
connection with an automatic investing plan are subject to a minimum initial
purchase of $250 and a minimum subsequent purchase of $25. There are no minimum
purchase requirements for Class R and the Institutional Classes, but certain
eligibility requirements must be met.
You
may purchase up to $1 million of Class C shares of the Funds. See Investment
Plans for purchase limitations applicable to retirement plans. The Trust will
reject any purchase order for $1 million or more of Class C shares. In doing so,
an investor should keep in mind, however, that reduced front-end sales charges
apply to investments of $100,000 or more in Class A shares, and that Class A
shares are subject to lower annual Rule 12b-1 Plan expenses than Class B shares
and Class C shares and generally are not subject to a CDSC.
Selling dealers are responsible for transmitting orders promptly. If a purchase
is canceled because your check is returned unpaid, you are responsible for any
loss incurred. Each Fund reserves the right to reject any order for the purchase
of its shares if, in the opinion of management, such rejection is in the Funds
best interest. Each Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any Delaware Investments
®
Fund. Each Fund reserves the right to
reject purchase orders paid by third-party checks or checks that are not drawn
on a domestic branch of a United States financial institution. If a check drawn
on a foreign financial institution is accepted, you may be subject to additional
bank charges for clearance and currency conversion.
Each
Fund also reserves the right, following shareholder notification, to charge a
service fee on nonretirement accounts that, as a result of redemption, have
remained below the minimum stated account balance for a period of three or more
consecutive months. Holders of such accounts may be notified of their
insufficient account balance and advised that they have until the end of the
current calendar quarter to raise their balance to the stated minimum. If the
account has not reached the minimum balance requirement by that time, the Funds
may charge a $9 fee for that quarter and each subsequent calendar quarter until
the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining
low-balance accounts. No fees will be charged without proper notice, and no CDSC
will apply to such assessments.
Each
Fund also reserves the right, upon 60-days written notice, to involuntarily
redeem accounts that remain under the minimum initial purchase amount as a
result of redemptions. An investor making the minimum initial investment may be
subject to involuntary redemption without the imposition of a CDSC or Limited
CDSC if he or she redeems any portion of his or her account.
FINRA
has adopted amendments to its Conduct Rules, relating to investment company
sales charges. The Trust and the Distributor intend to operate in compliance
with these rules.
Certificates representing shares purchased are not ordinarily issued.
Certificates were previously issued for Class A shares and Institutional Class
shares of the Funds. However, purchases not involving the issuance of certificates are confirmed to the investor and credited to the
shareholders account on the books maintained by the Transfer Agent. The
investor will have the same rights of ownership with respect to such shares as
if certificates had been issued. An investor will be permitted to obtain a
certificate in certain limited circumstances that are approved by an appropriate
officer of the Funds. No charge is assessed by the Trust for any certificate
issued. The Funds do not intend to issue replacement certificates for lost or
stolen certificates, except in certain limited circumstances that are approved
by an appropriate officer of the Funds. In those circumstances, a shareholder
may be subject to fees for replacement of a lost or stolen certificate, under
certain conditions, including the cost of obtaining a bond covering the lost or
stolen certificate. Please contact the Trust for further information. Investors
who hold certificates representing any of their shares may only redeem those
shares by written request. The investors certificate(s) must accompany such
request.
57
Certain omnibus accounts and managed or asset-allocation programs may be opened
below the minimum stated account balance and may maintain balances that are
below the minimum stated account balance without incurring a service fee or
being subject to involuntary redemption.
Alternative Purchase Arrangements
Class A, Class B, and Class C Shares
The alternative purchase
arrangements of Class A shares, Class B shares, and Class C shares permit
investors to choose the method of purchasing shares that is most suitable for
their needs given the amount of their purchase, the length of time they expect
to hold their shares and other relevant circumstances. Please note that as of
May 31, 2007, each of the Funds ceased to permit new or subsequent investments,
including investments through automatic investment plans and by qualified
retirement plans (such as 401(k) or 457 plans), in Class B shares in any of the
Funds, except through a reinvestment of dividends or capital gains or permitted
exchanges. Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A shares and incur a
front-end sales charge and annual Rule 12b-1 Plan expenses of up to 0.30% of the
average daily net assets of Class A shares of a Fund, or to purchase Class C
shares and have the entire initial purchase amount invested in a Fund with the
investment thereafter subject to a CDSC and annual Rule 12b-1 Plan expenses.
Class B shares are subject to a CDSC if the shares are redeemed within six years
of purchase, and Class C shares are subject to a CDSC if the shares are redeemed
within 12 months of purchase. Class B and Class C shares are each subject to
annual Rule 12b-1 Plan expenses of up to 1.00% (0.25% of which is a service fee
to be paid to the Distributor, dealers, or others for providing personal service
and/or maintaining shareholder accounts) of average daily net assets of the
respective Class. Class B shares will automatically convert to Class A shares at
the end of approximately eight years after purchase and, thereafter, be subject
to Class A shares annual Rule 12b-1 Plan expenses. Unlike Class B shares, Class
C shares do not convert to another Class.
The
higher Rule 12b-1 Plan expenses on Class B shares and Class C shares will be
offset to the extent a return is realized on the additional money initially
invested upon the purchase of such shares. However, there can be no assurance as
to the return, if any, that will be realized on such additional money. In
addition, the effect of any return earned on such additional money will diminish
over time.
Class
R shares have no front-end sales charge and are not subject to a CDSC, but incur
annual Rule 12b-1 expenses of up to 0.60%. Class A shares generally are not
available for purchase by anyone qualified to purchase Class R shares.
In
comparing Class C shares to Class R shares, investors should consider the higher
Rule 12b-1 Plan expenses on Class C shares. Investors also should consider the
fact that Class R shares do not have a front-end sales charge and, unlike Class
C shares, are not subject to a CDSC.
For
the distribution and related services provided to, and the expenses borne on
behalf of, the Funds, the Distributor and others will be paid, in the case of
Class A shares, from the proceeds of the front-end sales charge and Rule 12b-1
Plan fees, in the case of Class B shares and Class C shares, from the proceeds
of the Rule 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption, and in the case of Class R shares, from the proceeds of the Rule
12b-1 Plan fees. Financial advisors may receive different compensation for
selling Class A shares, Class B shares, Class C shares, and Class R shares.
Investors should understand that the purpose and function of the respective Rule 12b-1 Plans (including for Class R
shares) and the CDSCs applicable to Class B shares and Class C shares are the
same as those of the Rule 12b-1 Plan and the front-end sales charge applicable
to Class A shares in that such fees and charges are used to finance the
distribution of the respective Classes. See Plans under Rule 12b-1 for the
Retail Classes below.
58
Dividends, if any, paid on a Funds Class A shares, Class B shares, Class C
shares, Class R shares and Institutional Class shares will be calculated in the
same manner, at the same time and on the same day and will be in the same
amount, except that the additional amount of Rule 12b-1 Plan expenses relating
to Retail Classes will be borne exclusively by such shares. See Determining
Offering Price and Net Asset Value below.
Class A Shares:
Purchases of $100,000 or more of Class A shares at the offering price
carry reduced front-end sales charges as shown in the table in the Prospectuses,
and may include a series of purchases over a 13-month period under a letter of
intent signed by the purchaser. See Special Purchase Features
Class A Shares below for
more information on ways in which investors can avail themselves of reduced
front-end sales charges and other purchase features.
From
time to time, upon written notice to all of its dealers, the Distributor may
hold special promotions for specified periods during which the Distributor may
re-allow to dealers up to the full amount of the front-end sales charge. The
Distributor should be contacted for further information on these requirements,
as well as the basis and circumstances upon which the additional commission will
be paid. Participating dealers may be deemed to have additional responsibilities
under the securities laws. Dealers who receive 90% or more of the sales charge
may be deemed to be underwriters under the 1933 Act.
Class A Broker
Exchanges
Class A shares purchased by accounts
participating in certain programs sponsored by and/or controlled by financial
intermediaries (Programs) may be exchanged by the financial intermediary on
behalf of the shareholder for Institutional Class shares of the Fund under
certain circumstances, including such Programs eligibility to purchase
Institutional Class shares of the Fund. Such exchange will be on the basis of
the net asset values per share, without the imposition of any sales load, fee or
other charge.
If a
shareholder of Institutional Class shares has ceased his or her participation in
the Program, the financial intermediary may exchange all such Institutional
Class shares for Class A shares of the Fund. Such exchange will be on the basis
of the relative net asset values of the shares, without imposition of any sales
load, fee or other charge. Holders of Class A shares that were sold without a
front-end sales load but for which the Distributor has paid a commission to a
financial intermediary are generally not eligible for this exchange privilege
until two years after the purchase of such Class A shares.
Exchange of Class A shares for Institutional Class shares of the same Fund, or
the exchange of Institutional Class shares for Class A shares of the same Fund,
under these particular circumstances, will be tax-free for federal income tax
purposes. You should also consult with your tax advisor regarding the state and
local tax consequences of such an exchange of Fund shares.
This
exchange privilege is subject to termination and may be amended from time to
time.
Class B
Exchanges
Class B shares that are or were held
in a qualified retirement plan account serviced by Delaware Management Trust
Company may be exchanged by the holder of such shares or any financial
intermediary on behalf of such shareholder for Class A shares of the same Fund.
Such exchange will be on the basis of the relative net asset values per share,
without the imposition of any sales load, fee or other charge. Any contingent
deferred sales charge applicable to Class B shares that are exchanged pursuant
to this exchange privilege will be waived. This exchange privilege is subject to
termination and may be amended from time to time.
59
The
exchange of Class B shares for Class A shares of the same Fund is not taxable
for federal income tax purposes and no gain or loss will be reported on the
transaction. This is for general information only and not tax advice. All
investors should consult their own tax advisors as to the federal, state, local
and foreign tax provisions applicable to them.
Class C Broker
Exchanges
Class C shares purchased by accounts
participating in certain Programs may be exchanged by the financial intermediary
on behalf of the shareholder for either Class A shares or Institutional Class
shares of the Fund under certain circumstances, including such Programs
eligibility to purchase either Class A shares or Institutional Class shares of
the Fund. Such exchange will be on the basis of the net asset values per share,
without the imposition of any sales load, fee or other charge.
Holders of Class C shares that are subject to a CDSC are generally not eligible
for this exchange privilege until the applicable CDSC period has expired. The
applicable CDSC period is generally one year after the purchase of such Class C
shares.
If a
shareholder of Institutional Class shares has ceased his or her participation in
the Program, the financial intermediary may exchange all such Institutional
Class shares for Class C shares of a Fund. Such exchange will be on the basis of
the relative net asset values of the shares, without imposition of any sales
load, fee or other charge.
Exchanges of Class C shares for Class A shares or Institutional Class shares of
the same Fund, or the exchange of Institutional Class shares for Class C shares
of the same Fund, under these particular circumstances, will be tax-free for
federal income tax purposes. You should also consult with your tax advisor
regarding the state and local tax consequences of such an exchange of Fund
shares.
This
exchange privilege is subject to termination and may be amended from time to
time.
Dealers Commission
As described in the
Prospectuses, for initial purchases of Class A shares of $1 million or more, a
dealers commission may be paid by the Distributor to financial advisors through
whom such purchases are effected.
In
determining a financial advisors eligibility for the dealers commission,
purchases of Class A shares of other Delaware Investments
®
Funds as
to which a Limited CDSC applies (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange) may be aggregated with those of the Class A shares of
a Fund. Financial advisors also may be eligible for a dealers commission in
connection with certain purchases made under a letter of intent or pursuant to
an investors right of accumulation. Financial advisors should contact the
Distributor concerning the applicability and calculation of the dealers
commission in the case of combined purchases.
An
exchange from other Delaware Investments
®
Funds will not qualify for
payment of the dealers commission, unless a dealers commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealers commission are subject to change or
termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge
Class B Shares and Class C Shares
Class B shares were previously
available for purchase, and Class C shares are purchased, without a front-end
sales charge. The Funds Class B shares redeemed within six years of purchase
may be subject to a CDSC at the rates set forth above, and the Funds Class C
shares redeemed within 12 months of purchase may be subject to a CDSC of 1.00%.
CDSCs are charged as a percentage of the dollar amount subject to the CDSC. The
charge will be assessed on an amount equal to the lesser of the NAV at the time
of purchase of the shares being redeemed or the NAV of those shares at the time
of redemption. No CDSC will be imposed on increases in NAV above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestment of dividends or capital gains distributions. For purposes
of this formula, the net asset value at the time of purchase will be the NAV at purchase of Class B shares or Class C shares, even if
those shares are later exchanged for shares of another Delaware
Investments
®
Fund. In the event of an exchange of the shares, the
net asset value of such shares at the time of redemption will be the NAV of
the shares that were acquired in the exchange. See the Prospectuses for a list
of the instances in which the CDSC is waived.
60
During the seventh year after purchase and, thereafter, until converted
automatically to Class A shares, Class B shares will still be subject to the
annual Rule 12b-1 Plan expenses of up to 1.00% of average daily net assets of
those shares. At the end of eight years after purchase, the investors Class B
shares will be automatically converted to Class A shares of the same Fund. See
Automatic Conversion of Class B Shares below. Such conversion will constitute
a tax-free exchange for federal income tax purposes. Investors are reminded that
the Class A shares into which Class B shares will convert are subject to Class A
shares ongoing annual Rule 12b-1 Plan expenses.
In
determining whether a CDSC applies to a redemption of Class B shares, it will be
assumed that shares held for more than six years are redeemed first, followed by
shares acquired through the reinvestment of dividends or distributions, and
finally by shares held longest during the six-year period. With respect to Class
C shares, it will be assumed that shares held for more than 12 months are
redeemed first followed by shares acquired through the reinvestment of dividends
or distributions, and finally by shares held for 12 months or less.
Deferred Sales Charge Alternative
Class B Shares
Class B shares were previously
available for purchase at NAV without a front-end sales charge and, as a result,
the full amount of the investors purchase payment was invested in Fund shares.
The Distributor previously had compensated dealers or brokers for selling Class
B shares at the time of purchase from its own assets in an amount equal to no
more than 4.00% of the dollar amount purchased. As discussed below, however,
Class B shares are subject to annual Rule 12b-1 Plan expenses and, if redeemed
within six years of purchase, a CDSC.
Proceeds from the CDSC and the annual Rule 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B shares. These
payments support the compensation paid to dealers or brokers for selling Class B
shares. Payments to the Distributor and others under the Class B Rule 12b-1 Plan
may be in an amount equal to no more than 1.00% annually. The combination of the
CDSC and the proceeds of the Rule 12b-1 Plan fees made it possible for a Fund to
sell Class B shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B shares who exercise the exchange privilege described below
will continue to be subject to the CDSC schedule for Class B shares described in
this Part B, even after the exchange. Such CDSC schedule may be higher than the
CDSC schedule for Class B shares acquired as a result of the exchange. See
Redemption and Exchange below.
Automatic Conversion of Class B
Shares
Class B shares, other than shares
acquired through reinvestment of dividends, held for eight years after purchase
are eligible for automatic conversion to Class A shares. Conversions of Class B
shares to Class A shares will occur only four times in any calendar year, on the
18th day (or next business day) of March, June, September, and December (each, a
Conversion Date). A business day is any day that the New York Stock Exchange
(NYSE) is open for business (Business Day). If the eighth anniversary after
a purchase of Class B shares falls on a Conversion Date, an investors Class B
shares will be converted on that date. If the eighth anniversary occurs between
Conversion Dates, an investors Class B shares will be converted on the next
Conversion Date after such anniversary. Consequently, if a shareholders eighth
anniversary falls on the day after a Conversion Date, that shareholder will have
to hold Class B shares for as long as three additional months after the eighth
anniversary of purchase before the shares will automatically convert to Class A
shares.
Class
B shares of a Fund acquired through a reinvestment of dividends will convert to
the corresponding Class A shares of that Fund (or, in the case of Delaware Cash
Reserve, the Consultant Class) pro rata with Class B shares of that Fund not
acquired through dividend reinvestment.
61
All
such automatic conversions of Class B shares will constitute tax-free exchanges
for federal income tax purposes.
Level Sales Charge Alternative
Class C
Shares
Class C shares may be purchased at
NAV without a front-end sales charge and, as a result, the full amount of the
investors purchase payment will be invested in Fund shares. The Distributor
currently compensates dealers or brokers for selling Class C shares at the time
of purchase from its own assets in an amount equal to no more than 1.00% of the
dollar amount purchased. As discussed below, Class C shares are subject to
annual Rule 12b-1 Plan expenses and, if redeemed within 12 months of purchase, a
CDSC.
Proceeds from the CDSC and the annual Rule 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C shares. These
payments support the compensation paid to dealers or brokers for selling Class C
shares. Payments to the Distributor and others under the Class C Rule 12b-1 Plan
may be in an amount equal to no more than 1.00% annually.
Holders of Class C shares who exercise the exchange privilege described below
will continue to be subject to the CDSC schedule for Class C shares as described
in this Part B. See Redemption and Exchange below.
Plans under Rule 12b-1 for the Retail
Classes
Pursuant to Rule 12b-1 under the
1940 Act, the Trust has adopted a plan for each of the Retail Classes (the
Plans). Each Plan permits the relevant Fund to pay for certain distribution,
promotional, and related expenses involved in the marketing of only the class of
shares to which the Plan applies. The Plans do not apply to the Institutional
Class shares. Such shares are not included in calculating the Plans fees, and
the Plans are not used to assist in the distribution and marketing of
Institutional Class shares. Shareholders of the Institutional Class may not vote
on matters affecting the Plans.
The
Plans permit the Funds, pursuant to their Distribution Agreement, to pay out of
the assets of the Retail Classes monthly fees to the Distributor for its
services and expenses in distributing and promoting sales of shares of such
classes. These expenses include, among other things, preparing and distributing
advertisements, sales literature, and prospectuses and reports used for sales
purposes, compensating sales and marketing personnel; holding special promotions
for specified periods of time; and paying distribution and maintenance fees to
brokers, dealers, and others. In connection with the promotion of shares of the
Retail Classes, the Distributor may, from time to time, pay to participate in
dealer-sponsored seminars and conferences, and reimburse dealers for expenses
incurred in connection with pre-approved seminars, conferences, and advertising.
The Distributor may pay or allow additional promotional incentives to dealers as
part of pre-approved sales contests and/or to dealers who provide extra training
and information concerning the Retail Classes and increase sales of the Retail
Classes.
The
Plans do not limit fees to amounts actually expended by the Distributor. It is
therefore possible that the Distributor may realize a profit in any particular
year. However, the Distributor currently expects that its distribution expenses
will likely equal or exceed payments to it under the Plans. The Distributor may,
however, incur such additional expenses and make additional payments to dealers
from its own resources to promote the distribution of shares of the Retail
Classes. The monthly fees paid to the Distributor under the Plans are subject to
the review and approval of the Trusts Independent Trustees, who may reduce the
fees or terminate the Plans at any time.
With
respect to Delaware High-Yield Opportunities Fund, effective June 1, 1992, the
Board determined that the annual fee, payable on a monthly basis, under the Plan
relating to the Class A shares, will be equal to the sum of: (i) the amount
obtained by multiplying 0.10% by the average daily net assets represented by the
Class A shares that were originally purchased prior to June 1, 1992, and (ii)
the amount obtained by multiplying 0.30% by the average daily net assets
represented by all other Class A shares. While this is the method to be used to
calculate the 12b-1 fees to be paid by the Funds Class A shares under its Plan,
the fee is a Class A share expense so that all shareholders of the Class A shares,
regardless of whether they originally purchased or received shares in the Fund,
will bear Rule 12b-1 expenses at the same rate. This method of calculating Class
A shares 12b-1 fees may be discontinued at the discretion of the Board. While
this describes the current formula for calculating the fees that will be payable
under the Class A shares Plan, the Plan permits a full 0.30% on all Class A
share assets to be paid at any time following appropriate Board
approval.
62
All of the distribution expenses
incurred by the Distributor and others, such as broker/dealers, in excess of the
amount paid on behalf of the Retail Classes would be borne by such persons
without any reimbursement from such Retail Classes. Consistent with the
requirements of Rule 12b-1(h) under the 1940 Act and subject to seeking best
execution, a Fund may, from time to time, buy or sell portfolio securities from,
or to, firms that receive payments under the Plans.
From time to time, the Distributor
may pay additional amounts from its own resources to dealers for aid in
distribution or for aid in providing administrative services to shareholders.
The Plans and the Distribution
Agreement, as amended, have all been approved by the Board, including a majority
of the Independent Trustees who have no direct or indirect financial interest in
the Plans and the Distribution Agreement, by a vote cast in person at a meeting
duly called for the purpose of voting on the Plans and such Agreement.
Continuation of the Plans and the Distribution Agreement, as amended, must be
approved annually by the Board in the same manner as specified above.
Each year, the Board must determine
whether continuation of the Plans is in the best interest of shareholders of the
Retail Classes and that there is a reasonable likelihood of each Plan providing
a benefit to its respective Retail Class. The Plans and the Distribution
Agreement, as amended, may be terminated with respect to a Retail Class at any
time without penalty by a majority of Independent Trustees who have no direct or
indirect financial interest in the Plans and the Distribution Agreement, or by a
majority vote of the relevant Retail Class outstanding voting securities. Any
amendment materially increasing the percentage payable under the Plans must
likewise be approved by a majority vote of the relevant Retail Class
outstanding voting securities, as well as by a majority vote of Independent
Trustees who have no direct or indirect financial interest in the Plans or
Distribution Agreement. With respect to a Funds Class A Plan, any material
increase in the maximum percentage payable thereunder must also be approved by a
majority of the outstanding voting securities of a Funds Class B shares. Also,
any other material amendment to the Plans must be approved by a majority vote of
the Board, including a majority of Independent Trustees who have no direct or
indirect financial interest in the Plans or Distribution Agreement. In addition,
in order for the Plans to remain effective, the selection and nomination of
Independent Trustees must be effected by the Trustees who are Independent
Trustees and who have no direct or indirect financial interest in the Plans or
Distribution Agreement. Persons authorized to make payments under the Plans must
provide written reports at least quarterly to the Board for its review.
For the fiscal year ended July 31,
2012, the Rule 12b-1 payments for Delaware Corporate Bond Funds Class A shares,
Class B shares, Class C shares, and Class R shares were: $1,208,803, $55,122,
$1,776,812, and $73,063, respectively. Such amounts were used for the following
purposes:
Delaware Corporate Bond
Fund
|
Class A
|
Class B
|
Class C
|
Class R
|
Advertising
|
$3,498
|
$---
|
$1,225
|
$5
|
Annual/Semiannual Reports
|
2,753
|
---
|
1,041
|
188
|
Broker Sales Charges
|
---
|
30,672
|
632,464
|
---
|
Broker Trails*
|
280,953
|
13,350
|
589,404
|
---
|
Salaries & Commissions
to
Wholesalers
|
638,976
|
---
|
388,065
|
12,938
|
Interest on Broker Sales Charges
|
---
|
1,256
|
15,941
|
---
|
Promotional Other
|
---
|
---
|
---
|
---
|
Prospectus Printing
|
1,421
|
---
|
583
|
95
|
Wholesaler Expenses
|
281,202
|
193
|
148,089
|
59,837
|
Total Expenses
|
1,208,803
|
45,471
|
1,776,812
|
73,063
|
* The broker
trail amounts listed in this row are principally based on payments made to
broker-dealers monthly. However, certain brokers receive trail payments
quarterly. The quarterly payments are based on estimates, and the estimates may
be reflected in the amounts in this row.
63
For the fiscal year ended July 31,
2012, the Rule 12b-1 payments for Delaware Extended Duration Funds Class A
shares, Class B shares, Class C shares, and Class R shares were: $963,813,
$20,393, $419,298, and $77,503, respectively. Such amounts were used for the
following purposes:
Delaware Extended Duration
Fund
|
Class A
|
Class B
|
Class C
|
Class R
|
Advertising
|
$4,881
|
$---
|
$261
|
$5
|
Annual/Semiannual Reports
|
2,385
|
---
|
286
|
183
|
Broker Sales Charges
|
---
|
10,499
|
206,618
|
---
|
Broker Trails*
|
537,653
|
9,418
|
72,712
|
65,209
|
Salaries & Commissions
to
Wholesalers
|
238,550
|
---
|
106,114
|
11,594
|
Interest on Broker Sales Charges
|
---
|
388
|
5,020
|
---
|
Promotional Other
|
---
|
---
|
---
|
---
|
Prospectus Printing
|
940
|
---
|
136
|
89
|
Wholesaler Expenses
|
179,404
|
88
|
28,151
|
423
|
Total Expenses
|
963,813
|
$20,393
|
$419,298
|
$77,503
|
* The broker
trail amounts listed in this row are principally based on payments made to
broker-dealers monthly. However, certain brokers receive trail payments
quarterly. The quarterly payments are based on estimates, and the estimates may
be reflected in the amounts in this row.
For the fiscal year ended July 31,
2012, the Rule 12b-1 payments for Delaware High-Yield Opportunities Funds Class
A shares, Class B shares, Class C shares, and Class R shares were: $893,557,
$57,841, $550,810, and $89,880, respectively. Such amounts were used for the
following purposes:
Delaware
High-Yield Opportunities
Bond Fund
|
Class A
|
Class B
|
Class C
|
Class R
|
Advertising
|
$2,545
|
$---
|
$391
|
$7
|
Annual/Semiannual Reports
|
3,855
|
---
|
697
|
316
|
Broker Sales Charges
|
---
|
16,708
|
139,052
|
---
|
Broker Trails*
|
576,474
|
14,106
|
292,943
|
1,695
|
Salaries & Commissions
to
Wholesalers
|
308,705
|
---
|
81,856
|
24,031
|
Interest on Broker Sales Charges
|
---
|
794
|
3,491
|
---
|
Promotional Other
|
---
|
---
|
---
|
---
|
Prospectus Printing
|
1,978
|
---
|
381
|
172
|
Wholesaler Expenses
|
---
|
44
|
31,999
|
63,659
|
Total Expenses
|
893,557
|
31,652
|
550,810
|
89,880
|
* The broker
trail amounts listed in this row are principally based on payments made to
broker-dealers monthly. However, certain brokers receive trail payments
quarterly. The quarterly payments are based on estimates, and the estimates may
be reflected in the amounts in this row.
64
For the fiscal year ended July 31,
2012, the Rule 12b-1 payments for Delaware Diversified Floating Rate Funds
Class A shares, Class C shares and Class R shares were: $113,837, $240,807, and
$24, respectively. Such amounts were used for the following purposes:
Delaware Diversified Floating
Rate
Fund
|
Class A
|
Class C
|
Class R
|
Advertising
|
$2,329
|
$193
|
$---
|
Annual/Semiannual Reports
|
551
|
318
|
18
|
Broker Sales Charges
|
---
|
135,395
|
---
|
Broker Trails*
|
9,834
|
63,883
|
---
|
Salaries & Commissions
to
Wholesalers
|
63,844
|
24,693
|
---
|
Interest on Broker Sales Charges
|
---
|
1,647
|
---
|
Promotional Other
|
---
|
---
|
---
|
Prospectus Printing
|
733
|
390
|
6
|
Wholesaler Expenses
|
36,546
|
14,288
|
---
|
Total Expenses
|
113,837
|
240,807
|
24
|
* The broker
trail amounts listed in this row are principally based on payments made to
broker-dealers monthly. However, certain brokers receive trail payments
quarterly. The quarterly payments are based on estimates, and the estimates may
be reflected in the amounts in this row.
For the fiscal year ended July 31,
2012, the Rule 12b-1 payments for Delaware Core Bond Funds Class A shares,
Class C shares, and Class R shares were: $12,158, $10,495, and $12,
respectively. Such amounts were used for the following purposes:
Delaware
Core Bond Fund
|
Class
A
|
Class
C
|
Class
R
|
Advertising
|
$47
|
$16
|
$---
|
Annual/Semiannual
Reports
|
235
|
125
|
1
|
Broker
Sales Charges
|
---
|
1,523
|
---
|
Broker
Trails*
|
3,599
|
5,385
|
---
|
Salaries
& Commissions to
Wholesalers
|
6,132
|
3,046
|
---
|
Interest
on Broker Sales Charges
|
---
|
105
|
---
|
Promotional
Other
|
---
|
---
|
---
|
Prospectus
Printing
|
419
|
104
|
11
|
Wholesaler
Expenses
|
590
|
191
|
---
|
Total
Expenses
|
11,022
|
10,495
|
12
|
* The broker
trail amounts listed in this row are principally based on payments made to
broker-dealers monthly. However, certain brokers receive trail payments
quarterly. The quarterly payments are based on estimates, and the estimates may
be reflected in the amounts in this row.
Special Purchase Features Class A
Shares
Buying Class A shares at
Net Asset Value:
As disclosed in
the Prospectuses, participants of certain group retirement plans and members of
their households may make purchases of Class A shares at NAV. The requirements
are as follows: (i) the purchases must be made in a Delaware Investments
®
Individual Retirement Account (Foundation IRA
®
) established by a participant
from a group retirement plan or a member of their household distributed by an
affiliate of the Manager; and (ii) purchases in a Foundation IRA
®
require a
minimum initial investment of $5,000 per Fund. The Funds reserve the right to
modify or terminate these arrangements at any time.
Allied Plans:
Class A shares are available for
purchase by participants in certain 401(k) Defined Contribution Plans (Allied
Plans) which are made available under a joint venture agreement between the
Distributor and another institution through which mutual funds are marketed and
which allow investments in Class A shares of designated Delaware
Investments
®
Funds (eligible Delaware Investments
®
Fund
shares), as well as shares of designated classes of non-Delaware
Investments
®
Funds (eligible non-Delaware Investments
®
Fund shares). Class C shares are not eligible for purchase by Allied
Plans.
65
With respect to purchases made in
connection with an Allied Plan, the value of eligible Delaware
Investments
®
and eligible non-Delaware Investments
®
Fund
shares held by the Allied Plan may be combined with the dollar amount of new
purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Investments
®
Fund shares.
See Combined Purchases Privilege below.
Participants in Allied Plans may
exchange all or part of their eligible Delaware Investments
®
Fund
shares for other eligible Delaware Investments
®
Fund shares or for
eligible non-Delaware Investments
®
Fund shares at NAV without payment
of a front-end sales charge. However, exchanges of eligible fund shares, both
Delaware Investments and non-Delaware Investments
®
Funds, which were
not subject to a front-end sales charge, will be subject to the applicable sales
charge if exchanged for eligible Delaware Investments
®
Fund shares to
which a sales charge applies. No sales charge will apply if the eligible fund
shares were previously acquired through the exchange of eligible shares on which
a sales charge was already paid or through the reinvestment of dividends. See
Investing by Exchange under Investment Plans below.
A dealers commission may be payable
on purchases of eligible Delaware Investments
®
Fund shares under an
Allied Plan. In determining a financial advisors eligibility for a dealers
commission on NAV purchases of eligible Delaware Investments
®
Fund
shares in connection with Allied Plans, all participant holdings in the Allied
Plan will be aggregated. See Class A Shares above under Alternative Purchase
Arrangements.
The Limited CDSC is applicable to
redemptions of NAV purchases from an Allied Plan on which a dealers commission
has been paid. Waivers of the Limited CDSC, as described in the Prospectuses,
apply to redemptions by participants in Allied Plans except in the case of
exchanges between eligible Delaware Investments
®
and non-Delaware
Investments
®
Fund shares. When eligible Delaware
Investments
®
Fund shares are exchanged into eligible non-Delaware
Investments
®
Fund shares, the Limited CDSC will be imposed at the
time of the exchange, unless the joint venture agreement specifies that the
amount of the Limited CDSC will be paid by the financial advisor or selling
dealer. See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange below.
Letter of Intent:
The reduced front-end sales charges
described above with respect to Class A shares are also applicable to the
aggregate amount of purchases made by any such purchaser within a 13-month
period pursuant to a written letter of intent provided by the Distributor and
signed by the purchaser, and not legally binding on the signer or the Trust
which provides for the holding in escrow by the Transfer Agent, of 5.00% of the
total amount of Class A shares intended to be purchased until such purchase is
completed within the 13-month period. The Funds no longer accept retroactive
letters of intent. The 13-month period begins on the date of the earliest
purchase. If the intended investment is not completed, except as noted below,
the purchaser will be asked to pay an amount equal to the difference between the
front-end sales charge on Class A shares purchased at the reduced rate and the
front-end sales charge otherwise applicable to the total shares purchased. If
such payment is not made within 20 days following the expiration of the 13-month
period, the Transfer Agent will surrender an appropriate number of the escrowed
shares for redemption in order to realize the difference. Such purchasers may
include the values (at offering price at the level designated in their letter of
intent) of all their shares of the Funds and of any class of any of the other
Delaware Investments
®
Funds previously purchased and still held as of
the date of their letter of intent toward the completion of such letter, except
as described below. Those
purchasers cannot include shares that did not carry a front-end sales charge,
CDSC, or Limited CDSC, unless the purchaser acquired those shares through an
exchange from a Delaware Investments
®
Fund that did carry a front-end
sales charge, CDSC, or Limited CDSC. For purposes of satisfying an investors
obligation under a letter of intent, Class B shares and Class C shares of the
Funds and the corresponding classes of shares of other Delaware
Investments
®
Funds which offer such shares may be aggregated with
Class A shares of the Funds and the corresponding class of shares of the other
Delaware Investments
®
Funds.
66
Employers offering a Delaware
Investments
®
retirement plan may also complete a letter of intent to
obtain a reduced front-end sales charge on investments of Class A shares made by
the plan. The aggregate investment level of the letter of intent will be
determined and accepted by the Transfer Agent at the point of plan
establishment. The level and any reduction in front-end sales charge will be
based on actual plan participation and the projected investments in Delaware
Investments
®
Funds that are offered with a front-end sales charge,
CDSC, or Limited CDSC for a 13-month period. The Transfer Agent reserves the
right to adjust the signed letter of intent based on these acceptance criteria.
The 13-month period will begin on the date this letter of intent is accepted by
the Transfer Agent. If actual investments exceed the anticipated level and equal
an amount that would qualify the plan for further discounts, any front-end sales
charges will be automatically adjusted. In the event this letter of intent is
not fulfilled within the 13-month period, the plan level will be adjusted
(without completing another letter of intent) and the employer will be billed
for the difference in front-end sales charges due, based on the plans assets
under management at that time. Employers may also include the value (at offering
price at the level designated in their letter of intent) of all their shares
intended for purchase that are offered with a front-end sales charge, CDSC, or
Limited CDSC of any class. Class B shares and Class C shares of the Funds and
other Delaware Investments
®
Funds which offer corresponding classes
of shares may also be aggregated for this purpose.
Combined Purchases
Privilege:
When you determine the
availability of the reduced front-end sales charges on Class A shares, you can
include, subject to the exceptions described below, the total amount of any
Class of shares you own of a Fund and all other Delaware Investments
®
Funds. However, you cannot include mutual fund shares that do not carry a
front-end sales charge, CDSC, or Limited CDSC, unless you acquired those shares
through an exchange from a Delaware Investments
®
Fund that did carry
a front-end sales charge, CDSC, or Limited CDSC.
The privilege also extends to all
purchases made at one time by an individual; or an individual, his or her
spouse, and their children under 21; or a trustee or other fiduciary of trust
estates or fiduciary accounts for the benefit of such family members (including
certain employee benefit programs).
Right of Accumulation:
In determining the availability of
the reduced front-end sales charge on Class A shares, purchasers may also
combine any subsequent purchases of Class A shares and Class C shares, as well
as shares of any other class of any of the other Delaware
Investments
®
Funds which offer Class A and Class C shares (except
shares of any Delaware Investments
®
Fund that do not carry a
front-end sales charge, CDSC, or Limited CDSC). If, for example, any such
purchaser has previously purchased and still holds Class A shares of a Fund
and/or shares of any other of the classes described in the previous sentence
with a value of $40,000 and subsequently purchases $10,000 at offering price of
additional Class A shares of the Fund, the charge applicable to the $10,000
purchase would currently be 4.75%. For the purpose of this calculation, the
shares presently held shall be valued at the public offering price that would
have been in effect had the shares been purchased simultaneously with the
current purchase. Investors should refer to the table of sales charges for Class
A shares in the Prospectuses to determine the applicability of the right of
accumulation to their particular circumstances.
12-Month Reinvestment
Privilege:
Holders of Class A
shares (and of the Institutional Class shares of the Funds holding shares which
were acquired through an exchange from one of the other Delaware
Investments
®
Funds offered with a front-end sales charge) who redeem
such shares have one year from the date of redemption to reinvest all or part of
their redemption proceeds in the same Class of the Funds or in the same Class of
any of the other Delaware Investments
®
Funds. The reinvestment will
not be assessed a front-end sales charge. The reinvestment will be subject to
applicable eligibility and minimum purchase requirements and must be in states
where shares of such other funds may be sold. This reinvestment privilege does
not extend to Class A shares where the redemption of the shares triggered the
payment of a Limited CDSC. Persons investing redemption proceeds from direct
investments in the Delaware Investments
®
Funds, offered without a
front-end sales charge will be required to pay the applicable sales charge when
purchasing Class A shares. The reinvestment privilege does not extend to a
redemption of Class B or Class C shares.
Any such reinvestment cannot exceed
the redemption proceeds (plus any amount necessary to purchase a full share).
The reinvestment will be made at the NAV next determined after receipt of
remittance.
Any reinvestment directed to a
Delaware Investments
®
Fund in which the investor does not then have
an account will be treated like all other initial purchases of such Funds
shares. Consequently, an investor should obtain and read carefully the
prospectus for the Delaware Investments
®
Fund in which the investment
is intended to be made before investing or sending money.
The prospectus contains more complete information about the Delaware
Investments
®
Fund, including charges and expenses.
67
Investors should consult their
financial advisors or the Transfer Agent, which also serves as the Funds
shareholder servicing agent, about the applicability of the Class A Limited CDSC
in connection with the features described above.
Group Investment Plans:
Group Investment Plans that are not
eligible to purchase shares of the
Institutional
Class may also benefit from the reduced front-end sales charges for investments
in Class A shares set forth in the table in the Prospectuses, based on total
plan assets. If a company has more than one plan investing in Delaware
Investments
®
Funds, then the total amount invested in all plans would
be used in determining the applicable front-end sales charge reduction upon each
purchase, both initial and subsequent, upon notification to the Funds at the
time of each such purchase. Employees participating in such Group Investment
Plans may also combine the investments made in their plan account when
determining the applicable front-end sales charge on purchases to non-retirement
Delaware Investments investment accounts if they so notify the Fund in which
they are investing in connection with each purchase. See Retirement Plans for
the Retail Classes under Investment Plans below for information about
retirement plans.
The Limited CDSC is generally
applicable to any redemptions of NAV purchases made on behalf of a group
retirement plan on which a dealers commission has been paid only if such
redemption is made pursuant to a withdrawal of the entire plan from a Delaware
Investments
®
Fund. See Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under Redemption
and Exchange below. Notwithstanding the foregoing, the Limited CDSC for Class A
shares on which a dealers commission has been paid will be waived in connection
with redemptions by certain group defined contribution retirement plans that
purchase shares through a retirement plan alliance program which requires that
shares will be available at NAV, provided that RFS either was the sponsor of the
alliance program or had a product participation agreement with the sponsor of
the alliance program that specifies that the Limited CDSC will be waived.
Availability of Class R
Shares
Class R shares generally are
available only to: (i) qualified and non-qualified plan shareholders covering
multiple employees (including 401(k), 401(a), 457, and non-custodial 403(b)
plans, as well as other non-qualified deferred compensation plans) with assets
(at the time shares are considered for purchase) of $10 million or less; and
(ii) to IRA rollovers from plans maintained on Delaware Investments
®
retirement recordkeeping system that are offering Class R shares to
participants.
Reinvestment Plan
Unless otherwise designated by
shareholders in writing, dividends from net investment income and distributions
from realized securities profits, if any, will be automatically reinvested in
additional shares of the respective Retail Class in which an investor has an
account (based on the NAV in effect on the reinvestment date) and will be
credited to the shareholders account on that date. All dividends and
distributions of the Institutional Class are reinvested in the accounts of the
holders of such shares (based on the NAV in effect on the reinvestment date). A
confirmation of each dividend payment from net investment income and of
distributions from realized securities profits, if any, will be mailed to
shareholders in the first quarter of the next fiscal year.
Reinvestment of Dividends in other
Delaware Investments
®
Funds
Subject to applicable eligibility
and minimum initial purchase requirements and the limitations set forth below,
holders of Retail Classes may automatically reinvest dividends and/or
distributions in any of the other Delaware Investments
®
Funds,
including the Funds, in states where their shares may be sold. Such investments
will be at NAV at the close of business on the reinvestment date without any
front-end sales charge or service fee. The shareholder must notify the Transfer
Agent in writing and must have established an account in the fund into
which the dividends and/or distributions
are to be invested. Any reinvestment directed to a fund in which the investor
does not then have an account will be treated like all other initial purchases
of the funds shares. Consequently, an investor should obtain and read carefully
the prospectus for the fund in which the investment is intended to be made
before investing or sending money. The prospectus contains more complete
information about the fund, including charges and expenses.
68
Subject to the following
limitations, dividends, and/or distributions from other Delaware
Investments
®
Funds may be invested in shares of the Funds, provided
an account has been established. Dividends from Class A shares may only be
directed to other Class A shares, dividends from Class B shares may only be
directed to other Class B shares, dividends from Class C shares may only be
directed to other Class C shares, dividends from Class R shares may only be
directed to other Class R shares, and dividends from Institutional Class shares
may only be directed to other Institutional Class shares.
Capital gains and/or dividend
distributions for participants in the following retirement plans are
automatically reinvested into the same Delaware Investments
®
Fund in
which their investments are held: traditional IRA, Roth IRA, SIMPLE IRA, SEP,
SARSEP, Coverdell Education Savings Accounts (Coverdell ESAs), 401(k), SIMPLE
401(k), Profit Sharing, Money Purchase, or 457 Retirement Plans.
Investing by Exchange
If you have an investment in another
Delaware Investments
®
Fund, you may write and authorize an exchange
of part or all of your investment into shares of the Funds. If you wish to open
an account by exchange, call the Shareholder Service Center at 800 523-1918 for
more information. All exchanges are subject to the eligibility and minimum
purchase requirements and any additional limitations set forth in the Funds
Prospectuses. See Redemption and Exchange below for more complete information
concerning your exchange privileges.
Investing Proceeds from Eligible 529
Plans
The proceeds of a withdrawal from an
Eligible 529 Plan which are directly reinvested in a substantially similar class
of the Delaware Investments
®
Funds will qualify for treatment as if
such proceeds had been exchanged from another Delaware Investments
®
Fund rather than transferred from the Eligible 529 Plan, as described under
Redemption and Exchange below. The treatment of your redemption proceeds from
an Eligible 529 Plan does not apply if you take possession of the proceeds of
the withdrawal and subsequently reinvest them (i.e., the transfer is not made
directly). Similar benefits may also be extended to direct transfers from a
substantially similar class of a Delaware Investments
®
Fund into an
Eligible 529 Plan.
Investing by Electronic Fund
Transfer
Direct
Deposit Purchase Plan
:
Investors may arrange for the Funds to
accept for investment in Class A shares, Class C shares, or Class R shares,
through an agent bank, pre-authorized government, or private recurring payments.
This method of investment assures the timely credit to the shareholders account
of payments such as social security, veterans pension or compensation benefits,
federal salaries, railroad retirement benefits, private payroll checks,
dividends, and disability or pension fund benefits. It also eliminates the
possibility and inconvenience of lost, stolen, and delayed checks.
Automatic Investing
Plan:
Shareholders of Class A
shares and Class C shares may make automatic investments by authorizing, in
advance, monthly or quarterly payments directly from their checking accounts for
deposit into their Fund accounts. This type of investment will be handled in
either of the following ways: (i) if the shareholders bank is a member of the
National Automated Clearing House Association (NACHA), the amount of the
periodic investment will be electronically deducted from his or her checking
account by Electronic Fund Transfer (EFT) and such checking account will
reflect a debit although no check is required to initiate the transaction; or
(ii) if the shareholders bank is not a member of NACHA, deductions will be made
by pre-authorized checks, known as Depository Transfer Checks. Should the
shareholders bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
69
This option is not available to
participants in the following Fund sponsored custodian plans: SIMPLE IRA, SEP,
SARSEP, 401(k), SIMPLE 401(k), Profit Sharing, Money Purchase, or 457 Retirement
Plans.
* * *
Minimum
Initial/Subsequent Investments by Electronic Fund Transfer:
Initial investments under the
direct deposit purchase plan and the automatic investing plan must be for $250
or more and subsequent investments under such plans must be for $25 or more. An
investor wishing to take advantage of either service must complete an
authorization form. Either service can be discontinued by the shareholder at any
time without penalty by giving written notice.
Payments to the Funds from the
federal government or its agencies on behalf of a shareholder may be credited to
the shareholders account after such payments should have been terminated by
reason of death or otherwise. Any such payments are subject to reclamation by
the federal government or its agencies. Similarly, under certain circumstances,
investments from private sources may be subject to reclamation by the
transmitting bank. In the event of a reclamation, the Funds may liquidate
sufficient shares from a shareholders account to reimburse the government or
the private source. In the event there are insufficient shares in the
shareholders account, the shareholder is expected to reimburse the Funds.
Direct Deposit Purchases by
Mail
Shareholders may authorize a third
party, such as a bank or employer, to make investments directly to their Fund
accounts. The Funds will accept these investments, such as bank-by-phone,
annuity payments and payroll allotments, by mail directly from the third party.
Investors should contact their employers or financial institutions who in turn
should contact the Trust for proper instructions.
On Demand Service
You or your investment dealer may
request purchases of Fund shares by phone using the on demand service. When you
authorize the Funds to accept such requests from you or your investment dealer,
funds will be withdrawn from (for share purchases) your predesignated bank
account. Your request will be processed the same day if you call prior to 4:00
p.m., Eastern time. There is a $25 minimum and $100,000 maximum limit for on
demand service transactions.
It may take up to four Business Days
for the transactions to be completed. You can initiate this service by
completing an Account Services form. If your name and address are not identical
to the name and address on your Fund account, you must have your signature
guaranteed. The Funds do not charge a fee for this service; however, your bank
may charge a fee.
Systematic Exchange
Option
Shareholders can use
the systematic exchange option to invest in the Retail Classes through regular
liquidations of shares in their accounts in other Delaware
Investments
®
Funds. Shareholders of the Retail Classes may elect to
invest in one or more of the other Delaware Investments
®
Funds
through the systematic exchange option. If, in connection with the election of
the systematic exchange option, you wish to open a new account to receive the
automatic investment, such new account must meet the minimum initial purchase
requirements described in the prospectus of the fund that you select. All
investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above.
Under this automatic exchange
program, shareholders can authorize regular monthly investments (minimum of $100
per fund) to be liquidated from their accounts and invested automatically into
other Delaware Investments
®
Funds, subject to the conditions and
limitations set forth in the Prospectuses
.
The investment will be made on the 20th day
of each month (or, if the fund selected is not open that day, the next Business
Day) at the public offering price or NAV, as applicable, of the fund selected on
the date of investment. No investment will be made for any month if the value of
the shareholders account is less than the amount specified for
investment.
70
Periodic investment through the
systematic exchange option does not insure profits or protect against losses in
a declining market. The price of the fund into which investments are made could
fluctuate. Since this program involves continuous investment regardless of such
fluctuating value, investors selecting this option should consider their
financial ability to continue to participate in the program through periods of
low fund share prices. This program involves automatic exchanges between two or
more fund accounts and is treated as a purchase of shares of the fund into which
investments are made through the program. Shareholders can terminate their
participation in the systematic exchange option at any time by giving written
notice to the fund from which exchanges are made.
This option is not available to
participants in the following plans: SIMPLE IRA, SEP, SARSEP, 401(k), SIMPLE
401(k), Profit Sharing, Money Purchase, or 457 Retirement Plans. This option
also is not available to shareholders of the Institutional Classes.
Retirement Plans for the Retail
Classes
An investment in the
Funds may be suitable for tax-deferred retirement plans, such as: traditional
IRA, SIMPLE IRA, SEP, SARSEP, 401(k), SIMPLE 401(k), Profit Sharing, Money
Purchase, or 457 Retirement Plans. In addition, the Funds may be suitable for
use in Roth IRAs and Coverdell ESAs. For further details concerning these plans
and accounts, including applications, contact your financial advisor or the
Distributor. To determine whether the benefits of a tax-sheltered retirement
plan, Roth IRA, or Coverdell ESA are available and/or appropriate, you should
consult with a tax advisor.
The CDSC may be waived on certain
redemptions of Class B shares and Class C shares. See the Prospectuses for a
list of the instances in which the CDSC is waived.
Purchases of Class C shares must be
in an amount that is less than $1 million for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations
generally applicable to other investors do not apply to retirement plans other
than IRAs, for which there is a minimum initial purchase of $250 and a minimum
subsequent purchase of $25, regardless of which Class is selected. Retirement
plans may be subject to plan establishment fees, annual maintenance fees, and/or
other administrative or trustee fees. Fees are based upon the number of
participants in the plan as well as the services selected. Additional
information about fees is included in retirement plan materials. Fees are quoted
upon request. Annual maintenance fees may be shared by Delaware Management Trust
Company, the Transfer Agent, other affiliates of the Manager, and others that
provide services to such Plans.
Certain shareholder investment
services available to non-retirement plan shareholders may not be available to
retirement plan shareholders. Certain retirement plans may qualify to purchase
Institutional Class shares. For additional information on any of the plans and
Delaware Investments retirement services, call the Shareholder Service Center
at 800 523-1918.
DETERMINING
OFFERING PRICE AND NET ASSET VALUE
|
Orders for purchases and redemptions
of Class A shares are effected at the offering price next calculated after
receipt of the order by the Funds, their agent, or certain other authorized
persons. Orders for purchases and redemptions of Class B shares, Class C shares,
Class R shares, and Institutional Class shares, as applicable, are effected at
the NAV per share next calculated after receipt of the order by the Funds, their
agent, or certain other authorized persons. See Distributor under Investment
Manager and Other Service Providers above. Selling dealers are responsible for
transmitting orders promptly.
71
The offering price for Class A
shares consists of the NAV per share plus any applicable sales charges. Offering
price and NAV are computed as of the close of regular trading on the NYSE, which
is normally 4:00 p.m., Eastern time, on days when the NYSE is open for business.
The NYSE is scheduled to be open Monday through Friday throughout the year
except for days when the following holidays are observed: New Years Day, Martin
Luther King, Jr.s Birthday, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas. The time at which
transactions and shares are priced and the time by which orders must be received
may be changed in case of emergency or if regular trading on the NYSE is stopped
at a time other than 4:00 p.m. Eastern time. When the NYSE is closed, the Funds
will generally be closed, pricing calculations will not be made, and purchase
and redemption orders will not be processed.
The NAV per share for each share
class of each Fund is calculated by subtracting the liabilities of each class
from its total assets and dividing the resulting number by the number of shares
outstanding for that class. In determining each Funds total net assets,
portfolio securities primarily listed or traded on a national or foreign
securities exchange, except for bonds, are generally valued at the closing price
on that exchange, unless such closing prices are determined to be not readily
available pursuant to the Funds pricing procedures. Exchange traded options are
valued at the last reported sale price or, if no sales are reported, at the mean
between bid and asked prices. Non-exchange traded options are valued at fair
value using a mathematical model. Futures contracts are valued at their daily
quoted settlement price. For valuation purposes, foreign currencies and foreign
securities denominated in foreign currency values will be converted into U.S.
dollar values at the mean between the bid and offered quotations of such
currencies against the U.S. dollar based on rates in effect that day. Securities
not traded on a particular day, over-the-counter securities, and government and
agency securities are valued at the mean value between bid and asked prices.
Money market instruments having a maturity of less than 60 days are valued at
amortized cost, which approximates market value. Debt securities (other than
short-term obligations) are valued on the basis of valuations provided by a
pricing service when such prices are believed to reflect the fair value of such
securities. Foreign securities and the prices of foreign securities denominated
in foreign currencies are translated to U.S. dollars at the mean between the bid
and offer quotations of such currencies based on rates in effect as of the close
of the New York Stock Exchange.
Use of a pricing service has been
approved by the Board. Prices provided by a pricing service take into account
appropriate factors such as institutional trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data. Subject to the foregoing, securities for
which market quotations are not readily available and other assets are valued at
fair value as determined in good faith and in a method approved by the Board.
Each Class of a Fund will bear,
pro-rata, all of the common expenses of that Fund. The NAVs of all outstanding
shares of each Class of a Fund will be computed on a pro-rata basis for each
outstanding share based on the proportionate participation in that Fund
represented by the value of shares of that Class. All income earned and expenses
incurred by a Fund, will be borne on a pro-rata basis by each outstanding share
of a Class, based on each Class percentage in that Fund represented by the
value of shares of such Classes, except that Institutional Classes will not
incur any of the expenses under the Trusts Rule 12b-1 Plans, while the Retail
Classes will bear the Rule 12b-1 Plan expenses payable under their respective
Plans. Due to the specific distribution expenses and other costs that will be
allocable to each Class, the NAV of each Class of a Fund will vary.
General Information
You can
redeem or exchange your shares in a number of different ways that are described
below. Your shares will be redeemed or exchanged at a price based on the NAV
next determined after a Fund receives your request in good order, subject, in
the case of a redemption, to any applicable CDSC or Limited CDSC. For example,
redemption or exchange requests received in good order after the time the
offering price and NAV of shares are determined will be processed on the next
Business Day. See the Funds Prospectuses. A shareholder submitting a redemption
request may indicate that he or she wishes to receive redemption proceeds of a
specific dollar amount. In the case of such a request, and in the case of
certain redemptions from retirement plan accounts, a Fund will redeem the number
of shares necessary to deduct the applicable CDSC in the case of Class B shares
and Class C shares, and, if applicable, the Limited CDSC in the case of Class A
shares and tender to the shareholder the requested amount, assuming the
shareholder holds enough shares in his or her account for the redemption to be
processed in this manner. Otherwise, the amount tendered to the shareholder upon
redemption will be reduced by the amount of the applicable CDSC or Limited CDSC.
Redemption proceeds will be distributed promptly, as described below, but not
later than seven days after receipt of a redemption request.
72
Except as noted below, for a
redemption request to be in good order, you must provide your account number,
account registration, and the total number of shares or dollar amount of the
transaction. For exchange requests, you must also provide the name of the
Delaware Investments
®
Fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800 523-1918. The Funds
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days written notice to shareholders.
Orders for the repurchase of Fund
shares which are submitted to the Distributor prior to the close of its Business
Day will be executed at the NAV per share computed that day (subject to the
applicable CDSC or Limited CDSC), if the repurchase order was received by the
broker/dealer from the shareholder prior to the time the offering price and NAV
are determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Payment for shares redeemed will
ordinarily be mailed the next Business Day, but in no case later than seven
days, after receipt of a redemption request in good order by either Fund or
certain other authorized persons (see Distributor under Investment Manager
and Other Service Providers above); provided, however, that each commitment to
mail or wire redemption proceeds by a certain time, as described below, is
modified by the qualifications described in the next paragraph.
The Funds will process written and
telephone redemption requests to the extent that the purchase orders for the
shares being redeemed have already settled. The Funds will honor redemption
requests as to shares for which a check was tendered as payment, but the Funds
will not mail or wire the proceeds until they are reasonably satisfied that the
purchase check has cleared, which may take up to 15 days from the purchase date.
You can avoid this potential delay if you purchase shares by wiring Federal
Funds. Each Fund reserves the right to reject a written or telephone redemption
request or delay payment of redemption proceeds if there has been a recent
change to the shareholders address of record.
If a shareholder has been credited
with a purchase by a check which is subsequently returned unpaid for
insufficient funds or for any other reason, the Funds will automatically redeem
from the shareholders account the shares purchased by the check plus any
dividends earned thereon. Shareholders may be responsible for any losses to the
Funds or to the Distributor.
In case of a suspension of the
determination of the NAV because the NYSE is closed for other than weekends or
holidays, or trading thereon is restricted, or an emergency exists as a result
of which disposal by the Funds of securities owned by them is not reasonably
practical, or it is not reasonably practical for the Funds fairly to value their
assets, or in the event that the SEC has provided for such suspension for the
protection of shareholders, the Funds may postpone payment or suspend the right
of redemption or repurchase. In such cases, the shareholder may withdraw the
request for redemption or leave it standing as a request for redemption at the
NAV next determined after the suspension has been terminated.
Payment for shares redeemed or
repurchased may be made either in cash or in-kind, or partly in cash and partly
in kind. Any portfolio securities paid or distributed in kind would be valued as
described in Determining Offering Price and Net Asset Value above. Subsequent
sale by an investor receiving a distribution in kind could result in the payment
of brokerage commissions. However, the Trust has elected to be governed by Rule
18f-1 under the 1940 Act pursuant to which each Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1.00% of the NAV of such
Fund during any 90-day period for any one shareholder.
73
The
value of each Funds investments is subject to changing market prices. Thus, a
shareholder redeeming shares of the Funds may sustain either a gain or loss,
depending upon the price paid and the price received for such shares.
Certain redemptions of Class A shares purchased at NAV may result in the
imposition of a Limited CDSC. See Contingent Deferred Sales Charge for Certain
Redemptions of Class A shares Purchased at Net Asset Value below. Class B and
Class C shares are subject to CDSCs as described in the Prospectuses. Except for
the applicable CDSC or Limited CDSC and, with respect to the expedited payment
by wire described below for which, in the case of the Retail Classes, there may
be a bank wiring cost, neither the Funds nor the Distributor charge a fee for
redemptions or repurchases, but such fees could be charged at any time in the
future.
Holders of Class B shares or Class C shares that exchange their shares
(Original Shares) for shares of other Delaware Investments
®
Funds
(in each case, New Shares) in a permitted exchange will not be subject to a
CDSC that might otherwise be due upon redemption of the Original Shares.
However, such shareholders will continue to be subject to the CDSC and any CDSC
assessed upon redemption of the New Shares will be charged by the Fund from
which the Original Shares were exchanged. In the case of Class B shares,
shareholders will also continue to be subject to the automatic conversion
schedule of the Original Shares as described in this Part B. In an exchange of
Class B shares, a Funds CDSC schedule may be higher than the CDSC schedule
relating to the New Shares acquired as a result of the exchange. For purposes of
computing the CDSC that may be payable upon a disposition of the New Shares, the
period of time that an investor held the Original Shares is added to the period
of time that an investor held the New Shares. With respect to Class B shares,
the automatic conversion schedule of the Original Shares may be longer than that
of the New Shares. Consequently, an investment in New Shares by exchange may
subject an investor to the higher Rule 12b-1 fees applicable to Class B shares
for a longer period of time than if the investment in New Shares were made
directly.
Holders of Class A shares of the Funds may exchange all or part of their shares
for shares of other
Delaware
Investments
®
Funds, including other Class A shares, but may not
exchange their Class A shares for Class B shares, Class C shares, or Class R
shares of the Funds or of any other Delaware Investments
®
Fund.
Holders of Class B shares are permitted to exchange all or part of their Class B
shares only into Class B shares of other Delaware Investments
®
Funds.
Similarly, holders of Class C shares of the Funds are permitted to exchange all
or part of their Class C shares only into Class C shares of any other Delaware
Investments
®
Fund. Class B shares of the Funds and Class C shares of
the Funds acquired by exchange will continue to carry the CDSC and, in the case
of Class B shares, the automatic conversion schedule of the fund from which the
exchange is made. The holding period of Class B shares of the Funds acquired by
exchange will be added to that of the shares that were exchanged for purposes of
determining the time of the automatic conversion into Class A shares of the
Funds. Holders of Class R shares of the Funds are permitted to exchange all or
part of their Class R shares only into Class R shares of other Delaware
Investments
®
Funds or, if Class R shares are not available for a
particular fund, into the Class A shares of such Fund.
Permissible exchanges into Class A shares of the Funds will be made without a
front-end sales charge, except for exchanges of shares that were not previously
subject to a front-end sales charge (unless such shares were acquired through
the reinvestment of dividends). Permissible exchanges into Class B shares or
Class C shares will be made without the imposition of a CDSC by the Delaware
Investments
®
Fund from which the exchange is being made at the time
of the exchange.
Each
Fund also reserves the right to refuse the purchase side of an exchange request
by any person, or group if, in the Managers judgment, the Fund would be unable
to invest effectively in accordance with its investment objectives and policies,
or would otherwise potentially be adversely affected. A shareholders purchase
exchanges may be restricted or refused if a Fund receives or anticipates
simultaneous orders affecting significant portions of the Funds assets.
74
The Funds discourage purchases by market timers and purchase
orders (including the purchase side of exchange orders) by shareholders
identified as market timers may be rejected. The Funds will consider anyone who
follows a pattern of market timing in any Delaware Investments
®
Fund
to be a market timer.
Market timing of a Delaware Investments
®
Fund occurs when investors
make consecutive rapid short-term roundtrips, or in other words, purchases
into a Delaware Investments
®
Fund followed quickly by redemptions out
of that Fund. A short-term roundtrip is any redemption of Fund shares within 20
Business Days of a purchase of that Funds shares. If you make a second such
short-term roundtrip in a Delaware Investments
®
Fund within the same
calendar quarter of a previous short-term roundtrip in that Fund, you may be
considered a market timer. The purchase and sale of Fund shares through the use
of the exchange privilege are also included in determining whether market timing
has occurred. The Funds also reserve the right to consider other trading
patterns as market timing.
Your
ability to use the Funds exchange privilege may be limited if you are
identified as a market timer. If you are identified as a market timer, we will
execute the redemption side of your exchange order but may refuse the purchase
side of your exchange order.
Written Redemption
You can write to the Funds at P.O.
Box 9876, Providence, RI 02940-8076 by regular mail or 4400 Computer Drive,
Westborough, MA 01581-1722 by overnight courier service to redeem some or all of
your shares. The request must be signed by all owners of the account or your
investment dealer of record. For redemptions of more than $100,000, or when the
proceeds are not sent to the shareholder(s) at the address of record, the Funds
require a signature by all owners of the account and a signature guarantee for
each owner. A signature guarantee can be obtained from a commercial bank, a
trust company, or a member of a Securities Transfer Association Medallion
Program (STAMP). Each Fund reserves the right to reject a signature guarantee
supplied by an eligible institution based on its creditworthiness. The Funds may
require further documentation from corporations, executors, retirement plans,
administrators, trustees, or guardians.
Payment is normally mailed the next Business Day after receipt of your
redemption request. If your Class A shares or Institutional Class shares are in
certificate form, the certificate(s) must accompany your request and also be in
good order. Certificates generally are no longer issued for Class A shares and
Institutional Class shares. Certificates are not issued for Class B shares or
Class C shares.
Written Exchange
You may also write to the Funds at
P.O. Box 9876, Providence, RI 02940-8076 by regular mail or 4400 Computer Drive,
Westborough, MA 01581-1722 by overnight courier service to request an exchange
of any or all of your shares into another Delaware Investments
®
Fund,
subject to the same conditions and limitations as other exchanges noted
above.
Telephone Redemption and
Exchange
To get the added convenience of the
telephone redemption and exchange methods, you must have the Transfer Agent hold
your shares (without charge) for you. If you hold your Class A shares or
Institutional Class shares in certificate form, you may redeem or exchange only
by written request and you must return your certificates.
Telephone Redemption:
The Check to Your Address of Record service and the Telephone Exchange
service, both of which are described below, are automatically provided unless
you notify the Funds in writing, that you do not wish to have such services
available with respect to your account. Each Fund reserves the right to modify,
terminate or suspend these procedures upon 60 days written notice to
shareholders. It may be difficult to reach the Funds by telephone during periods
when market or economic conditions lead to an unusually large volume of
telephone requests.
75
The
Funds and their Transfer Agent are not responsible for any shareholder loss
incurred in acting upon written or telephone instructions for redemption or
exchange of Fund shares that are reasonably believed to be genuine. With respect
to such telephone transactions, the Funds will follow reasonable procedures to
confirm that instructions communicated by telephone are genuine (including
verification of a form of personal identification) as, if it does not, such Fund
or the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent transactions. Telephone instructions received by the Funds are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange, and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone RedemptionCheck to Your Address of Record:
The Telephone Redemption feature is
a quick and easy method to redeem shares. You or your investment dealer of
record can have redemption proceeds of $100,000 or less mailed to you at your
address of record. Checks will be payable to the shareholder(s) of record.
Payment is normally mailed the next Business Day after receipt of the redemption
request. This service is only available to individual, joint, and individual
fiduciary-type accounts.
Telephone RedemptionProceeds to Your Bank:
Redemption proceeds of $1,000 or
more can be transferred to your predesignated bank account by wire or by check.
You should authorize this service when you open your account. If you change your
predesignated bank account, you must complete an authorization form and have
your signature guaranteed. For your protection, your authorization must be on
file. If you request a wire, your funds will normally be sent the next Business
Day. If the proceeds are wired to the shareholders account at a bank which is
not a member of the Federal Reserve System, there could be a delay in the
crediting of the funds to the shareholders bank account. A bank wire fee may be
deducted from Retail Class redemption proceeds. If you ask for a check, it will
normally be mailed the next Business Day after receipt of your redemption
request to your predesignated bank account. There are no separate fees for this
redemption method, but mailing a check may delay the time it takes to have your
redemption proceeds credited to your predesignated bank account. Simply call the
Shareholder Service Center at 800 523-1918 prior to the time the offering price
and NAV are determined, as noted above.
Telephone
Exchange:
The Telephone Exchange feature is a
convenient and efficient way to adjust your investment holdings as your
liquidity requirements and investment objectives change. You or your investment
dealer of record can exchange your shares into other Delaware
Investments
®
Funds under the same registration, subject to the same
conditions and limitations as other exchanges noted above. As with the written
exchange service, telephone exchanges are subject to the requirements of the
Funds, as described above. Telephone exchanges may be subject to limitations as
to amount or frequency
.
The
telephone exchange privilege is intended as a convenience to shareholders and is
not intended to be a vehicle to speculate on short-term swings in the securities
market through frequent transactions into and out of the Delaware
Investments
®
Funds. Telephone exchanges may be subject to limitations
as to amount or frequency. The Transfer Agent and each Fund reserve the right to
record exchange instructions received by telephone and to reject exchange
requests at any time in the future.
On Demand Service
You or your investment dealer may
request redemptions of Retail Class shares by phone using the on demand service.
When you authorize the Funds to accept such requests from you or your investment
dealer, funds will be deposited to your predesignated bank account. Your request
will be processed the same day if you call prior to 4:00 p.m., Eastern time.
There is a $25 minimum and $100,000 maximum limit for on demand service
transactions. For more information, see On Demand Service under Investment
Plans above.
76
Systematic Withdrawal
Plans
Shareholders of the Retail Classes who own or purchase $5,000 or more of
shares at the offering price, or NAV, as applicable, for which certificates have
not been issued may establish a systematic withdrawal plan for monthly
withdrawals of $25 or more, or quarterly withdrawals of $75 or more, although
the Funds do not recommend any specific amount of withdrawal. This is
particularly useful to shareholders living on fixed incomes, since it can
provide them with a stable supplemental amount. This $5,000 minimum does not
apply for investments made through qualified retirement plans. Shares purchased
with the initial investment and through reinvestment of cash dividends and
realized securities profits distributions will be credited to the shareholders
account and sufficient full and fractional shares will be redeemed at the NAV
calculated on the third Business Day preceding the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected by the
shareholder (unless such date falls on a holiday or a weekend), and are normally
mailed within two Business Days. Both ordinary income dividends and realized
securities profits distributions will be automatically reinvested in additional
shares of the Class at NAV. This plan is not recommended for all investors and
should be started only after careful consideration of its operation and effect
upon the investors savings and investment program. To the extent that
withdrawal payments from the plan exceed any dividends and/or realized
securities profits distributions paid on shares held under the plan, the
withdrawal payments will represent a return of capital, and the share balance
may in time be depleted, particularly in a declining market. Shareholders should
not purchase additional shares while participating in a systematic withdrawal
plan.
The
sale of shares for withdrawal payments constitutes a taxable event and a
shareholder may incur a capital gain or loss for federal income tax purposes.
This gain or loss may be long-term or short-term depending on the holding period
for the specific shares liquidated. Premature withdrawals from retirement plans
may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of additional
shares may be disadvantageous to the shareholder. Purchases of Class A shares
through a periodic investment program in the Funds must be terminated before a
systematic withdrawal plan with respect to such shares can take effect, except
if the shareholder is a participant in a retirement plan offering Delaware
Investments
®
Funds or is investing in Delaware
Investments
®
Funds which do not carry a sales charge. Redemptions of
Class A shares pursuant to a systematic withdrawal plan may be subject to a
Limited CDSC if the purchase was made at NAV and a dealers commission has been
paid on that purchase. The applicable Limited CDSC for Class A shares and CDSC
for Class B and C shares redeemed via a systematic withdrawal plan will be
waived if the annual amount withdrawn in each year is less than 12% of the
account balance on the date that the Plan was established. If the annual amount
withdrawn in any year exceeds 12% of the account balance on the date that the
systematic withdrawal plan was established, all
redemptions under the Plan will be
subject to the applicable CDSC, including an assessment for previously redeemed
amounts under the Plan. Whether a waiver of the CDSC is available or not, the
first shares to be redeemed for each systematic withdrawal plan payment will be
those not subject to a CDSC because they have either satisfied the required
holding period or were acquired through the reinvestment of distributions. See
the Prospectuses for more information about the waiver of CDSCs.
An
investor wishing to start a systematic withdrawal plan must complete an
authorization form. If the recipient of systematic withdrawal plan payments is
other than the registered shareholder, the shareholders signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. Each Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
Systematic withdrawal plan payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the on demand service. Your
funds will normally be credited to your bank account up to four Business Days
after the payment date. There are no separate fees for this redemption method.
It may take up to four Business Days for the transactions to be completed. You can initiate this service by completing
an account services form. If your name and address are not identical to the name
and address on your Fund account, you must have your signature guaranteed. The
Funds do not charge a fee for this service; however, your bank may charge a fee.
This service is not available for retirement plans.
77
The
systematic withdrawal plan is not available for the Institutional Classes.
Shareholders should consult with their financial advisors to determine whether a
systematic withdrawal plan would be suitable for them.
Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset
Value
For purchases of $1
million or more, a Limited CDSC will be imposed on certain redemptions of Class
A shares (or shares into which such Class A shares are exchanged) according to
the following schedule: (i) 1.00% if shares are redeemed during the first year
after the purchase; and (ii) 0.50% if such shares are redeemed during the second
year after the purchase, if such purchases were made at NAV and triggered the
payment by the Distributor of the dealers commission described above in
Dealers Commission under Purchasing Shares.
The
Limited CDSC will be paid to the Distributor and will be assessed on an amount
equal to the lesser of: (i) the NAV at the time of purchase of the Class A
shares being redeemed; or (ii) the NAV of such Class A shares at the time of
redemption. For purposes of this formula, the NAV at the time of purchase will
be the NAV at purchase of the Class A shares even if those shares are later
exchanged for shares of another Delaware Investments
®
Fund and, in
the event of an exchange of Class A shares, the NAV of such shares at the time
of redemption will be the NAV of the shares acquired in the
exchange.
Redemptions of such Class A shares held for more than two years will not be
subject to the Limited CDSC and an exchange of such Class A shares into another
Delaware Investments
®
Fund will not trigger the imposition of the
Limited CDSC at the time of such exchange. The period a shareholder owns shares
into which Class A shares are exchanged will count towards satisfying the
two-year holding period. The Limited CDSC is assessed if such two-year period is
not satisfied irrespective of whether the redemption triggering its payment is
of Class A shares of the Funds or Class A shares acquired in the
exchange.
In
determining whether a Limited CDSC is payable, it will be assumed that shares
not subject to the Limited CDSC are the first redeemed followed by other shares
held for the longest period of time. The Limited CDSC will not be imposed on
shares representing reinvested dividends or capital gains distributions, or upon
amounts representing share appreciation.
Waivers of Contingent Deferred Sales
Charges
Please see the Prospectuses for
instances in which the Limited CDSC applicable to Class A shares and the CDSCs
applicable to Class B and C shares may be waived.
Class
B and Class C shares that are or were held in a qualified retirement plan
account serviced by Delaware Management Trust Company will not be subject to a
CDSC upon the redemption of such shares regardless of the length of time the
shares were held by the shareholder.
DISTRIBUTIONS
The
following supplements the information in the Prospectuses
.
The
policy of the Trust is to distribute substantially all of each Funds net
investment income and net realized capital gains, if any, in the amount and at
the times that will avoid a Fund incurring any material amounts of federal
income or excise taxes.
78
Each
Class of shares of a Fund will share proportionately in the investment income
and expenses of that Fund, except that each Retail Class alone will incur
distribution fees under its respective Rule 12b-1 Plan.
All
dividends and any capital gains distributions will be automatically reinvested
in additional shares of the same Class of the Fund at NAV unless otherwise
designated in writing that such dividends and/or distributions be paid in cash.
Dividend payments of $1.00 or less will be automatically reinvested,
notwithstanding a shareholders election to receive dividends in cash. If such a
shareholders dividends increase to greater than $1.00, the shareholder would
have to file a new election in order to begin receiving dividends in cash again.
Any
check in payment of dividends or other distributions which cannot be delivered
by the United States Postal Service or which remains uncashed for a period of
more than one year may be reinvested in the shareholders account at the
then-current NAV and the dividend option may be changed from cash to reinvest. A
Fund may deduct from a shareholders account the costs of the Funds efforts to
locate a shareholder if a shareholders mail is returned by the United States
Postal Service or the Fund is otherwise unable to locate the shareholder or
verify the shareholders mailing address. These costs may include a percentage
of the account when a search company charges a percentage fee in exchange for
their location services.
TAXES
The following is a summary of
certain additional tax considerations generally affecting a Fund (sometimes
referred to as the Fund) and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning.
This
Distributions and Taxes section is based on the Internal Revenue Code and
applicable regulations in effect on the date of this Statement of Additional
Information. Future legislative, regulatory or administrative changes, including
provisions of current law that sunset and thereafter no longer apply, or court
decisions may significantly change the tax rules applicable to the Fund and its
shareholders. Any of these changes or court decisions may have a retroactive
effect.
This is for general information only
and not tax advice. All investors should consult their own tax advisors as to
the federal, state, local and foreign tax provisions applicable to them.
Taxation of the
Fund
. The Fund has elected and
intends to qualify, or, if newly organized, intends to elect and qualify, each
year as a regulated investment company (sometimes referred to as a regulated
investment company, RIC or fund) under Subchapter M of the Internal Revenue
Code. If the Fund so qualifies, the Fund will not be subject to federal income
tax on the portion of its investment company taxable income (that is, generally,
taxable interest, dividends, net short-term capital gains, and other taxable
ordinary income, net of expenses, without regard to the deduction for dividends
paid) and net capital gain (that is, the excess of net long-term capital gains
over net short-term capital losses) that it distributes to
shareholders.
In
order to qualify for treatment as a regulated investment company, the Fund must
satisfy the following requirements:
-
Distribution Requirement the Fund must distribute an amount equal to the sum of at
least 90% of its investment company taxable income and 90% of its net
tax-exempt income, if any, for the tax year (including, for purposes of
satisfying this distribution requirement, certain distributions made by the
Fund after the close of its taxable year that are treated as made during such
taxable year).
-
Income Requirement the Fund must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including, but not limited to, gains from
options, futures or forward contracts) derived from its business of investing
in such stock, securities or currencies and net income derived from qualified
publicly traded partnerships (QPTPs).
-
Asset
Diversification Test the Fund must satisfy the following asset diversification test at the
close of each quarter of the Funds tax year: (1) at least 50% of the value of
the Funds assets must consist of cash and cash items, U.S. government
securities, securities of other regulated investment companies, and securities
of other issuers (as to which the Fund has not invested more than 5% of the
value of the Funds total assets in securities of an issuer and as to which
the Fund does not hold more than 10% of the outstanding voting securities of
the issuer); and (2) no more than 25% of the value of the Funds total assets
may be invested in the securities of any one issuer (other than U.S.
government securities and securities of other regulated investment companies)
or of two or more issuers which the Fund controls and which are engaged in the
same or similar trades or businesses, or, in the securities of one or more
QPTPs.
79
In
some circumstances, the character and timing of income realized by the Fund for
purposes of the Income Requirement or the identification of the issuer for
purposes of the Asset Diversification Test is uncertain under current law with
respect to a particular investment, and an adverse determination or future
guidance by the Internal Revenue Service (IRS) with respect to such type of
investment may adversely affect the Funds ability to satisfy these
requirements. See, Tax Treatment of Portfolio Transactions below with respect
to the application of these requirements to certain types of investments. In
other circumstances, the Fund may be required to sell portfolio holdings in
order to meet the Income Requirement, Distribution Requirement, or Asset
Diversification Test, which may have a negative impact on the Funds income and
performance. In lieu of potential disqualification, the Fund is permitted to pay
a tax for certain failures to satisfy the Asset Diversification Test or Income
Requirement, which, in general, are limited to those due to reasonable cause and
not willful neglect.
The
Fund may use "equalization accounting" (in lieu of making some cash
distributions) in determining the portion of its income and gains that has been
distributed. If the Fund uses equalization accounting, it will allocate a
portion of its undistributed investment company taxable income and net capital
gain to redemptions of Fund shares and will correspondingly reduce the amount of
such income and gains that it distributes in cash. If the IRS determines that
the Funds allocation is improper and that the Fund has under-distributed its
income and gain for any taxable year, the Fund may be liable for federal income
and/or excise tax. If, as a result of such adjustment, the Fund fails to satisfy
the Distribution Requirement, the Fund will not qualify that year as a regulated
investment company the effect of which is described in the following paragraph.
If
for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) would be
subject to tax at regular corporate rates without any deduction for dividends
paid to shareholders, and the dividends would be taxable to the shareholders as
ordinary income (or possibly as qualified dividend income) to the extent of the
Funds current and accumulated earnings and profits. Failure to qualify as a
regulated investment company would thus have a negative impact on the Funds
income and performance. Subject to savings provisions
for certain failures to satisfy the Income Requirement or Asset Diversification
Test, which, in general, are limited to those due to reasonable cause and not
willful neglect, it is possible that the Fund will not qualify as a regulated
investment company in any given tax year. Even if such savings provisions apply,
the Fund may be subject to a monetary sanction of $50,000 or more.
Moreover, the Board reserves the right not to maintain the
qualification of the Fund as a regulated investment company if it determines
such a course of action to be beneficial to shareholders.
Portfolio turnover.
For investors that
hold their Fund shares in a taxable account, a high portfolio turnover rate may
result in higher taxes. This is because a fund with a high turnover rate is
likely to accelerate the recognition of capital gains and more of such gains are
likely to be taxable as short-term rather than long-term capital gains in
contrast to a comparable fund with a low turnover rate. Any such higher taxes
would reduce the Funds after-tax performance. See, Taxation of Fund
Distributions - Distributions of capital gains below. For non-U.S. investors,
any such acceleration of the recognition of capital gains that results in more
short-term and less long-term capital gains being recognized by the Fund may
cause such investors to be subject to increased U.S. withholding taxes. See,
Non-U.S. Investors Capital gain dividends and short-term capital gain
dividends below.
80
Capital loss carryovers
. The capital
losses of the Fund, if any, do not flow through to shareholders. Rather,
the Fund may use its capital losses, subject to applicable limitations,
to offset its capital gains without being required to pay taxes on or distribute
to shareholders such gains that are offset by the losses. Under the Regulated
Investment Company Modernization Act of 2010 (RIC Mod Act), rules similar to
those that apply to capital loss carryovers of individuals are made applicable
to RICs. Thus, if the Fund has a "net capital loss" (that is, capital losses in
excess of capital gains) for a taxable year beginning after December 22, 2010,
the excess (if any) of the Fund's net short-term capital losses over its net
long-term capital gains is treated as a short-term capital loss arising on the
first day of the Fund's next taxable year, and the excess (if any) of the Fund's
net long-term capital losses over its net short-term capital gains is treated as
a long-term capital loss arising on the first day of the Fund's next taxable
year. Any such net capital losses of the Fund that are not used to offset
capital gains may be carried forward indefinitely to reduce any future capital
gains realized by the Fund in succeeding taxable years. However, for any net
capital losses realized in taxable years of the Fund beginning on or before
December 22, 2010, the Fund is only permitted to carry forward such capital
losses for eight years as a short-term capital loss. Under a transition rule,
capital losses arising in a taxable year beginning after December 22, 2010 must
be used before capital losses realized in a prior taxable year. The amount of
capital losses that can be carried forward and used in any single year is
subject to an annual limitation if there is a more than 50% change in
ownership of the Fund. An ownership change generally results when shareholders
owning 5% or more of the Fund increase their aggregate holdings by more than 50%
over a three-year look-back period. An ownership change could result in capital
loss carryovers being used at a slower rate (or, in the case of those realized
in taxable years of the Fund beginning on or before December 22, 2010, to expire
unutilized), thereby reducing the Funds ability to offset capital gains with
those losses. An increase in the amount of taxable gains distributed to the
Funds shareholders could result from an ownership change. The Fund undertakes
no obligation to avoid or prevent an ownership change, which can occur in the
normal course of shareholder purchases and redemptions or as a result of
engaging in a tax-free reorganization with another fund. Moreover, because of
circumstances beyond the Funds control, there can be no assurance that the Fund
will not experience, or has not already experienced, an ownership change.
Additionally, if the Fund engages in a tax-free reorganization with another
Fund, the effect of these and other rules not discussed herein may be to
disallow or postpone the use by the Fund of its capital loss carryovers
(including any current year losses and built-in losses when realized) to offset
its own gains or those of the other Fund, or vice versa, thereby reducing the
tax benefits Fund shareholders would otherwise have enjoyed from use of such
capital loss carryovers.
Deferral of late year losses
. The Fund may
elect to treat part or all of any "qualified late year loss" as if it had been
incurred in the succeeding taxable year in determining the Funds taxable
income, net capital gain, net short-term capital gain, and earnings and profits.
The effect of this election is to treat any such qualified late year loss as
if it had been incurred in the succeeding taxable year in characterizing Fund
distributions for any calendar year (see, Taxation of Fund Distributions -
Distributions of capital gains below). A "qualified late year loss" includes:
|
(i)
|
|
any net capital loss,
net long-term capital loss, or net short-term capital loss incurred after
October 31 of the current taxable year (post-October losses),
and
|
|
(ii)
|
|
the excess, if any, of
(1) the sum of (a) specified losses incurred after October 31 of the
current taxable year, and (b) other ordinary losses incurred after
December 31 of the current taxable year, over (2) the sum of (a) specified
gains incurred after October 31 of the current taxable year, and (b) other
ordinary gains incurred after December 31 of the current taxable
year.
|
The terms specified losses and
specified gains mean ordinary losses and gains from the sale, exchange, or
other disposition of property (including the termination of a position with
respect to such property), foreign currency losses and gains, and losses and
gains resulting from holding stock in a passive foreign investment company
(PFIC) for which a mark-to-market election is in effect. The terms ordinary
losses and ordinary gains mean other ordinary losses and gains that are not
described in the preceding sentence.
Undistributed capital gains
. The Fund may
retain or distribute to shareholders its net capital gain for each taxable year.
The Fund currently intends to distribute net capital gains. If the Fund elects
to retain its net capital gain, the Fund will be taxed thereon (except to the
extent of any available capital loss carryovers) at the highest corporate tax
rate (currently 35%). If the Fund elects to retain its net capital gain, it is
expected that the Fund also will elect to have
shareholders treated as if each received a distribution of its pro rata share of
such gain, with the result that each shareholder will be required to report its
pro rata share of such gain on its tax return as long-term capital gain, will
receive a refundable tax credit for its pro rata share of tax paid by the Fund
on the gain, and will increase the tax basis for its shares by an amount equal
to the deemed distribution less the tax credit.
81
Federal excise tax
. To avoid a 4%
non-deductible excise tax, the Fund must distribute by December 31 of each year
an amount equal to: (1) 98% of its ordinary income for the calendar year, (2)
98.2% of capital gain net income (that is, the excess of the gains from sales or
exchanges of capital assets over the losses from such sales or exchanges) for
the one-year period ended on October 31 of such calendar year, and (3) any prior
year undistributed ordinary income and capital gain net income. The Fund may
elect to defer to the following year any net ordinary loss incurred for the
portion of the calendar year which is after the beginning of the Funds taxable
year. Also, the Fund will defer any specified gain or specified loss which
would be properly taken into account for the portion of the calendar year after
October 31. Any net ordinary loss, specified gain, or specified loss deferred
shall be treated as arising on January 1 of the following calendar year.
Generally, the Fund intends to make sufficient distributions prior to the end of
each calendar year to avoid any material liability for federal income and excise
tax, but can give no assurances that all or a portion of such liability will be
avoided. In addition, under certain circumstances, temporary timing or permanent
differences in the realization of income and expense for book and tax purposes
can result in the Fund having to pay an excise tax.
Foreign income tax
. Investment income
received by the Fund from sources within foreign countries may be subject to
foreign income tax withheld at the source and the amount of tax withheld
generally will be treated as an expense of the Fund. The United States has
entered into tax treaties with many foreign countries, which entitle the Fund to
a reduced rate of, or exemption from, tax on such income. It is impossible to
determine the effective rate of foreign tax in advance since the amount of the
Fund's assets to be invested in various countries is not known. Under certain
circumstances, the Fund may elect to pass-through foreign tax credits to
shareholders, although it reserves the right not to do so.
Taxation of Fund
Distributions
.
The Fund anticipates distributing
substantially all of its investment company taxable income and net capital gain
for each taxable year. Distributions by the Fund will be treated in the manner
described below regardless of whether such distributions are paid in cash or
reinvested in additional shares of the Fund (or of another fund). The Fund will
send you information annually as to the federal income tax consequences of
distributions made (or deemed made) during the year.
Distributions of net investment income.
The
Fund receives ordinary income generally in the form of dividends and/or interest
on its investments. The Fund may also recognize ordinary income from other
sources, including, but not limited to, certain gains on foreign
currency-related transactions. This income, less expenses incurred in the
operation of the Fund, constitutes the Fund's net investment income from which
dividends may be paid to you. If you are a taxable investor, distributions of
net investment income generally are taxable as ordinary income to the extent of
the Funds earnings and profits. In the case of a Fund whose strategy includes
investing in stocks of corporations, a portion of the income dividends paid to
you may be qualified dividends eligible to be taxed at reduced rates. See the
discussion below under the headings, Qualified dividend income for
individuals and Dividends-received deduction for corporations.
Distributions of capital gains.
The Fund may
derive capital gain and loss in connection with sales or other dispositions of
its portfolio securities. Distributions derived from the excess of net
short-term capital gain over net long-term capital loss will be taxable to you
as ordinary income. Distributions paid from the excess of net long-term capital
gain over net short-term capital loss will be taxable to you as long-term
capital gain, regardless of how long you have held your shares in the Fund. Any
net short-term or long-term capital gain realized by the Fund (net of any
capital loss carryovers) generally will be distributed once each year and may be
distributed more frequently, if necessary, in order to reduce or eliminate
federal excise or income taxes on the Fund.
Returns of capital.
Distributions by the Fund
that are not paid from earnings and profits will be treated as a return of
capital to the extent of (and in reduction of) the shareholder's tax basis in
his shares; any excess will be treated as gain from the
sale of his shares. Thus, the portion of a distribution that constitutes a
return of capital will decrease the shareholders tax basis in his Fund shares
(but not below zero), and will result in an increase in the amount of gain (or
decrease in the amount of loss) that will be recognized by the shareholder for
tax purposes on the later sale of such Fund shares. Return of capital
distributions can occur for a number of reasons including, among others, the
Fund over-estimates the income to be received from certain investments such as
those classified as partnerships or equity real estate investment trusts
(REITs) (see, Tax Treatment of Portfolio TransactionsInvestments in U.S. REITs
below).
82
Qualified dividend income for individuals.
With respect to ordinary income dividends paid on or before December 31,
2012 (unless such provision is extended, possibly retroactively to January 1,
2013, or made permanent), amounts reported by the Fund to shareholders as
derived from qualified dividend income will be taxed in the hands of individuals
and other noncorporate shareholders at the rates applicable to long-term capital
gain. Qualified dividend income means dividends paid to the Fund (a) by
domestic corporations, (b) by foreign corporations that are either (i)
incorporated in a possession of the United States, or (ii) are eligible for
benefits under certain income tax treaties with the United States that include
an exchange of information program, or (c) with respect to stock of a foreign
corporation that is readily tradable on an established securities market in the
United States. Both the Fund and the investor must meet certain holding period
requirements to qualify Fund dividends for this treatment. Specifically, the
Fund must hold the stock for at least 61 days during the 121-day period
beginning 60 days before the stock becomes ex-dividend. Similarly, investors
must hold their Fund shares for at least 61 days during the 121-day period
beginning 60 days before the Fund distribution goes ex-dividend. Income derived
from investments in derivatives, fixed-income securities, U.S. REITs, PFICs, and
income received in lieu of dividends in a securities lending transaction
generally is not eligible for treatment as qualified dividend income. If the
qualifying dividend income received by the Fund is equal to or greater than 95%
of the Fund's gross income (exclusive of net capital gain) in any taxable year,
all of the ordinary income dividends paid by the Fund will be qualifying
dividend income.
Dividends-received deduction for corporations
. For corporate shareholders, a portion of the dividends paid by the Fund
may qualify for the 70% corporate dividends-received deduction. The portion of
dividends paid by the Fund that so qualifies will be reported by the Fund to
shareholders each year and cannot exceed the gross amount of dividends received
by the Fund from domestic (U.S.) corporations. The availability of the
dividends-received deduction is subject to certain holding period and debt
financing restrictions that apply to both the Fund and the investor.
Specifically, the amount that the Fund may report as eligible for the
dividends-received deduction will be reduced or eliminated if the shares on
which the dividends earned by the Fund were debt-financed or held by the Fund
for less than a minimum period of time, generally 46 days during a 91-day period
beginning 45 days before the stock becomes ex-dividend. Similarly, if your Fund
shares are debt-financed or held by you for less than a 46-day period then the
dividends-received deduction for Fund dividends on your shares may also be
reduced or eliminated. Even if reported as dividends eligible for the
dividends-received deduction, all dividends (including any deducted portion)
must be included in your alternative minimum taxable income
calculation
.
Income derived by the Fund from investments in derivatives, fixed-income
and foreign securities generally is not eligible for this treatment.
Impact of realized but undistributed income and gains, and net unrealized
appreciation of portfolio securities
. At the
time of your purchase of shares, the Funds net asset value may reflect
undistributed income, undistributed capital gains, or net unrealized
appreciation of portfolio securities held by the Fund. A subsequent distribution
to you of such amounts, although constituting a return of your investment, would
be taxable, and would be taxed as ordinary income (some portion of which may be
taxed as qualified dividend income), capital gains, or some combination of both,
unless you are investing through a tax-deferred arrangement, such as a 401(k)
plan or an individual retirement account. The Fund may be able to reduce the
amount of such distributions from capital gains by utilizing its capital loss
carryovers, if any.
Pass-through of foreign tax credits
. If more
than 50% of the Funds total assets at the end of a fiscal year is invested in
foreign securities, the Fund may elect to pass through to you your pro rata
share of foreign taxes paid by the Fund. If this election is made, the Fund may
report more taxable income to you than it actually distributes. You will then be entitled either to deduct your share of these taxes in
computing your taxable income, or to claim a foreign tax credit for these taxes
against your U.S. federal income tax (subject to limitations for certain
shareholders). The Fund will provide you with the information necessary to claim
this deduction or credit on your personal income tax return if it makes this
election. No deduction for foreign tax may be claimed by a noncorporate
shareholder who does not itemize deductions or who is subject to the alternative
minimum tax. Shareholders may be unable to claim a credit for the full amount of
their proportionate shares of the foreign income tax paid by the Fund due to
certain limitations that may apply. The Fund reserves the right not to pass
through to its shareholders the amount of foreign income taxes paid by the Fund.
Additionally, any foreign tax withheld on payments made in lieu of dividends
or interest will not qualify for the pass-through of foreign tax credits to
shareholders. See, Tax Treatment of Portfolio Transactions Securities
lending below.
83
Tax credit bonds
. If the Fund holds, directly
or indirectly, one or more tax credit bonds (including build America bonds,
clean renewable energy bonds and qualified tax credit bonds) on one or more
applicable dates during a taxable year, the Fund may elect to permit its
shareholders to claim a tax credit on their income tax returns equal to each
shareholders proportionate share of tax credits from the applicable bonds that
otherwise would be allowed to the Fund. In such a case, shareholders must
include in gross income (as interest) their proportionate share of the income
attributable to their proportionate share of those offsetting tax credits. A
shareholders ability to claim a tax credit associated with one or more tax
credit bonds may be subject to certain limitations imposed by the Internal
Revenue Code. Even if the Fund is eligible to pass through tax credits to
shareholders, the Fund may choose not to do so.
U.S. government securities.
Income earned on
certain U.S. government obligations is exempt from state and local personal
income taxes if earned directly by you. States also grant tax-free status to
dividends paid to you from interest earned on direct obligations of the U.S.
government, subject in some states to minimum investment or reporting
requirements that must be met by the Fund. Income on investments by the Fund in
certain other obligations, such as repurchase agreements collateralized by U.S.
government obligations, commercial paper and federal agency-backed obligations
(e.g., GNMA or FNMA obligations), generally does not qualify for tax-free
treatment. The rules on exclusion of this income are different for
corporations.
Dividends declared in December and paid in January
. Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year
in accordance with the guidance that has been provided by the IRS.
Medicare tax
. The recently enacted Patient
Protection and Affordable Care Act of 2010, as amended by the Health Care and
Education Affordability Reconciliation Act of 2010, will impose a 3.8% Medicare
tax on net investment income earned by certain individuals, estates and trusts
for taxable years beginning after December 31, 2012. Net investment income,
for these purposes, means investment income, including ordinary dividends and
capital gain distributions received from the Fund and net gains from redemptions
or other taxable dispositions of Fund shares, reduced by the deductions properly
allocable to such income. In the case of an individual, the tax will be imposed
on the lesser of (1) the shareholders net investment income or (2) the amount
by which the shareholders modified adjusted gross income exceeds $250,000 (if
the shareholder is married and filing jointly or a surviving spouse), $125,000
(if the shareholder is married and filing separately) or $200,000 (in any other
case).
Sales, Exchanges and
Redemptions of Fund Shares
.
Sales, exchanges and redemptions
(including redemptions in kind) of Fund shares are taxable transactions for
federal and state income tax purposes. If you redeem your Fund shares, the IRS
requires you to report any gain or loss on your redemption. If you held your
shares as a capital asset, the gain or loss that you realize will be a capital
gain or loss and will be long-term or short-term, generally depending on how
long you have held your shares. Any redemption fees you incur on shares redeemed
will decrease the amount of any capital gain (or increase any capital loss) you
realize on the sale. Capital losses in any year are deductible only to
the extent of capital gains plus, in the case of a noncorporate taxpayer, $3,000
of ordinary income.
84
Tax basis information
. The Fund is required
to report to you and the IRS annually on Form 1099-B the cost basis of shares
purchased or acquired on or after January 1, 2012 where the cost basis of the
shares is known by the Fund (referred to as covered shares) and which are
disposed of after that date. However, cost basis reporting is not required for
certain shareholders, including shareholders investing in the Fund through a
tax-advantaged retirement account, such as a 401(k) plan or an individual
retirement account, or shareholders investing in a money market fund that
maintains a stable net asset value.
When required to report cost basis, the Fund will calculate it using the
Funds default method, unless you instruct the Fund to use a different
calculation method. For additional information regarding the Funds available
cost basis reporting methods, including its default method, please contact the
Fund. If you hold your Fund shares through a broker (or other nominee), please
contact that broker (nominee) with respect to reporting of cost basis and
available elections for your account.
The IRS permits the use of several methods to determine the cost basis of
mutual fund shares. The method used will determine which specific shares are
deemed to be sold when there are multiple purchases on different dates at
differing share prices, and the entire position is not sold at one time. The
Fund does not recommend any particular method of determining cost basis, and the
use of other methods may result in more favorable tax consequences for some
shareholders. It is important that you consult with your tax advisor to
determine which method is best for you and then notify the Fund if you intend to
utilize a method other than the Funds default method for covered shares. If you
do not notify the Fund of your elected cost basis method upon the later of
January 1, 2012 or the initial purchase into your account, the default method
will be applied to your covered shares.
The Fund will compute and report the cost basis of your Fund shares sold or
exchanged by taking into account all of the applicable adjustments to cost basis
and holding periods as required by the Internal Revenue Code and Treasury
regulations for purposes of reporting these amounts to you and the IRS. However
the Fund is not required to, and in many cases the Fund does not possess the
information to, take all possible basis, holding period or other adjustments
into account in reporting cost basis information to you. Therefore, shareholders
should carefully review the cost basis information provided by the Fund.
Please refer to the Funds website at www.delawareinvestments.com for
additional information.
Wash sales
. All or a portion of any loss that
you realize on a redemption of your Fund shares will be disallowed to the extent
that you buy other shares in the Fund (through reinvestment of dividends or
otherwise) within 30 days before or after your share redemption. Any loss
disallowed under these rules will be added to your tax basis in the new shares.
Redemptions at a loss within six months of purchase
. Any loss incurred on a redemption or exchange of shares held for six
months or less will be treated as long-term capital loss to the extent of any
long-term capital gain distributed to you by the Fund on those
shares.
Deferral of basis
. If a shareholder (a)
incurs a sales load in acquiring shares of the Fund, (b) disposes of such shares
less than 91 days after they are acquired, and (c) subsequently acquires shares
of the Fund or another fund by January 31 of the calendar year following the
calendar year in which the disposition of the original shares occurred at a
reduced sales load pursuant to a right to reinvest at such reduced sales load
acquired in connection with the acquisition of the shares disposed of, then the
sales load on the shares disposed of (to the extent of the reduction in the
sales load on the shares subsequently acquired) shall not be taken into account
in determining gain or loss on the shares disposed of, but shall be treated as
incurred on the acquisition of the shares subsequently acquired. The wash sale
rules may also limit the amount of loss that may be taken into account on
disposition after such adjustment.
85
Conversion of shares into shares of the
same
Fund.
The conversion of shares of one class into another class of
the same Fund is not taxable for federal income tax purposes. Thus, the
automatic conversion of Class B shares into Class A shares of the same Fund at
the end of approximately eight years after purchase will be tax-free for federal
income tax purposes. Similarly, the exchange of Class A shares or Class C shares
for Institutional Class shares of the same Fund by certain Programs, or the
exchange of Institutional Class shares for Class A shares or Class C shares of
the same Fund by certain shareholders of Institutional Class shares who cease
participation in a Program, will be tax-free for federal income tax purposes.
Shareholders should also consult their tax advisors regarding the state and
local tax consequences of a conversion or exchange of shares.
Reportable transactions.
Under Treasury
regulations, if a shareholder recognizes a loss with respect to the Funds
shares of $2 million or more for an individual shareholder or $10 million or
more for a corporate shareholder (or certain greater amounts over a combination
of years), the shareholder must file with the IRS a disclosure statement on Form
8886. The fact that a loss is reportable under these regulations does not affect
the legal determination of whether the taxpayers treatment of the loss is
proper. Shareholders should consult their tax advisers to determine the
applicability of these regulations in light of their individual
circumstances.
Tax Treatment of Portfolio
Transactions
. Set forth below is a
general description of the tax treatment of certain types of securities,
investment techniques and transactions that may apply to a fund and, in turn,
affect the amount, character and timing of dividends and distributions payable
by the fund to its shareholders. This section should be read in conjunction with
the discussion above under Investment Strategies and Risks
for a detailed description
of the various types of securities and investment techniques that apply to the
Fund.
In
general
. In general, gain or loss recognized
by a fund on the sale or other disposition of portfolio investments will be a
capital gain or loss. Such capital gain and loss may be long-term or short-term
depending, in general, upon the length of time a particular investment position
is maintained and, in some cases, upon the nature of the transaction. Property
held for more than one year generally will be eligible for long-term capital
gain or loss treatment. The application of certain rules described below may
serve to alter the manner in which the holding period for a security is
determined or may otherwise affect the characterization as long-term or
short-term, and also the timing of the realization and/or character, of certain
gains or losses.
Certain fixed-income investments
. Gain
recognized on the disposition of a debt obligation purchased by a fund at a
market discount (generally, at a price less than its principal amount) will be
treated as ordinary income to the extent of the portion of the market discount
which accrued during the period of time the fund held the debt obligation unless
the fund made a current inclusion election to accrue market discount into income
as it accrues. If a fund purchases a debt obligation (such as a zero coupon
security or pay-in-kind security) that was originally issued at a discount, the
fund generally is required to include in gross income each year the portion of
the original issue discount which accrues during such year. Therefore, a funds
investment in such securities may cause the fund to recognize income and make
distributions to shareholders before it receives any cash payments on the
securities. To generate cash to satisfy those distribution requirements, a fund
may have to sell portfolio securities that it otherwise might have continued to
hold or to use cash flows from other sources such as the sale of fund shares.
Investments in debt obligations that
are at risk of or in default present tax issues for a fund
. Tax rules are not entirely clear about issues such as
whether and to what extent a fund should recognize market discount on a debt
obligation, when a fund may cease to accrue interest, original issue discount or
market discount, when and to what extent a fund may take deductions for bad
debts or worthless securities and how a fund should allocate payments received
on obligations in default between principal and income. These and other related
issues will be addressed by a fund in order to ensure that it distributes
sufficient income to preserve its status as a regulated investment
company.
86
Options, futures, forward contracts, swap agreements and hedging
transactions
. In general, option premiums
received by a fund are not immediately included in the income of the fund.
Instead, the premiums are recognized when the option contract expires, the
option is exercised by the holder, or the fund transfers or otherwise terminates
the option (e.g., through a closing transaction). If an option written by a fund
is exercised and the fund sells or delivers the underlying stock, the
fund generally will recognize capital gain or loss equal to (a) sum of the
strike price and the option premium received by the fund minus (b) the funds
basis in the stock. Such gain or loss generally will be short-term or long-term
depending upon the holding period of the underlying stock. If securities are
purchased by a fund pursuant to the exercise of a put option written by it, the
fund generally will subtract the premium received from its cost basis in the
securities purchased. The gain or loss with respect to any termination of a
funds obligation under an option other than through the exercise of the option
and related sale or delivery of the underlying stock generally will be
short-term gain or loss depending on whether the premium income received by the
fund is greater or less than the amount paid by the fund (if any) in terminating
the transaction. Thus, for example, if an option written by a fund expires
unexercised, the fund generally will recognize short-term gain equal to the
premium received.
The tax treatment of certain futures contracts entered into by a fund as
well as listed non-equity options written or purchased by the fund on U.S.
exchanges (including options on futures contracts, broad-based equity indices
and debt securities) may be governed by section 1256 of the Internal Revenue
Code (section 1256 contracts). Gains or losses on section 1256 contracts
generally are considered 60% long-term and 40% short-term capital gains or
losses (60/40), although certain foreign currency gains and losses from such
contracts may be treated as ordinary in character. Also, any section 1256
contracts held by a fund at the end of each taxable year (and, for purposes of
the 4% excise tax, on certain other dates as prescribed under the Internal
Revenue Code) are marked to market with the result that unrealized gains or
losses are treated as though they were realized and the resulting gain or loss
is treated as ordinary or 60/40 gain or loss, as applicable. Section 1256
contracts do not include any interest rate swap, currency swap, basis swap,
interest rate cap, interest rate floor, commodity swap, equity swap, equity
index swap, credit default swap, or similar agreement.
In addition to the special rules described above in respect of options and
futures transactions, a funds transactions in other derivative instruments
(including options, forward contracts and swap agreements) as well as its other
hedging, short sale, or similar transactions, may be subject to one or more
special tax rules (including the constructive sale, notional principal contract,
straddle, wash sale and short sale rules). These rules may affect whether gains
and losses recognized by a fund are treated as ordinary or capital or as
short-term or long-term, accelerate the recognition of income or gains to the
fund, defer losses to the fund, and cause adjustments in the holding periods of
the funds securities. These rules, therefore, could affect the amount, timing
and/or character of distributions to shareholders. Moreover, because the tax
rules applicable to derivative financial instruments are in some cases uncertain
under current law, an adverse determination or future guidance by the IRS with
respect to these rules (which determination or guidance could be retroactive)
may affect whether a fund has made sufficient distributions, and otherwise
satisfied the relevant requirements, to maintain its qualification as a
regulated investment company and avoid a fund-level tax.
Certain of a funds investments in derivatives and foreign
currency-denominated instruments, and the funds transactions in foreign
currencies and hedging activities, may produce a difference between its book
income and its taxable income. If a funds book income is less than the sum of
its taxable income and net tax-exempt income (if any), the fund could be
required to make distributions exceeding book income to qualify as a regulated
investment company. If a funds book income exceeds the sum of its taxable
income and net tax-exempt income (if any), the distribution of any such excess
will be treated as (i) a dividend to the extent of the funds remaining earnings
and profits (including current earnings and profits arising from tax-exempt
income, reduced by related deductions), (ii) thereafter, as a return of capital
to the extent of the recipients basis in the shares, and (iii) thereafter, as
gain from the sale or exchange of a capital asset.
Foreign currency transactions
. A funds
transactions in foreign currencies, foreign currency-denominated debt
obligations and certain foreign currency options, futures contracts and forward
contracts (and similar instruments) may give rise to ordinary income or loss to
the extent such income or loss results from fluctuations in the value of the
foreign currency concerned. This treatment could increase or decrease a fund's
ordinary income distributions to you, and may cause some or all of the fund's
previously distributed income to be classified as a return of capital. In
certain cases, a fund may make an election to treat such gain or loss as
capital.
87
PFIC investments
.
A fund may invest in securities of
foreign companies that may be classified under the Internal Revenue Code as
PFICs. In general, a foreign company is classified as a PFIC if at least
one-half of its assets constitute investment-type assets or 75% or more of its
gross income is investment-type income. When investing in PFIC securities, a
fund intends to mark-to-market these securities under certain provisions of the
Internal Revenue Code and recognize any unrealized gains as ordinary income at
the end of the funds fiscal and excise tax years. Deductions for losses are
allowable only to the extent of any current or previously recognized gains.
These gains (reduced by allowable losses) are treated as ordinary income that a
fund is required to distribute, even though it has not sold or received
dividends from these securities. You should also be aware that the designation
of a foreign security as a PFIC security will cause its income dividends to fall
outside of the definition of qualified foreign corporation dividends. These
dividends generally will not qualify for the reduced rate of taxation on
qualified dividends when distributed to you by a fund. Foreign companies are not
required to identify themselves as PFICs. Due to various complexities in
identifying PFICs, a fund can give no assurances that it will be able to
identify portfolio securities in foreign corporations that are PFICs in time for
the fund to make a mark-to-market election. If a fund is unable to identify an
investment as a PFIC and thus does not make a mark-to-market election, the fund
may be subject to U.S. federal income tax on a portion of any excess
distribution or gain from the disposition of such shares even if such income is
distributed as a taxable dividend by the fund to its shareholders. Additional
charges in the nature of interest may be imposed on a fund in respect of
deferred taxes arising from such distributions or gains.
Investments in U.S. REITs.
A U.S. REIT is not
subject to federal income tax on the income and gains it distributes to
shareholders. Dividends paid by a U.S. REIT, other than capital gain
distributions, will be taxable as ordinary income up to the amount of the U.S.
REITs current and accumulated earnings and profits. Capital gain dividends paid
by a U.S. REIT to a fund will be treated as long term capital gains by the fund
and, in turn, may be distributed by the fund to its shareholders as a capital
gain distribution. Because of certain noncash expenses, such as property
depreciation, an equity U.S. REITs cash flow may exceed its taxable income. The
equity U.S. REIT, and in turn a fund, may distribute this excess cash to
shareholders in the form of a return of capital distribution. However, if a U.S.
REIT is operated in a manner that fails to qualify as a REIT, an investment in
the U.S. REIT would become subject to double taxation, meaning the taxable
income of the U.S. REIT would be subject to federal income tax at regular
corporate rates without any deduction for dividends paid to shareholders and the
dividends would be taxable to shareholders as ordinary income (or possibly as
qualified dividend income) to the extent of the U.S. REITs current and
accumulated earnings and profits. Also, see, Tax Treatment of Portfolio
Transactions
Investment in taxable mortgage pools (excess inclusion income) and Non-U.S.
Investors
Investment in U.S. real property below with respect to certain other tax
aspects of investing in U.S. REITs.
Investment in non-U.S.
REITs
. While non-U.S. REITs often use complex
acquisition structures that seek to minimize taxation in the source country, an
investment by a fund in a non-U.S. REIT may subject the fund, directly or
indirectly, to corporate taxes, withholding taxes, transfer taxes and other
indirect taxes in the country in which the real estate acquired by the non-U.S.
REIT is located. A funds pro rata share of any such taxes will reduce the
funds return on its investment. A funds investment in a non-U.S. REIT may be
considered an investment in a PFIC, as discussed above in PFIC investments.
Additionally, foreign withholding taxes on distributions from the non-U.S. REIT
may be reduced or eliminated under certain tax treaties, as discussed above in
Taxation of the Fund Foreign income tax. Also, a fund in certain limited
circumstances may be required to file an income tax return in the source country
and pay tax on any gain realized from its investment in the non-U.S. REIT under
rules similar to those in the United States which tax foreign persons on gain
realized from dispositions of interests in U.S. real estate
.
88
Investment in taxable mortgage pools (excess inclusion
income).
Under a Notice issued by the IRS, the Internal Revenue Code and Treasury
regulations to be issued, a portion of a funds income from a U.S. REIT that is
attributable to the REITs residual interest in a REMIC or equity interests in a
taxable mortgage pool (referred to in the Internal Revenue Code as an excess
inclusion) will be subject to federal income tax in all events. The excess
inclusion income of a regulated investment company, such as a fund, will be
allocated to shareholders of the regulated investment company in proportion to
the dividends received by such shareholders, with the same consequences as if
the shareholders held the related REMIC residual interest or, if applicable,
taxable mortgage pool directly. In general, excess inclusion income
allocated to shareholders (i) cannot be offset by net operating losses (subject
to a limited exception for certain thrift institutions), (ii) will constitute
unrelated business taxable income (UBTI) to entities (including qualified
pension plans, individual retirement accounts, 401(k) plans, Keogh plans or
other tax-exempt entities) subject to tax on UBTI, thereby potentially requiring
such an entity that is allocated excess inclusion income, and otherwise might
not be required to file a tax return, to file a tax return and pay tax on such
income, and (iii) in the case of a foreign stockholder, will not qualify for any
reduction in U.S. federal withholding tax. In addition, if at any time during
any taxable year a disqualified organization (which generally includes certain
cooperatives, governmental entities, and tax-exempt organizations not subject to
UBTI) is a record holder of a share in a regulated investment company, then the
regulated investment company will be subject to a tax equal to that portion of
its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations. The Notice imposes certain reporting requirements upon
regulated investment companies that have excess inclusion income. There can be
no assurance that a fund will not allocate to shareholders excess inclusion
income.
These
rules are potentially applicable to a fund with respect to any income it
receives from the equity interests of certain mortgage pooling vehicles, either
directly or, as is more likely, through an investment in a U.S. REIT. It is
unlikely that these rules will apply to a fund that has a non-REIT
strategy.
Investments in partnerships and QPTPs
.
For purposes of the Income Requirement, income derived by a fund from a
partnership that is
not
a QPTP will be treated as qualifying income only to the
extent such income is attributable to items of income of the partnership that
would be qualifying income if realized directly by the fund. For purposes of
testing whether a fund satisfies the Asset Diversification Test, the fund
generally is treated as owning a pro rata share of the underlying assets of a
partnership. See, Taxation of the Fund. In contrast, different rules apply to
a partnership that is a QPTP. A QPTP is a partnership (a) the interests in which
are traded on an established securities market, (b) that is treated as a
partnership for federal income tax purposes, and (c) that derives less than 90%
of its income from sources that satisfy the Income Requirement (e.g., because it
invests in commodities). All of the net income derived by a fund from an
interest in a QPTP will be treated as qualifying income but the fund may not
invest more than 25% of its total assets in one or more QPTPs. However, there
can be no assurance that a partnership classified as a QPTP in one year will
qualify as a QPTP in the next year. Any such failure to annually qualify as a
QPTP might, in turn, cause a fund to fail to qualify as a regulated investment
company. Although, in general, the passive loss rules of the Internal Revenue
Code do not apply to RICs, such rules do apply to a fund with respect to items
attributable to an interest in a QPTP. Fund investments in partnerships,
including in QPTPs, may result in the fund's being subject to state, local or
foreign income, franchise or withholding tax liabilities.
Securities lending
. While securities are
loaned out by a fund, the fund generally will receive from the borrower amounts
equal to any dividends or interest paid on the borrowed securities. For federal
income tax purposes, payments made in lieu of dividends are not considered
dividend income. These distributions will neither qualify for the reduced rate
of taxation for individuals on qualified dividends nor the 70% dividends
received deduction for corporations. Also, any foreign tax withheld on payments
made in lieu of dividends or interest will not qualify for the pass-through of
foreign tax credits to shareholders. Additionally, in the case of a fund with a
strategy of investing in tax-exempt securities, any payments made "in lieu of"
tax-exempt interest will be considered taxable income to the fund, and thus, to
the investors, even though such interest may be tax-exempt when paid to the
borrower.
Investments in convertible securities
.
Convertible debt is ordinarily treated as a single property consisting of a
pure debt interest until conversion, after which the investment becomes an
equity interest. If the security is issued at a premium (i.e., for cash in
excess of the face amount payable on retirement), the creditor-holder may
amortize the premium over the life of the bond. If the security is issued for
cash at a price below its face amount, the creditor-holder must accrue original
issue discount in income over the life of the debt. The creditor-holder's
exercise of the conversion privilege is treated as a nontaxable event.
Mandatorily convertible debt (e.g., an exchange traded note or ETN issued in the
form of an unsecured obligation that pays a return based on the performance of a
specified market index, exchange currency, or commodity) is often, but not
always, treated as a contract to buy or sell the
reference property rather than debt. Similarly, convertible preferred stock with
a mandatory conversion feature is ordinarily, but not always, treated as equity
rather than debt. Dividends received generally are qualified dividend income and
eligible for the corporate dividends received deduction. In general, conversion
of preferred stock for common stock of the same corporation is tax-free.
Conversion of preferred stock for cash is a taxable redemption. Any redemption
premium for preferred stock that is redeemable by the issuing company might be
required to be amortized under original issue discount (OID)
principles.
89
Investments in securities of
uncertain tax character.
A fund may invest in
securities the U.S. federal income tax treatment of which may not be clear or
may be subject to recharacterization by the IRS. To the extent the tax treatment
of such securities or the income from such securities differs from the tax
treatment expected by a fund, it could affect the timing or character of income
recognized by the fund, requiring the fund to purchase or sell securities, or
otherwise change its portfolio, in order to comply with the tax rules applicable
to regulated investment companies under the Internal Revenue Code.
Backup Withholding
. By law,
the Fund may be required to withhold a portion of your taxable dividends and
sales proceeds unless you:
-
provide your correct social security or taxpayer
identification number,
-
certify that this number is correct,
-
certify that you are not subject to backup withholding,
and
-
certify that you are a U.S. person (including a U.S. resident
alien).
The Fund also must withhold if the IRS
instructs it to do so. When withholding is required, the amount will be 28% of
any distributions or proceeds paid. This rate will expire and the backup
withholding rate will be 31% for amounts paid after December 31, 2012, unless
the 28% rate is extended, possibly retroactively to January 1, 2013, or made
permanent. Backup withholding is not an additional tax. Any amounts withheld may
be credited against the shareholders U.S. federal income tax liability,
provided the appropriate information is furnished to the IRS. Certain payees and
payments are exempt from backup withholding and information reporting. The
special U.S. tax certification requirements applicable to non-U.S. investors to
avoid backup withholding are described under the Non-U.S. Investors heading
below.
Non-U.S.
Investors
. Non-U.S. investors
(shareholders who, as to the United States, are nonresident alien individuals,
foreign trusts or estates, foreign corporations, or foreign partnerships) may be
subject to U.S. withholding and estate tax and are subject to special U.S. tax
certification requirements. Non-U.S. investors should consult their tax advisors
about the applicability of U.S. tax withholding and the use of the appropriate
forms to certify their status.
In
general
. The United States imposes a flat 30%
withholding tax (or a withholding tax at a lower treaty rate) on U.S. source
dividends, including on income dividends paid to you by the Fund. Exemptions
from this U.S. withholding tax are provided for capital gain dividends paid by
the Fund from its net long-term capital gains and, with respect to taxable years
of the Fund beginning
before
January 1, 2012 (unless such provision is extended, possibly
retroactively to January 1, 2012, or made permanent), interest-related dividends
paid by the Fund from its qualified net interest income from U.S. sources and
short-term capital gain dividends. However, notwithstanding such exemptions from
U.S. withholding at the source, any dividends and distributions of income and
capital gains, including the proceeds from the sale of your Fund shares, will be
subject to backup withholding at a rate of 28% (subject to increase to 31% as
described above) if you fail to properly certify that you are not a U.S.
person.
Capital gain dividends and short-term capital gain dividends
. In general, (i) a capital gain dividend reported by the Fund
to shareholders as paid from its net long-term capital gains, or (ii) with
respect to taxable years of the Fund beginning before January 1, 2012 (unless
such provision is extended, possibly retroactively to January 1, 2012, or made
permanent), a short-term capital gain dividend reported by the Fund to
shareholders as paid from its net short-term capital gains, other than long- or
short-term capital gains realized on disposition of U.S. real property interests (see the discussion below), are not subject to
U.S. withholding tax unless you are a nonresident alien individual present in
the United States for a period or periods aggregating 183 days or more during
the calendar year. After such sunset date, short-term capital gains are taxable
to non-U.S. investors as ordinary dividends subject to U.S. withholding tax at a
30% or lower treaty rate.
90
Interest-related dividends.
With respect to taxable years of the Fund
beginning before January 1, 2012 (unless such provision is extended, possibly
retroactively to January 1, 2012, or made permanent), dividends reported by the
Fund to shareholders as interest-related dividends and paid from its qualified
net interest income from U.S. sources are not subject to U.S. withholding tax.
Qualified interest income includes, in general, U.S. source (1) bank deposit
interest, (2) short-term original discount, (3) interest (including original
issue discount, market discount, or acquisition discount) on an obligation which
is in registered form, unless it is earned on an obligation issued by a
corporation or partnership in which the Fund is a 10-percent shareholder or is
contingent interest, and (4) any interest-related dividend from another
regulated investment company. On any payment date, the amount of an income
dividend that is reported by the Fund to shareholders as an interest-related
dividend may be more or less than the amount that is so qualified. This is
because the reporting is based on an estimate of the Funds qualified net
interest income for its entire fiscal year, which can only be determined with
exactness at fiscal year end. As a consequence, the Fund may over withhold a
small amount of U.S. tax from a dividend payment. In this case, the non-U.S.
investors only recourse may be to either forgo recovery of the excess
withholding, or to file a United States nonresident income tax return to recover
the excess withholding.
Further limitations on tax reporting
for interest-related dividends and short-term capital gain dividends for
non-U.S. investors
. It may not be practical
in every case for the Fund to report, and the Fund reserves the right in these
cases to not report, small amounts of interest-related or short-term capital
gain dividends. Additionally, the Funds reporting of interest-related or
short-term capital gain dividends may not be passed through to shareholders by
intermediaries who have assumed tax reporting responsibilities for this income
in managed or omnibus accounts due to systems limitations or operational
constraints.
Net investment income from dividends
on stock and foreign source interest income continue to be subject to
withholding tax; foreign tax credits.
Ordinary dividends paid by the Fund to non-U.S. investors on the income
earned on portfolio investments in (i) the stock of domestic and foreign
corporations and (ii) the debt of foreign issuers continue to be subject to U.S.
withholding tax. Foreign shareholders may be subject to U.S. withholding tax at
a rate of 30% on the income resulting from an election to pass-through foreign
tax credits to shareholders, but may not be able to claim a credit or deduction
with respect to the withholding tax for the foreign tax treated as having been
paid by them.
Income effectively connected with a U.S. trade or business
. If the income from the Fund is effectively connected with a
U.S. trade or business carried on by a foreign shareholder, then ordinary income
dividends, capital gain dividends and any gains realized upon the sale or
redemption of shares of the Fund will be subject to U.S. federal income tax at
the rates applicable to U.S. citizens or domestic corporations and require the
filing of a nonresident U.S. income tax return.
Investment in U.S. real property
. The Fund
may invest in equity securities of corporations that invest in U.S. real
property, including U.S. REITs. The sale of a U.S. real property interest
(USRPI) by the Fund or by a U.S. REIT or U.S. real property holding
corporation in which the Fund invests may trigger special tax consequences to
the Funds non-U.S. shareholders.
91
The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) makes
non-U.S. persons subject to U.S. tax on disposition of a USRPI as if he or she
were a U.S. person. Such gain is sometimes referred to as FIRPTA gain. The
Internal Revenue Code provides a look-through rule for distributions of FIRPTA
gain by a RIC received from a U.S. REIT or another RIC classified as a U.S. real
property holding corporation or realized by the RIC on a sale of a USRPI (other
than a domestically controlled U.S. REIT or RIC that is classified as a
qualified investment entity) as follows:
-
The RIC is classified as a qualified investment
entity. A RIC is classified as a qualified investment entity with respect to
a distribution to a non-U.S. person which is attributable directly or
indirectly to a distribution from a U.S. REIT if, in general, 50% or more of
the RICs assets consists of interests in U.S. REITs and U.S. real property
holding corporations, and
-
You are a non-U.S. shareholder that owns more than
5% of a class of Fund shares at any time during the one-year period ending on
the date of the distribution.
-
If these conditions are met, such Fund
distributions to you are treated as gain from the disposition of a USRPI,
causing the distributions to be subject to U.S. withholding tax at a rate of
35% (unless reduced by future regulations), and requiring that you file a
nonresident U.S. income tax return.
-
In addition, even if you do not own more than 5%
of a class of Fund shares, but the Fund is a qualified investment entity, such
Fund distributions to you will be taxable as ordinary dividends (rather than
as a capital gain or short-term capital gain dividend) subject to withholding
at 30% or lower treaty rate.
These
rules apply to dividends paid by the Fund before January 1, 2012 (unless such
provision is extended, possibly retroactively to January 1, 2012, or made
permanent). After such sunset date, Fund distributions from a U.S. REIT (whether
or not domestically controlled) attributable to FIRPTA gain will continue to be
subject to the withholding rules described above provided the Fund would
otherwise be classified as a qualified investment entity.
Because the Fund expects to invest less than 50% of its assets at all
times, directly or indirectly, in U.S. real property interests, the Fund expects
that neither gain on the sale or redemption of Fund shares nor Fund dividends
and distributions would be subject to FIRPTA reporting and tax
withholding.
U.S. estate tax
. Transfers by gift of
shares of the Fund by a foreign shareholder who is a nonresident alien
individual will not be subject to U.S. federal gift tax. An individual who, at
the time of death, is a non-U.S. shareholder will nevertheless be subject to
U.S. federal estate tax with respect to Fund shares at the graduated rates
applicable to U.S. citizens and residents, unless a treaty exemption applies. If
a treaty exemption is available, a decedents estate may nonetheless need to
file a U.S. estate tax return to claim the exemption in order to obtain a U.S.
federal transfer certificate. The transfer certificate will identify the
property (i.e., Fund shares) as to which the U.S. federal estate tax lien has
been released. In the absence of a treaty, there is a $13,000 statutory estate
tax credit (equivalent to U.S. situs assets with a value of $60,000). For
estates with U.S. situs assets of not more than $60,000, the Fund may accept, in
lieu of a transfer certificate, an affidavit from an appropriate individual
evidencing that decedents U.S. situs assets are below this threshold amount. In
addition, a partial exemption from U.S. estate tax may apply to Fund shares held
by the estate of a nonresident decedent. The amount treated as exempt is based
upon the proportion of the assets held by the Fund at the end of the quarter
immediately preceding the decedent's death that are debt obligations, deposits,
or other property that generally would be treated as situated outside the United
States if held directly by the estate. This partial exemption applies to
decedents dying after December 31, 2004 and before January 1, 2012, unless such
provision is extended, possibly retroactively to January 1, 2012, or made
permanent.
U.S. tax certification rules
. Special
U.S. tax certification requirements may apply to non-U.S. shareholders both to
avoid U.S. backup withholding imposed at a rate of 28% (subject to increase to
31% as described above) and to obtain the benefits of any treaty between the
United States and the shareholders country of residence. In general, a non-U.S.
shareholder must provide a Form W-8 BEN (or other applicable Form W-8) to
establish that you are not a U.S. person, to claim that you are the beneficial
owner of the income and, if applicable, to claim a reduced rate of, or exemption
from, withholding as a resident of a country with which the United States has an
income tax treaty. A Form W-8 BEN provided without a U.S. taxpayer
identification number will remain in effect for a period beginning on the date
signed and ending on the last day of the third succeeding calendar year unless
an earlier change of circumstances makes the information on the form incorrect.
Certain payees and payments are exempt from backup withholding.
The tax consequences to a non-U.S. shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Non-U.S. shareholders are urged to consult their own tax advisors with
respect to the particular tax consequences to them of an investment in the Fund,
including the applicability of foreign
tax.
92
Foreign Account Tax Compliance Act (FATCA).
Under the Foreign Account Tax Compliance Act, the relevant withholding
agent may be required to withhold 30% of: (a) income dividends paid after
December 31, 2013 and (b) certain capital gains distributions and the proceeds
of a sale of shares paid after December 31, 2016 to (i) a foreign financial
institution (FFI) unless the FFI becomes a participating FFI by entering
into a U.S. tax compliance agreement with the IRS under section 1471(b) of the
Internal Revenue Code (FFI agreement) and thereby agrees to verify, report and
disclose certain of its U.S. accountholders and meets certain other specified
requirements or (ii) a non-financial foreign entity that is the beneficial owner
of the payment unless such entity certifies that it does not have any
substantial U.S. owners or provides the name, address and taxpayer
identification number of each substantial U.S. owner and such entity meets
certain other specified requirements. These requirements are different from, and
in addition to, the U.S. tax certification rules described above. The scope of
these requirements remains unclear, and shareholders are urged to consult their
tax advisors regarding the application of these requirements to their own
situation.
Alternatively, the U.S. Treasury is in various stages of negotiations with
a number of foreign governments with respect to one or more other approaches to
implement FATCA. Under one proposed model agreement, FFIs located in a foreign
country that enters into an intergovernmental agreement with the U.S. Treasury
would be required to report U.S.-owned account information directly to their
local tax authority, rather than to the IRS. The local tax authority would then
automatically share that information with the IRS. Under another approach, FFIs
located in a foreign country that enters into an intergovernmental agreement
would not need to enter into a separate FFI Agreement with the IRS, provided
each FFI registers with the IRS. Under this approach, the FFIs would be required
to report U.S.-owned account information directly to the IRS as opposed to
reporting via the local tax authority.
Effect of Future Legislation; Local Tax
Considerations
. The foregoing
general discussion of U.S. federal income tax consequences is based on the
Internal Revenue Code and the regulations issued thereunder as in effect on the
date of this Statement of Additional Information. Future legislative or
administrative changes, including provisions of current law that sunset and
thereafter no longer apply, or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein. Rules
of state and local taxation of ordinary income, qualified dividend income and
capital gain dividends may differ from the rules for U.S. federal income
taxation described above. Distributions may also be subject to additional state,
local and foreign taxes depending on each shareholder's particular situation.
Non-U.S. shareholders may be subject to U.S. tax rules that differ significantly
from those summarized above. Shareholders are urged to consult their tax
advisors as to the consequences of these and other state and local tax rules
affecting investment in the Fund.
To obtain the Funds most current performance information, please call 800
523-1918 or visit delawareinvestments.com.
Performance quotations represent the Funds past performance and should not
be considered as representative of future results. The Funds will calculate
their performance in accordance with the requirements of the rules and
regulations under the 1940 Act, or any other applicable U.S. securities laws, as
they may be revised from time to time by the SEC.
PricewaterhouseCoopers LLP, which is located at 2001 Market Street,
Philadelphia, Pennsylvania 19103, serves as the independent registered public
accounting firm for the Trust and, in its capacity as such, audits the annual
financial statements contained in each Funds Annual Report. The Funds
Statements of Net Assets, Statement of Assets and Liabilities (where
applicable), Statements of Operations, Statements of Changes in Net Assets,
Financial Highlights, and Notes to Financial Statements, as well as the reports
of PricewaterhouseCoopers LLP, the independent registered public accounting
firm, for the fiscal year ended July 31, 2012, are included in each Funds
Annual Report to shareholders. The financial statement information for fiscal
years ended prior to July 31, 2010 were audited by the Funds prior independent
registered public accounting firm. The financial statements and financial
highlights, the notes relating thereto and the reports of PricewaterhouseCoopers
LLP listed above are incorporated by reference from the Annual Reports into this
Part B.
93
As of
October 31, 2012, management believes the following shareholders held of record
5% or more of the outstanding shares of each class of each Fund. Management does
not have knowledge of beneficial owners.
The
Manager and its affiliates may provide the initial seed capital in connection
with the creation of a Delaware Investments
®
product, such as
Delaware Core Bond Fund and Delaware Diversified Floating Rate Fund. To the
extent that the Manager or its affiliates maintain such seed capital in a
Delaware Investments
®
product, the Manager or its affiliates may engage in a
total return swap or other hedge on its investment for the sole purpose of
limiting the volatility of earnings of the Manager and its corporate parents.
Neither the Manager nor its affiliates seek to profit by hedging the seed
capital investments in the Delaware Investments
®
products, and the
total return swap or other hedge is not expected to have any effect on the
investment performance of any Delaware Investments
®
product.
Fund
Name
|
Class
|
Registration
Address Block
|
Percentage
|
|
|
|
of
Fund
|
DELAWARE
CORE
|
A
|
DMH
CORP
|
6.70%
|
BOND
FUND
|
|
ATTN
RICK SALUS
|
|
|
|
2005
MARKET ST FL 9
|
|
|
|
PHILADELPHIA
PA 19103-7007
|
|
|
A
|
DMTC
|
6.89%
|
|
|
C/F
THE ROLLOVER IRA OF
|
|
|
|
LUCILLE
R BUSH
|
|
|
|
HAROLD
KY 41635
|
|
|
A
|
PERSHING
LLC1
|
14.62%
|
|
|
PERSHING
PLAZA
|
|
|
|
JERSEY
CITY NJ 07399-0002
|
|
|
C
|
ATTN
JEFFERY PASSER
|
6.23%
|
|
|
SOUTH
CENTRAL MUTUAL INS CO
|
|
|
|
1120
GIANT DRIVE
|
|
|
|
BLUE
EARTH MN 56013-0037
|
|
|
C
|
CROWELL,
WEEDON & CO
|
18.67%
|
|
|
VINE
FOUNDATION
|
|
|
|
ONE
WILSHIRE BUILDING
|
|
|
|
624
SOUTH GRAND AVENUE
|
|
|
|
LOS
ANGELES, CA 90017
|
|
|
C
|
NFS
LLC
|
17.10%
|
|
|
FEBO
NFS/FMTC ROTH IRA
|
|
|
|
FBO
ELAINE T HADDAD
|
|
|
|
BLOOMFLD
HLS MI 48302
|
|
|
C
|
PERSHING
LLC
|
5.86%
|
|
|
1
PERSHING PLAZA
|
|
|
|
JERSEY
CITY NJ 07399-0002
|
|
94
|
C
|
PTC
|
5.21%
|
|
|
CUST
IRA
|
|
|
|
FBO
WILLIAM C ROGERS JR
|
|
|
|
KINGSVILLE
MD 21087
|
|
|
C
|
RAYMOND
JAMES
|
8.46%
|
|
|
OMNIBUS
FOR MUTUAL FUNDS
|
|
|
|
ATTN
COURTNEY WALLER
|
|
|
|
880
CARILLON PARKWAY
|
|
|
|
ST
PETERSBURG FL 33713
|
|
|
I
|
DINGLE
& CO
|
11.64%
|
|
|
P
O BOX 75000
|
|
|
|
DETROIT
MI 48275-3446
|
|
|
I
|
THE
CATHOLIC FOUNDATION
|
5.51%
|
|
|
5310
HARVEST HILL RD STE 248
|
|
|
|
DALLAS
TX 75230-5891
|
|
|
I
|
UMBSC
& CO
|
62.30%
|
|
|
FBO
WELS INCOME FUND PRI USD
|
|
|
|
PO
BOX 419260
|
|
|
|
KANSAS
CITY MO 64141-6260
|
|
|
R
|
DMH
CORP
|
98.99%
|
|
|
ATTN
RICK SALUS
|
|
|
|
2005
MARKET ST FL 9
|
|
|
|
PHILADELPHIA
PA 19103-7007
|
|
DELAWARE
|
A
|
FIRST
CLEARING LLC
|
5.55%
|
CORPORATE
BOND
|
|
SPECIAL
CUSTODY ACCT FOR THE
|
|
FUND
|
|
EXCLUSIVE
BENEFIT OF
|
|
|
|
CUSTOMER
|
|
|
|
2801
MARKET ST
|
|
|
|
SAINT
LOUIS MO 63103-2523
|
|
|
A
|
MLPF&S
FOR THE SOLE
|
8.34%
|
|
|
BENEFIT
OF ITS CUSTOMERS
|
|
|
|
ATTENTION:
FUND ADMIN
|
|
|
|
4800
DEER LAKE DRIVE E, FL2
|
|
|
|
JACKSONVILLE
FL 32246-6484
|
|
|
A
|
MORGAN
STANLEY SMITH
|
10.09%
|
|
|
BARNEY
|
|
|
|
HARBORSIDE
FINANCIAL CENTER
|
|
|
|
PLAZA
2 3RD FL
|
|
|
|
JERSEY
CITY NJ 07311
|
|
|
A
|
PERSHING
LLC
|
9.94%
|
|
|
1
PERSHING PLAZA
|
|
|
|
JERSEY
CITY NJ 07399-0002
|
|
|
A
|
UBS
WM USA
|
12.30%
|
|
|
OMNI
ACCOUNT M/F
|
|
|
|
ATTN
DEPARTMENT MANAGER
|
|
|
|
499
WASHINGTON BLVD FL 9
|
|
|
|
JERSEY
CITY NJ 07310-2055
|
|
|
B
|
FIRST
CLEARING LLC
|
9.92%
|
|
|
SPECIAL
CUSTODY ACCT FOR THE
|
|
|
|
EXCLUSIVE
BENEFIT OF
|
|
|
|
CUSTOMER
|
|
|
|
2801
MARKET ST
|
|
|
|
SAINT
LOUIS MO 63103-2523
|
|
95
|
B
|
MLPF&S
FOR THE SOLE
|
12.01%
|
|
|
BENEFIT
OF ITS CUSTOMERS
|
|
|
|
ATTENTION:
FUND ADMIN
|
|
|
|
4800
DEER LAKE DRIVE E, FL2
|
|
|
|
JACKSONVILLE
FL 32246-6484
|
|
|
B
|
MORGAN
STANLEY SMITH
|
10.65%
|
|
|
BARNEY
|
|
|
|
HARBORSIDE
FINANCIAL CENTER
|
|
|
|
PLAZA
2 3RD FL
|
|
|
|
JERSEY
CITY NJ 07311
|
|
|
B
|
PERSHING
LLC
|
20.87%
|
|
|
1
PERSHING PLAZA
|
|
|
|
JERSEY
CITY NJ 07399-0002
|
|
|
B
|
UBS
WM USA
|
5.97%
|
|
|
OMNI
ACCOUNT M/F
|
|
|
|
ATTN
DEPARTMENT MANAGER
|
|
|
|
499
WASHINGTON BLVD FL 9
|
|
|
|
JERSEY
CITY NJ 07310-2055
|
|
|
C
|
FIRST
CLEARING LLC
|
14.68%
|
|
|
SPECIAL
CUSTODY ACCT FOR THE
|
|
|
|
EXCLUSIVE
BENEFIT OF
|
|
|
|
CUSTOMER
|
|
|
|
2801
MARKET ST
|
|
|
|
SAINT
LOUIS MO 63103-2523
|
|
|
C
|
MLPF&S
FOR THE SOLE
|
45.37%
|
|
|
BENEFIT
OF ITS CUSTOMERS
|
|
|
|
ATTENTION:
FUND ADMIN
|
|
|
|
4800
DEER LAKE DRIVE E, FL2
|
|
|
|
JACKSONVILLE
FL 32246-6484
|
|
|
C
|
MORGAN
STANLEY SMITH
|
9.14%
|
|
|
BARNEY
|
|
|
|
HARBORSIDE
FINANCIAL CENTER
|
|
|
|
PLAZA
2 3RD FL
|
|
|
|
JERSEY
CITY NJ 07311
|
|
|
C
|
PERSHING
LLC
|
5.30%
|
|
|
1
PERSHING PLAZA
|
|
|
|
JERSEY
CITY NJ 07399-0002
|
|
|
C
|
UBS
WM USA
|
7.19%
|
|
|
OMNI
ACCOUNT M/F
|
|
|
|
ATTN
DEPARTMENT MANAGER
|
|
|
|
499
WASHINGTON BLVD FL 9
|
|
|
|
JERSEY
CITY NJ 07310-2055
|
|
|
I
|
FIRST
CLEARING LLC
|
12.89%
|
|
|
SPECIAL
CUSTODY ACCT FOR THE
|
|
|
|
EXCLUSIVE
BENEFIT OF
|
|
|
|
CUSTOMER
|
|
|
|
2801
MARKET ST
|
|
|
|
SAINT
LOUIS MO 63103-2523
|
|
|
I
|
MLPF&S
FOR THE SOLE
|
71.57%
|
|
|
BENEFIT
OF ITS CUSTOMERS
|
|
|
|
ATTENTION:
FUND ADMIN
|
|
|
|
4800
DEER LAKE DRIVE E, FL2
|
|
|
|
JACKSONVILLE
FL 32246-6484
|
|
96
|
R
|
ATTN
NPIO TRADE DESK
|
14.43%
|
|
|
DCGT
TRUSTEE & OR CUSTODIAN
|
|
|
|
FBO
PRINCIPAL FINANCIAL
|
|
|
|
GROUP
QUALIFIED FIA OMNIBUS
|
|
|
|
711
HIGH ST
|
|
|
|
DES
MOINES IA 50392-0001
|
|
|
R
|
ATTN
NPIO TRADE DESK
|
26.26%
|
|
|
DCGT
TRUSTEE & OR CUSTODIAN
|
|
|
|
FBO
PRINCIPAL FINANCIAL
|
|
|
|
GROUP
QUALIFIED PRIN ADVTG
|
|
|
|
OMNIBUS
|
|
|
|
711
HIGH ST
|
|
|
|
DES
MOINES IA 50392-0001
|
|
|
R
|
MLPF&S
FOR THE SOLE
|
22.62%
|
|
|
BENEFIT
OF ITS CUSTOMERS
|
|
|
|
ATTENTION:
FUND ADMIN
|
|
|
|
4800
DEER LAKE DRIVE E, FL2
|
|
|
|
JACKSONVILLE
FL 32246-6484
|
|
DELAWARE
|
A
|
FIRST
CLEARING LLC
|
9.42%
|
DIVERSIFIED
FLOATING
|
|
SPECIAL
CUSTODY ACCT FOR THE
|
|
RATE
FUND
|
|
EXCLUSIVE
BENEFIT OF
|
|
|
|
CUSTOMER
|
|
|
|
2801
MARKET ST
|
|
|
|
SAINT
LOUIS MO 63103-2523
|
|
|
A
|
MLPF&S
FOR THE SOLE
|
6.04%
|
|
|
BENEFIT
OF ITS CUSTOMERS
|
|
|
|
ATTENTION:
FUND ADMIN
|
|
|
|
4800
DEER LAKE DRIVE E, FL2
|
|
|
|
JACKSONVILLE
FL 32246-6484
|
|
|
A
|
MORGAN
STANLEY SMITH
|
23.91%
|
|
|
BARNEY
|
|
|
|
HARBORSIDE
FINANCIAL CENTER
|
|
|
|
PLAZA
2 3RD FL
|
|
|
|
JERSEY
CITY NJ 07311
|
|
|
A
|
PERSHING
LLC
|
18.41%
|
|
|
1
PERSHING PLAZA
|
|
|
|
JERSEY
CITY NJ 07399-0002
|
|
|
A
|
UBS
WM USA
|
24.03%
|
|
|
OMNI
ACCOUNT M/F
|
|
|
|
ATTN
DEPARTMENT MANAGER
|
|
|
|
499
WASHINGTON BLVD FL 9
|
|
|
|
JERSEY
CITY NJ 07310-2055
|
|
|
C
|
FIRST
CLEARING LLC
|
21.56%
|
|
|
SPECIAL
CUSTODY ACCT FOR THE
|
|
|
|
EXCLUSIVE
BENEFIT OF
|
|
|
|
CUSTOMER
|
|
|
|
2801
MARKET ST
|
|
|
|
SAINT
LOUIS MO 63103-2523
|
|
|
C
|
MLPF&S
FOR THE SOLE
|
22.56%
|
|
|
BENEFIT
OF ITS CUSTOMERS
|
|
|
|
ATTENTION:
FUND ADMIN
|
|
|
|
4800
DEER LAKE DRIVE E, FL2
|
|
|
|
JACKSONVILLE
FL 32246-6484
|
|
97
|
C
|
MORGAN
STANLEY SMITH
|
11.34%
|
|
|
BARNEY
|
|
|
|
HARBORSIDE
FINANCIAL CENTER
|
|
|
|
PLAZA
2 3RD FL
|
|
|
|
JERSEY
CITY NJ 07311
|
|
|
C
|
PERSHING
LLC
|
11.04%
|
|
|
1
PERSHING PLAZA
|
|
|
|
JERSEY
CITY NJ 07399-0002
|
|
|
C
|
UBS
WM USA
|
6.58%
|
|
|
OMNI
ACCOUNT M/F
|
|
|
|
ATTN
DEPARTMENT MANAGER
|
|
|
|
499
WASHINGTON BLVD FL 9
|
|
|
|
JERSEY
CITY NJ 07310-2055
|
|
|
I
|
FIRST
CLEARING LLC
|
30.72%
|
|
|
SPECIAL
CUSTODY ACCT FOR THE
|
|
|
|
EXCLUSIVE
BENEFIT OF
|
|
|
|
CUSTOMER
|
|
|
|
2801
MARKET ST
|
|
|
|
SAINT
LOUIS MO 63103-2523
|
|
|
I
|
LPL
FINANCIAL
|
11.02%
|
|
|
--OMNIBUS
CUSTOMER ACCOUNT-
|
|
|
|
ATTN:
LINDSAY O'TOOLE
|
|
|
|
9785
TOWNE CENTRE DR
|
|
|
|
SAN
DIEGO CA 92121
|
|
|
I
|
MLPF&S
FOR THE SOLE
|
37.25%
|
|
|
BENEFIT
OF ITS CUSTOMERS
|
|
|
|
ATTENTION:
FUND ADMIN
|
|
|
|
4800
DEER LAKE DRIVE E, FL2
|
|
|
|
JACKSONVILLE
FL 32246-6484
|
|
|
R
|
DMH
CORP
|
99.46%
|
|
|
ATTN
RICK SALUS
|
|
|
|
2005
MARKET ST FL 9
|
|
|
|
PHILADELPHIA
PA 19103-7007
|
|
DELAWARE
EXTENDED
|
A
|
MASSACHUSETTS
MUTUAL LIFE
|
28.12%
|
DURATION
BOND FUND
|
|
INS
CO
|
|
|
|
1295
STATE STREET - MIP C105
|
|
|
|
SPRINGFIELD
MA 01111-0001
|
|
|
A
|
MORGAN
STANLEY SMITH
|
5.37%
|
|
|
BARNEY
|
|
|
|
HARBORSIDE
FINANCIAL CENTER
|
|
|
|
PLAZA
2 3RD FL
|
|
|
|
JERSEY
CITY NJ 07311
|
|
|
A
|
PERSHING
LLC
|
6.16%
|
|
|
1
PERSHING PLAZA
|
|
|
|
JERSEY
CITY NJ 07399-0002
|
|
|
A
|
UBS
WM USA
|
9.20%
|
|
|
OMNI
ACCOUNT M/F
|
|
|
|
ATTN
DEPARTMENT MANAGER
|
|
|
|
499
WASHINGTON BLVD FL 9
|
|
|
|
JERSEY
CITY NJ 07310-2055
|
|
98
|
B
|
CHARLES
SCHWAB & CO INC
|
5.92%
|
|
|
SPECIAL
CUSTODY ACCT
|
|
|
|
FBO
CUSTOMERS
|
|
|
|
ATTN
MUTUAL FUNDS
|
|
|
|
211
MAIN ST
|
|
|
|
SAN
FRANCISCO CA 94105-1905
|
|
|
B
|
FIRST
CLEARING LLC
|
8.94%
|
|
|
SPECIAL
CUSTODY ACCT FOR THE
|
|
|
|
EXCLUSIVE
BENEFIT OF
|
|
|
|
CUSTOMER
|
|
|
|
2801
MARKET ST
|
|
|
|
SAINT
LOUIS MO 63103-2523
|
|
|
B
|
MLPF&S
FOR THE SOLE
|
15.48%
|
|
|
BENEFIT
OF ITS CUSTOMERS
|
|
|
|
ATTENTION:
FUND ADMIN
|
|
|
|
4800
DEER LAKE DRIVE E, FL2
|
|
|
|
JACKSONVILLE
FL 32246-6484
|
|
|
B
|
MORGAN
STANLEY SMITH
|
12.58%
|
|
|
BARNEY
|
|
|
|
HARBORSIDE
FINANCIAL CENTER
|
|
|
|
PLAZA
2 3RD FL
|
|
|
|
JERSEY
CITY NJ 07311
|
|
|
B
|
PERSHING
LLC
|
22.78%
|
|
|
1
PERSHING PLAZA
|
|
|
|
JERSEY
CITY NJ 07399-0002
|
|
|
C
|
FIRST
CLEARING LLC
|
11.31%
|
|
|
SPECIAL
CUSTODY ACCT FOR THE
|
|
|
|
EXCLUSIVE
BENEFIT OF
|
|
|
|
CUSTOMER
|
|
|
|
2801
MARKET ST
|
|
|
|
SAINT
LOUIS MO 63103-2523
|
|
|
C
|
MLPF&S
FOR THE SOLE
|
36.53%
|
|
|
BENEFIT
OF ITS CUSTOMERS
|
|
|
|
ATTENTION:
FUND ADMIN
|
|
|
|
4800
DEER LAKE DRIVE E, FL2
|
|
|
|
JACKSONVILLE
FL 32246-6484
|
|
|
C
|
PERSHING
LLC
|
10.55%
|
|
|
1
PERSHING PLAZA
|
|
|
|
JERSEY
CITY NJ 07399-0002
|
|
|
I
|
CHARLES
SCHWAB & CO INC
|
5.00%
|
|
|
SPEC
CUSTODY ACCT FOR THE
|
|
|
|
EXCL
BNFT OF CUSTS
|
|
|
|
ATTN
MUT FDS
|
|
|
|
211
MAIN ST
|
|
|
|
SAN
FRANCISCO CA 94105-1905
|
|
|
I
|
DCGT
AS TTEE AND/OR CUST
|
21.19%
|
|
|
FBO
PRINCIPAL FINANCIAL
|
|
|
|
GROUP
QUALIFIED FIA OMNIBUS
|
|
|
|
ATTN
NPIO TRADE DESK
|
|
|
|
711
HIGH STREET
|
|
|
|
DES
MOINES, IA 50303
|
|
99
|
I
|
FIRST
CLEARING LLC
|
10.42%
|
|
|
SPECIAL
CUSTODY ACCT FOR THE
|
|
|
|
EXCLUSIVE
BENEFIT OF
|
|
|
|
CUSTOMER
|
|
|
|
2801
MARKET ST
|
|
|
|
SAINT
LOUIS MO 63103-2523
|
|
|
I
|
MLPF&S
FOR THE SOLE
|
10.34%
|
|
|
BENEFIT
OF ITS CUSTOMERS
|
|
|
|
ATTENTION:
FUND ADMIN
|
|
|
|
4800
DEER LAKE DRIVE E, FL2
|
|
|
|
JACKSONVILLE
FL 32246-6484
|
|
|
I
|
YP
HOLDINGS LLC
|
5.84%
|
|
|
PENSION
TRUST
|
|
|
|
2247
NORTHLAKE PKWY STE 1026
|
|
|
|
TUCKER
GA 30084
|
|
|
R
|
ATTN
NPIO TRADE DESK
|
5.92%
|
|
|
DCGT
TRUSTEE & OR CUST
|
|
|
|
FBO
PRINCIPAL FINANCIAL
|
|
|
|
GROUP
QUALIFIED FIA OMNIBUS
|
|
|
|
711
HIGH ST
|
|
|
|
DES
MOINES IA 50392-0001
|
|
|
R
|
ING
LIFE INSURANCE AND
|
30.22%
|
|
|
ANNUITY
CO
|
|
|
|
1
ORANGE WAY
|
|
|
|
WINDSOR
CT 06095-4773
|
|
|
R
|
MASSACHUSETTS
MUTUAL LIFE
|
52.11%
|
|
|
INS
CO
|
|
|
|
1295
STATE STREET - MIP C105
|
|
|
|
SPRINGFIELD
MA 01111-0001
|
|
DELAWARE
HIGH
|
A
|
FIRST
CLEARING LLC
|
8.71%
|
YIELD
OPPORTUNITIES
|
|
SPECIAL
CUSTODY ACCT FOR THE
|
|
FUND
|
|
EXCLUSIVE
BENEFIT OF
|
|
|
|
CUSTOMER
|
|
|
|
2801
MARKET ST
|
|
|
|
SAINT
LOUIS MO 63103-2523
|
|
|
A
|
LPL
FINANCIAL
|
8.87%
|
|
|
--OMNIBUS
CUSTOMER ACCT--
|
|
|
|
ATTN:
LINDSAY O'TOOLE
|
|
|
|
9785
TOWNE CENTRE DR
|
|
|
|
SAN
DIEGO CA 92121
|
|
|
A
|
MORGAN
STANLEY SMITH
|
8.56%
|
|
|
BARNEY
HARBORSIDE FINANCIAL
|
|
|
|
CENTER
|
|
|
|
PLAZA
2 3RD FL
|
|
|
|
JERSEY
CITY NJ 07311
|
|
|
A
|
PERSHING
LLC
|
6.06%
|
|
|
1
PERSHING PLAZA
|
|
|
|
JERSEY
CITY NJ 07399-0002
|
|
100
|
B
|
CHARLES
SCHWAB & CO INC
|
6.00%
|
|
|
SPECIAL
CUSTODY ACCT FBO
|
|
|
|
CUSTOMERS
|
|
|
|
ATTN
MUTUAL FUNDS
|
|
|
|
211
MAIN ST
|
|
|
|
SAN
FRANCISCO CA 94105-1905
|
|
|
B
|
FIRST
CLEARING LLC
|
18.43%
|
|
|
SPECIAL
CUSTODY ACCT FOR THE
|
|
|
|
EXCLUSIVE
BENEFIT OF
|
|
|
|
CUSTOMER
|
|
|
|
2801
MARKET ST
|
|
|
|
SAINT
LOUIS MO 63103-2523
|
|
|
B
|
MORGAN
STANLEY SMITH
|
10.38%
|
|
|
BARNEY
|
|
|
|
HARBORSIDE
FINANCIAL CENTER
|
|
|
|
PLAZA
2 3RD FL
|
|
|
|
JERSEY
CITY NJ 07311
|
|
|
B
|
PERSHING
LLC
|
10.95%
|
|
|
1
PERSHING PLAZA
|
|
|
|
JERSEY
CITY NJ 07399-0002
|
|
|
C
|
FIRST
CLEARING LLC
|
10.51%
|
|
|
SPECIAL
CUSTODY ACCT FOR THE
|
|
|
|
EXCLUSIVE
BENEFIT OF
|
|
|
|
CUSTOMER
|
|
|
|
2801
MARKET ST
|
|
|
|
SAINT
LOUIS MO 63103-2523
|
|
|
C
|
MLPF&S
FOR THE SOLE
|
13.95%
|
|
|
BENEFIT
OF ITS CUSTOMERS
|
|
|
|
ATTENTION:
FUND ADMIN
|
|
|
|
4800
DEER LAKE DRIVE E, FL2
|
|
|
|
JACKSONVILLE
FL 32246-6484
|
|
|
C
|
MORGAN
STANLEY SMITH
|
10.33%
|
|
|
BARNEY
HARBORSIDE FINANCIAL
|
|
|
|
CENTER
|
|
|
|
PLAZA
2 3RD FL
|
|
|
|
JERSEY
CITY NJ 07311
|
|
|
C
|
PERSHING
LLC
|
5.83%
|
|
|
1
PERSHING PLAZA
|
|
|
|
JERSEY
CITY NJ 07399-0002
|
|
|
C
|
UBS
WM USA
|
9.31%
|
|
|
OMNI
ACCOUNT M/F
|
|
|
|
ATTN
DEPARTMENT MANAGER
|
|
|
|
499
WASHINGTON BLVD FL 9
|
|
|
|
JERSEY
CITY NJ 07310-2055
|
|
|
I
|
FIRST
CLEARING LLC
|
8.22%
|
|
|
SPECIAL
CUSTODY ACCT FOR THE
|
|
|
|
EXCLUSIVE
BENEFIT OF
|
|
|
|
CUSTOMER
|
|
|
|
2801
MARKET ST
|
|
|
|
SAINT
LOUIS MO 63103-2523
|
|
101
|
I
|
LPL
FINANCIAL
|
31.16%
|
|
|
--OMNIBUS
CUSTOMER ACCT--
|
|
|
|
ATTN:
LINDSAY O'TOOLE
|
|
|
|
9785
TOWNE CENTRE DR
|
|
|
|
SAN
DIEGO CA 92121
|
|
|
I
|
MLPF&S
FOR THE SOLE
|
5.27%
|
|
|
BENEFIT
OF ITS CUSTOMERS
|
|
|
|
ATTENTION:
FUND ADMIN
|
|
|
|
4800
DEER LAKE DRIVE E, FL2
|
|
|
|
JACKSONVILLE
FL 32246-6484
|
|
|
I
|
NFS
LLC
|
8.90%
|
|
|
FEBO
COUNTRY TRUST
|
|
|
|
PO
BOX 2020
|
|
|
|
BLOOMINGTON
IL 61702-2020
|
|
|
I
|
SEI
PRIVATE TRUST CO
|
7.23%
|
|
|
FBO
HALE & DORR LLP
|
|
|
|
ONE
FREEDOM VALLEY DRIVE
|
|
|
|
OAKS
PA 19456-9989
|
|
|
R
|
ING
LIFE INSURANCE AND
|
10.77%
|
|
|
ANNUITY
CO
|
|
|
|
1
ORANGE WAY
|
|
|
|
WINDSOR
CT 06095-4773
|
|
|
R
|
ING
|
19.65%
|
|
|
ENHANCED
K-CHOICE
|
|
|
|
TRUSTEE:
RELIANCE TRUST CO
|
|
|
|
400
ATRIUM DRIVE
|
|
|
|
SOMERSET
NJ 08873-4162
|
|
|
R
|
MLPF&S
FOR THE SOLE
|
12.44%
|
|
|
BENEFIT
OF ITS CUSTOMERS
|
|
|
|
ATTENTION:
FUND ADMIN
|
|
|
|
4800
DEER LAKE DRIVE E, FL2
|
|
|
|
JACKSONVILLE
FL 32246-6484
|
|
|
R
|
STATE
STREET BANK AND TRUST
|
9.11%
|
|
|
COMPANY
|
|
|
|
FBO
TAYNIK & CO
|
|
|
|
1200
CROWN COLONY DR
|
|
|
|
QUINCY
MA 02169-0938
|
|
102
APPENDIX A DESCRIPTION OF
RATINGS
|
General Rating
Information
Bonds
The ratings
list below can be further described as follows. For all categories lower than
Aaa, Moodys Investors Service, Inc. includes a 1, 2, or 3 following the
rating to designate a high, medium, or low rating, respectively. Similarly, for
all categories lower than AAA, Standard & Poors and Fitch IBCA, Inc. may
add a + or - following the rating to characterize a higher or lower rating,
respectively.
Moodys Investors
Service, Inc.
|
Aaa
|
Highest quality,
smallest degree of investment risk.
|
|
Aa
|
High quality; together
with Aaa bonds, they compose the high-grade bond group.
|
|
A
|
Upper-medium-grade
obligations; many favorable investment attributes.
|
|
Baa
|
Medium-grade
obligations; neither highly protected nor poorly secured. Interest and
principal appear adequate for the present, but certain protective elements
may be lacking or may be unreliable over any great length of time.
|
|
Ba
|
More uncertain with
speculative elements. Protective of interest and principal payments not
well safeguarded in good and bad times.
|
|
B
|
Lack characteristics of
desirable investment; potentially low assurance of timely interest and
principal payments or maintenance of other contract terms over time.
|
|
Caa
|
Poor standing, may be in
default; elements of danger with respect to principal or interest
payments.
|
|
Ca
|
Speculative in high
degree; could be in default or have other marked shortcomings.
|
|
C
|
Lowest rated. Extremely
poor prospects of ever attaining investment standing.
|
Standard & Poors
|
AAA
|
Highest rating;
extremely strong capacity to pay principal and interest.
|
|
AA
|
High quality; very
strong capacity to pay principal and interest.
|
|
A
|
Strong capacity to pay
principal and interest; somewhat more susceptible to the adverse effects
of changing circumstances and economic conditions.
|
|
BBB
|
Adequate capacity to pay
principal and interest; normally exhibit adequate protection parameters,
but adverse economic conditions or changing circumstances more likely to
lead to weakened capacity to pay principal and interest than for
higher-rated bonds.
|
|
BB, B,
CCC, CC
|
Predominantly
speculative with respect to the issuers capacity to meet required
interest and principal payments. BB lowest degree of speculation; CC
the highest degree of speculation. Quality and protective characteristics
outweighed by large uncertainties or major risk exposure to adverse
conditions.
|
|
D
|
In default.
|
103
Fitch IBCA, Inc.
|
AAA
|
Highest quality; obligor
has exceptionally strong ability to pay interest and repay principal,
which is unlikely to be affected by reasonably foreseeable
events.
|
|
AA
|
Very high quality;
obligors ability to pay interest and repay principal is very strong.
Because bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated F-1+.
|
|
A
|
High quality; obligors
ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than higher-rated bonds.
|
|
BBB
|
Satisfactory credit
quality; obligors ability to pay interest and repay principal is
considered adequate. Unfavorable changes in economic conditions and
circumstances are more likely to adversely affect these bonds and impair
timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for higher-rated
bonds.
|
|
BB,
CCC,
CC, C
|
Not investment grade;
predominantly speculative with respect to the issuers capacity to repay
interest and repay principal in accordance with the terms of the
obligation for bond issues not in default. BB is the least speculative. C
is the most speculative.
|
Commercial Paper
|
Moodys
|
|
S&P
|
|
Fitch
|
|
P-1
|
Superior quality
|
A-1+
|
Extremely strong quality
|
F-1+
|
Exceptionally strong
quality
|
P-2
|
Strong quality
|
A-1
|
Strong
quality
|
F-1
|
Very strong
quality
|
P-3
|
Acceptable quality
|
A-2
|
Satisfactory quality
|
F-2
|
Good credit
quality
|
|
|
A-3
|
Adequate quality
|
F-3
|
Fair
quality
|
|
|
B
|
Speculative quality
|
F-S
|
Weak credit
quality
|
|
|
C
|
Doubtful
quality
|
|
|
|
|
|
|
|
|
State and Municipal
Notes
|
Moodys
|
|
S&P
|
|
Fitch
|
|
MIG1/
|
|
|
|
|
|
VMIG1
|
Best quality
|
SP1+
|
Very strong quality
|
F-1+
|
Exceptionally strong
quality
|
|
|
SP1
|
Strong
grade
|
F-1
|
Very strong
quality
|
MIG2/
|
|
SP2
|
Satisfactory grade
|
F-2
|
Good credit
quality
|
VMIG2
|
High
quality
|
SP3
|
Speculative grade
|
F-3
|
Fair credit
quality
|
MIG3/
|
|
|
|
F-S
|
Weak credit
quality
|
VMIG3
|
Favorable
quality
|
|
|
|
|
MIG4/
|
|
|
|
|
|
VMIG4
|
Adequate
quality
|
|
|
|
|
SG
|
Speculative
quality
|
|
|
|
|
104
Earnings and Dividend Rankings for
Common Stocks
Standard & Poors
.
The investment process involves assessment of various factors -- such as product
and industry position, corporate resources and financial policy -- with results
that make some common stocks more highly esteemed than others. In this
assessment, S&P believes that earnings and dividend performance are the end
result of the interplay of these factors and that, over the long run, the record
of this performance has a considerable bearing on relative quality. The
rankings, however, do not pretend to reflect all of the factors, tangible or
intangible, that bear on stock quality.
Relative quality of bonds or other debt, that is, degrees of protection
for principal and interest, called creditworthiness, cannot be applied to common
stocks, and therefore rankings are not to be confused with bond quality ratings
which are arrived at by a necessarily different approach.
Growth and stability of earnings and dividends are deemed key elements in
establishing Standard & Poors earnings and dividend rankings for common
stocks, which are designed to capsulize the nature of this record in a single
symbol. It should be noted, however, that the process also takes into
consideration certain adjustments and modifications deemed desirable in
establishing such rankings.
The point of departure in arriving at these rankings is a computerized
scoring system based on per-share earnings and dividend records of the most
recent 10 years -- a period deemed long enough to measure significant time
segments of secular growth, to capture indications of basic changes in trends as
they develop, and to encompass the full peak-to-peak range of the business
cycle. Basic scores are computed for earnings and dividends, then adjusted as
indicated by a set of predetermined modifiers for growth, stability within
long-term trend, and cyclicality. Adjusted scores for earnings and dividends are
then combined to yield a final score.
Further, the ranking system makes allowance for the fact that, in
general, corporate size imparts certain recognized advantages from an investment
standpoint. Conversely, minimum size limits (in terms of corporate sales volume)
are set for the various rankings, but the system provides for making exceptions
where the score reflects an outstanding earnings-dividend record.
The final score for each stock is measured against a scoring matrix
determined by analysis of the scores of a large and representative sample of
stocks. The range of scores in the array of this sample has been aligned with
the following ladder of rankings:
A+
|
Highest
|
B+
|
Average
|
C
|
Lowest
|
A
|
High
|
B
|
Below
Average
|
D
|
In
Reorganization
|
A-
|
Above
Average
|
B-
|
Lower
|
|
NR signifies no ranking because of insufficient data or because the stock
is not amenable to the ranking process.
The positions as determined above may be modified in some instances by
special considerations, such as natural disasters, massive strikes, and
non-recurring accounting adjustments.
A ranking is not a forecast of future market price performance, but is
basically an appraisal of past performance of earnings and dividends, and
relative current standing. These rankings must not be used as market
recommendations; a high-score stock may at times be so overpriced as to justify
its sale, while a low-score stock may be attractively priced for purchase.
Rankings based on earnings and dividend records are no substitute for complete
analysis. They cannot take into account potential effects of management changes,
internal company policies not yet fully reflected in the earnings and dividend
record, public relations standing, recent competitive shifts, and a host of
other factors that may be relevant to investment status and decision.
105
Preferred Stock
Rating
|
Moodys Investors
Service, Inc.
|
Aaa
|
Considered to be a
top-quality preferred stock. This rating indicates good asset protection
and the least risk of dividend impairment within the universe of preferred
stocks.
|
|
Aa
|
Considered a high-grade
preferred stock. This rating indicates that there is reasonable assurance
that earnings and asset protection will remain relatively well maintained
in the foreseeable future.
|
|
A
|
Considered to be an
upper-medium grade preferred stock. While risks are judged to be somewhat
greater than in the Aaa and Aa classifications, earnings and asset
protection are, nevertheless, expected to be maintained at adequate
levels.
|
|
Baa
|
Considered to be
medium-grade, neither highly protected nor poorly secured. Earnings and
asset protection appear adequate at present but may be questionable over
any great length of time.
|
|
Ba
|
Considered to have
speculative elements and its future cannot be considered well assured.
Earnings and asset protection may be very moderate and not well
safeguarded during adverse periods. Uncertainty of position characterizes
preferred stocks in this class.
|
|
B
|
Generally lacks the
characteristics of a desirable investment. Assurance of dividend payments
and maintenance of other terms of the issue over any long period of time
may be small.
|
|
Caa
|
Likely to be in arrears
on dividend payments. This rating designation does not purport to indicate
the future status of payments.
|
|
Ca
|
Speculative in a high
degree and is likely to be in arrears on dividends with little likelihood
of eventual payment.
|
|
C
|
The lowest rated class
of preferred or preference stock. Issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment
standing.
|
Standard & Poor
s
|
AAA
|
Has the highest rating
that may be assigned by S&P to a preferred stock issue and indicates
an extremely strong capacity to pay the preferred stock
obligations.
|
|
AA
|
Qualifies as a
high-quality fixed income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues
rated AAA.
|
|
A
|
Backed by a sound
capacity to pay the preferred stock obligations, although it is somewhat
more susceptible to the adverse effects of changes in circumstances and
economic conditions.
|
|
BBB
|
Regarded as backed by an
adequate capacity to pay the preferred stock obligations. Whereas it
normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to make payments for a preferred stock in this category than for
issues in the A category.
|
|
BB,B,
CCC
|
Regarded, on balance, as
predominantly speculative with respect to the issuers capacity to pay
preferred stock obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation. While such issues
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
|
|
CC
|
Reserved for a preferred
stock issue in arrears on dividends or sinking fund payments but that is
currently paying.
|
|
C
|
A non-paying
issue.
|
|
D
|
A non-paying issue with
the issuer in default on debt instruments.
|
|
NR
|
Indicates that no rating
has been requested, that there is insufficient information on which to
base a rating, or that S&P does not rate a particular type of
obligation as a matter of policy.
|
106
PART C
(Delaware Group
®
Income Funds)
File Nos.
002-37707/811-02071
Post-Effective Amendment No. 83
OTHER INFORMATION
Item 28.
|
|
Exhibits
. The following exhibits are incorporated by reference to
the Registrants previously filed documents indicated below, except as
noted:
|
|
|
|
(a)
|
|
Articles
of Incorporation.
|
|
|
|
|
|
(1)
|
|
Agreement and Declaration
of Trust (December 17, 1998) incorporated into this filing by reference to
Post-Effective Amendment No. 61 filed July 29, 1999.
|
|
|
|
|
|
|
|
(i)
|
|
Executed Certificate of Amendment
(November 15, 2006) to the Agreement and Declaration of Trust incorporated
into this filing by reference to Post-Effective Amendment No. 72 filed
November 28, 2007.
|
|
|
|
|
|
|
|
(ii)
|
|
Executed Certificate of Amendment
(February 26, 2009) to the Agreement and Declaration of Trust incorporated
into this filing by reference to Post-Effective Amendment No. 75 filed
August 26, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(iii)
|
|
Executed Certificate of Amendment
(August 18, 2009) to the Agreement and Declaration of Trust incorporated
into this filing by reference to Post-Effective Amendment No. 76 filed
November 25, 2009.
|
|
|
|
|
|
(2)
|
|
Certificate of Trust
(December 17, 1998) incorporated into this filing by reference to
Post-Effective Amendment No. 61 filed July 29, 1999.
|
|
|
|
(b)
|
|
By-Laws
. Amended and Restated By-Laws (November 16, 2006)
incorporated into this filing by reference to Post-Effective Amendment No.
72 filed November 28, 2007.
|
|
|
|
(c)
|
|
Instruments Defining Rights of Security
Holders
.
|
|
|
|
|
|
(1)
|
|
Agreement and Declaration of Trust
.
Articles III, IV, V and VI
of the Agreement and Declaration of Trust (December 17, 1998) incorporated
into this filing by reference to Post-Effective Amendment No. 61 filed
July 29, 1999.
|
|
|
|
|
|
(2)
|
|
By-Laws
. Article II of the Amended and Restated By-Laws
(November 16, 2006) incorporated into this filing by reference to
Post-Effective Amendment No. 72 filed November 28, 2007.
|
|
|
|
(d)
|
|
Investment Advisory Contracts
.
|
|
|
|
|
|
(1)
|
|
Executed Investment
Management Agreement (January 4, 2010) between Delaware Management Company
(a series of Delaware Management Business Trust) and the Registrant
incorporated into this filing by reference to Post-Effective Amendment No.
78 filed February 25, 2010.
|
|
|
|
|
|
(2)
|
|
Executed Amendment No. 1
to Exhibit A (January 28, 2010) to the Investment Management Agreement
between Delaware Management Company (a series of Delaware Management
Business Trust) and the Registrant incorporated into this filing by
reference to Post-Effective Amendment No. 78 filed February 25,
2010.
|
|
|
|
|
|
(3)
|
|
Executed Amendment No. 2
to Exhibit A (February 25, 2010) to the Investment Management Agreement
between Delaware Management Company (a series of Delaware Management
Business Trust) and the Registrant incorporated into this filing by
reference to Post-Effective Amendment No. 80 filed November 29,
2010.
|
1
|
|
|
(4)
|
|
Executed Investment
Advisory Expense Limitation Letter (November 2012) between Delaware
Management Company (a series of Delaware Management Business Trust) and
the Registrant attached as Exhibit No. EX-99.d.4.
|
|
|
|
(e)
|
|
Underwriting
Contracts
.
|
|
|
|
|
|
(1)
|
|
Distribution
Agreements.
|
|
|
|
|
|
|
|
(i)
|
|
Executed Amended and Restated
Distribution Agreement (January 4, 2010) between Delaware Distributors,
L.P. and the Registrant incorporated into this filing by reference to
Post-Effective Amendment No. 79 filed September 30, 2010.
|
|
|
|
|
|
|
|
(ii)
|
|
Executed Amendment No. 1 to
Schedule I (February 25, 2010) to the Amended and Restated Distribution
Agreement incorporated into this filing by reference to Post-Effective
Amendment No. 79 filed September 30, 2010.
|
|
|
|
|
|
|
|
(iii)
|
|
Executed Distribution Expense
Limitation Letter (December 12, 2008) between Delaware Distributors, L.P.
and the Registrant, on behalf of the Delaware High-Yield Opportunities
Fund, incorporated into this filing by reference to Post-Effective
Amendment No. 1 on Form N-14 filed May 26, 2009.
|
|
|
|
|
|
|
|
(iv)
|
|
Executed Distribution Expense
Limitation Letter (November 2012) between Delaware Distributors, L.P. and
the Registrant attached as Exhibit No. EX-99.e.1.iv.
|
|
|
|
|
|
(2)
|
|
Form of Dealer's
Agreement incorporated into this filing by reference to Post-Effective
Amendment No. 81 filed November 28, 2011.
|
|
|
|
|
|
(3)
|
|
Form of Registered
Investment Advisers Agreement incorporated into this filing by reference
to Post-Effective Amendment No. 81 filed November 28, 2011.
|
|
|
|
|
|
(4)
|
|
Form of Bank/Trust
Agreement incorporated into this filing by reference to Post-Effective
Amendment No. 81 filed November 28, 2011.
|
|
|
|
(f)
|
|
Bonus or Profit
Sharing Contracts
. Not
applicable.
|
|
|
|
(g)
|
|
Custodian
Agreements
.
|
|
|
|
|
|
(1)
|
|
Executed Mutual Fund
Custody and Services Agreement (July 20, 2007) between The Bank of New
York Mellon (formerly, Mellon Bank, N.A.) and the Registrant incorporated
into this filing by reference to Post-Effective Amendment No. 73 filed
November 26, 2008.
|
|
|
|
|
|
(2)
|
|
Executed Securities
Lending Authorization (July 20, 2007) between The Bank of New York Mellon
(formerly, Mellon Bank, N.A.) and the Registrant incorporated into this
filing by reference to Post-Effective Amendment No. 72 filed November 28,
2007.
|
|
|
|
|
|
|
|
(i)
|
|
Executed Amendment (September 22,
2009) to the Securities Lending Authorization Agreement incorporated into
this filing by reference to Post-Effective Amendment No. 79 filed
September 30, 2010.
|
2
|
|
|
|
|
(ii)
|
|
Executed Amendment No. 2 (January 1, 2010) to
the Securities Lending Authorization Agreement incorporated
into this filing by reference to Post-Effective Amendment No. 78 filed
February 25, 2010.
|
|
|
|
(h)
|
|
Other Material
Contracts
.
|
|
|
|
|
|
(1)
|
|
Executed Shareholder Services
Agreement (April 19, 2001) between Delaware Service Company, Inc. and the
Registrant incorporated into this filing by reference to Post-Effective
Amendment No. 65 filed October 17, 2002.
|
|
|
|
|
|
|
|
(i)
|
|
Executed Letter Amendment (August 23, 2002) to the
Shareholder Services Agreement incorporated into this filing by reference
to Post-Effective Amendment No. 67 filed September 29, 2003.
|
|
|
|
|
|
|
|
(ii)
|
|
Executed Amendment No. 2 (February 25, 2010) to Schedule
A to the Shareholder Services Agreement incorporated into this filing by
reference to Post-Effective Amendment No. 79 filed September 30,
2010.
|
|
|
|
|
|
|
|
(iii)
|
|
Executed Schedule B (July 18, 2011) to the Shareholder
Services Agreement incorporated into this filing by reference to
Post-Effective Amendment No. 81 filed November 28, 2011.
|
|
|
|
|
|
(2)
|
|
Executed Fund Accounting and
Financial Administration Services Agreement (October 1, 2007) between The
Bank of New York Mellon (formerly, Mellon Bank, N.A.) and the Registrant
incorporated into this filing by reference to Post-Effective Amendment No.
72 filed November 28, 2007.
|
|
|
|
|
|
(3)
|
|
Executed Fund Accounting and
Financial Administration Oversight Agreement (January 4, 2010) between
Delaware Service Company, Inc. and the Registrant incorporated into this
filing by reference to Post-Effective Amendment No. 79 filed September 30,
2010.
|
|
|
|
|
|
|
|
(i)
|
|
Amendment No. 2 (January 31, 2011) to Schedule A to the
Fund Accounting and Financial Administration Oversight Agreement
incorporated into this filing by reference to Post-Effective Amendment No.
81 filed November 28, 2011.
|
|
|
|
(i)
|
|
Legal Opinion
.
|
|
|
|
|
|
(1)
|
|
Opinion and Consent of Counsel (July
28, 1999) incorporated into this filing by reference to Post-Effective
Amendment No. 61 filed July 29, 1999.
|
|
|
|
|
|
(2)
|
|
Opinion and Consent of Counsel with
respect to Delaware Core Bond Fund (August 26, 2009) incorporated into
this filing by reference to Post-Effective Amendment No. 75 filed August
26, 2009.
|
|
|
|
|
|
(3)
|
|
Opinion and Consent of Counsel with
respect to Delaware Diversified Floating Rate Fund (February 25, 2010)
incorporated into this filing by reference to Post-Effective Amendment No.
78 filed February 25, 2010.
|
|
|
|
(j)
|
|
Other Opinions
. Consent of Independent Registered Public Accounting
Firm (November 2012) attached as Exhibit No. EX-99.j.
|
|
|
|
(k)
|
|
Omitted Financial
Statements
. Not
applicable.
|
|
|
|
(l)
|
|
Initial Capital
Agreements
. Not
applicable.
|
3
|
(m)
|
|
Rule 12b-1
Plan
.
|
|
|
|
|
|
(1)
|
|
Plan under Rule 12b-1
for Class A (April 19, 2001) incorporated into this filing by reference to
Post-Effective Amendment No. 64 filed September 28, 2001.
|
|
|
|
|
|
(2)
|
|
Plan under Rule 12b-1
for Class B (April 19, 2001) incorporated into this filing by reference to
Post-Effective Amendment No. 64 filed September 28, 2001.
|
|
|
|
|
|
(3)
|
|
Plan under Rule 12b-1
for Class C (April 19, 2001) incorporated into this filing by reference to
Post-Effective Amendment No. 64 filed September 28, 2001.
|
|
|
|
|
|
(4)
|
|
Plan under Rule 12b-1
for Class R (May 15, 2003) incorporated into this filing by reference to
Post-Effective Amendment No. 67 filed September 29, 2003.
|
|
|
|
(n)
|
|
Rule 18f-3
Plan
.
|
|
|
|
|
|
(1)
|
|
Plan under Rule 18f-3
(February 18, 2010) incorporated into this filing by reference to
Post-Effective Amendment No. 78 filed February 25, 2010.
|
|
|
|
|
|
|
|
(i)
|
|
Appendix A (October 1, 2012) to
Plan under Rule 18f-3 attached as Exhibit No. EX-99.n.1.i.
|
|
|
|
(o)
|
|
Reserved
.
|
|
|
|
(p)
|
|
Codes of
Ethics
.
|
|
|
|
|
|
(1)
|
|
Code of Ethics for the
Delaware Investments Family of Funds (December 1, 2011) attached as
Exhibit No. EX-99.p.1.
|
|
|
|
|
|
(2)
|
|
Code of Ethics for
Delaware Investments (Delaware Management Company, a series of Delaware
Management Business Trust, and Delaware Distributors, L.P.) (December 1,
2011) attached as Exhibit No. EX-99.p.2.
|
|
|
|
(q)
|
|
Other
.
|
|
|
|
|
|
(1)
|
|
Powers of Attorney (May
17, 2007) incorporated into this filing by reference to Post-Effective
Amendment No. 73 filed November 26, 2008.
|
|
|
|
|
|
(2)
|
|
Power of Attorney
(September 1, 2011) attached as Exhibit No. EX-99.q.2.
|
|
|
Item 29.
|
|
Persons Controlled
by or Under Common Control with Registrant
. None.
|
|
Item 30.
|
|
Indemnification
. Article VII, Section 2 (November 15, 2006)
to the Agreement and Declaration of Trust incorporated into this filing by
reference to Post-Effective Amendment No. 72 filed November 28, 2007.
Article VI of the Amended and Restated By-Laws (November 16, 2006)
incorporated into this filing by reference to Post-Effective Amendment No.
72 filed November 28, 2007.
|
|
Item 31.
|
|
Business and Other
Connections of the Investment Adviser
.
|
|
|
|
Delaware Management Company (the
Manager), a series of Delaware Management Business Trust, serves as
investment manager to the Registrant and also serves as investment manager
or sub-advisor to certain of the other funds in the Delaware
Investments
®
Funds (Delaware Group
®
Adviser Funds,
Delaware Group Cash Reserve, Delaware Group Equity Funds I, Delaware Group
Equity Funds II, Delaware Group Equity Funds III, Delaware Group Equity
Funds IV, Delaware Group Equity Funds V, Delaware Group Foundation Funds,
Delaware Group Global & International Funds, Delaware Group Government
Fund, Delaware Group Limited-Term Government Funds, Delaware Group State
Tax-Free
|
4
Income Trust, Delaware Group Tax-Free
Fund, Delaware Group Tax- Free Money Fund, Delaware Pooled
®
Trust,
Delaware VIP
®
Trust, Voyageur Insured Funds, Voyageur Intermediate
Tax Free Funds, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual
Funds III, Voyageur Tax Free Funds, Delaware Investments Dividend and Income
Fund, Inc., Delaware Investments Global Dividend and Income Fund, Inc., Delaware
Investments Arizona Municipal Income Fund, Inc., Delaware Investments Colorado
Municipal Income Fund, Inc., Delaware Investments National Municipal Income
Fund, Delaware Investments Minnesota Municipal Income Fund II, Inc., and
Delaware Enhanced Global Dividend and Income Fund) and the Optimum Fund Trust,
as well as to certain non-affiliated registered investment companies. In
addition, certain officers of the Manager also serve as trustees and/or officers
of other Delaware Investments Funds and Optimum Fund Trust. A company indirectly
owned by the Managers parent company acts as principal underwriter to the
mutual funds in the Delaware Investments Funds (see Item 32 below) and another
such company acts as the shareholder services, dividend disbursing, accounting
servicing and transfer agent for all of the Delaware Investments Funds.
Unless otherwise noted, the following
persons serving as directors or officers of the Manager have held the following
positions during the Trusts past two fiscal years. Unless otherwise noted, the
principal business address of the directors and officers of the Manager is 2005
Market Street, Philadelphia, PA 19103-7094.
Name and
Principal
|
Positions and
Offices
|
Positions and
Offices
|
Other
Positions and Offices
|
Business
Address
|
with
Manager
|
with
Registrant
|
Held
|
Patrick P. Coyne
|
President
|
Chairman/President/Chief
|
Mr.
Coyne has served in various
|
|
|
Executive Officer
|
executive capacities within
|
|
|
|
Delaware Investments
|
|
|
|
|
|
|
|
Director Kaydon Corp.
|
Michael J. Hogan
|
Executive Vice
|
Executive Vice
|
Mr.
Hogan has served in
|
|
President/Head of Equity
|
President/Head of Equity
|
various executive capacities
|
|
Investments
|
Investments
|
within Delaware Investments
|
David P. OConnor
|
Executive Vice
|
Executive Vice
|
Mr.
OConnor has served in
|
|
President/Strategic
|
President/Strategic
|
various executive capacities
|
|
Investment Relationships
|
Investment Relationships
|
within Delaware Investments
|
|
and
Initiatives/General
|
and
Initiatives/General
|
|
|
Counsel
|
Counsel
|
Senior Vice President/ Strategic
|
|
|
|
Investment Relationships and
|
|
|
|
Initiatives/General
|
|
|
|
Counsel/Chief Legal Officer
|
|
|
|
Optimum Fund Trust
|
See Yeng Quek
|
Executive Vice
|
Executive Vice
|
Mr.
Quek has served in various
|
|
President/Managing
|
President/Managing
|
executive capacities within
|
|
Director/Head of Fixed
|
Director, Fixed Income
|
Delaware Investments
|
|
Income Investments
|
|
|
Philip N. Russo
|
Executive Vice
|
None
|
Mr.
Russo has served in various
|
|
President/Chief
|
|
executive capacities within
|
|
Administrative Officer
|
|
Delaware Investments
|
Joseph R. Baxter
|
Senior Vice
|
Senior Vice
|
Mr.
Baxter has served in
|
|
President/Head of
|
President/Head of
|
various capacities within
|
|
Municipal Bond
|
Municipal Bond
|
Delaware Investments
|
|
Department/Senior
|
Department/Senior
|
|
|
Portfolio Manager
|
Portfolio Manager
|
|
5
Name and
Principal
|
Positions and
Offices
|
Positions and
Offices
|
Other
Positions and Offices
|
Business
Address
|
with
Manager
|
with
Registrant
|
Held
|
Christopher S. Beck
|
Senior Vice President/
|
Senior Vice President/
|
Mr.
Beck has served in various
|
|
Chief Investment
|
Chief Investment Officer -
|
capacities within Delaware
|
|
OfficerSmall Cap
|
Small Cap;
Value/Mid-Cap
|
Investments
|
|
Value/Mid-Cap Value
|
Value Equity
|
|
|
Equity
|
|
|
Michael P. Buckley
|
Senior Vice
|
Senior Vice
|
Mr.
Buckley has served in
|
|
President//Director of
|
President/Portfolio
|
various capacities within
|
|
Municipal Research
|
Manager/Director of
|
Delaware Investments
|
|
|
Municipal Research
|
|
Stephen J. Busch
|
Senior Vice President/
|
Senior Vice President/
|
Mr.
Busch has served in various
|
|
Investment Accounting
|
Investment Accounting
|
capacities within Delaware
|
|
|
|
Investments
|
Michael F. Capuzzi
|
Senior Vice President/
|
Senior Vice President/
|
Mr.
Capuzzi has served in
|
|
Investment Systems
|
Investment Systems
|
various capacities within
|
|
|
|
Delaware Investments
|
Liu-Er Chen
|
Senior Vice President/
|
Senior Vice President/
|
Mr.
Chen has served in various
|
|
Chief Investment Officer,
|
Chief Investment Officer,
|
capacities within Delaware
|
|
Emerging Markets and
|
Emerging Markets and
|
Investments
|
|
Healthcare
|
Healthcare
|
|
Thomas H. Chow
|
Senior Vice
|
Senior Vice
|
Mr.
Chow has served in various
|
|
President/Senior Portfolio
|
President/Senior Portfolio
|
capacities within Delaware
|
|
Manager
|
Manager
|
Investments
|
Stephen J. Czepiel
|
Senior Vice
|
Senior Vice
|
Mr.
Czepiel has served in
|
|
President/Senior Portfolio
|
President/Senior Portfolio
|
various capacities within
|
|
Manager
|
Manager
|
Delaware Investments
|
Chuck M. Devereux
|
Senior Vice
|
Senior Vice President/
|
Mr.
Devereux has served in
|
|
President/Director of
|
Director of Credit
|
various capacities within
|
|
Credit Research
|
Research
|
Delaware Investments
|
Roger A. Early
|
Senior Vice President/
|
Senior Vice President/ Co-
|
Mr.
Early has served in various
|
|
Co-Chief Investment
|
Chief Investment Officer-
|
capacities within Delaware
|
|
OfficerTotal Return
|
Total Return Fixed
|
Investments
|
|
Fixed Income Strategy
|
Income Strategy
|
|
Stuart M. George
|
Senior Vice
|
Senior Vice
|
Mr.
George has served in
|
|
President/Head of Equity
|
President/Head of Equity
|
various capacities within
|
|
Trading
|
Trading
|
Delaware Investments
|
Edward Gray
|
Senior Vice
|
Senior Vice
|
Mr.
Gray has served in various
|
|
President/Chief
|
President/Chief
|
capacities within Delaware
|
|
Investment Officer
|
Investment Officer
|
Investments
|
|
Global and International
|
Global and International
|
|
|
Value Equity
|
Value Equity
|
|
Paul Grillo
|
Senior Vice President/ Co-
|
Senior Vice President/ Co-
|
Mr.
Grillo has served in various
|
|
Chief Investment
|
Chief Investment
|
capacities within Delaware
|
|
OfficerTotal Return
|
OfficerTotal Return
|
Investments
|
|
Fixed Income Strategy
|
Fixed Income Strategy
|
|
Sharon Hill
|
Senior Vice President/
|
Senior Vice President/
|
Ms.
Hill has served in various
|
|
Head of Equity
|
Head of Quantitative
|
capacities within Delaware
|
|
Quantitative Research and
|
Research and Analytics
|
Investments
|
|
Analytics
|
|
|
James L. Hinkley
|
Senior Vice President/
|
Senior Vice President/
|
Mr.
Hinkley has served in
|
|
Head of Product
|
Head of Product
|
various capacities within
|
|
Management
|
Management
|
Delaware Investments
|
6
Name and
Principal
|
Positions and
Offices
|
Positions and
Offices
|
Other
Positions and Offices
|
Business
Address
|
with
Manager
|
with
Registrant
|
Held
|
Kevin P. Loome
|
Senior Vice
|
Senior Vice
|
Mr.
Loome has served in
|
|
President/Senior Portfolio
|
President/Senior Portfolio
|
various capacities within
|
|
Manager/Head of High
|
Manager/Head of High
|
Delaware Investments
|
|
Yield Investments
|
Yield Investments
|
|
Paul Matlack
|
Senior Vice President/U.S.
|
Senior Vice President/U.S.
|
Mr.
Matlack has served in
|
|
Fixed Income Strategist
|
Fixed Income Strategist
|
various capacities within
|
|
|
|
Delaware Investments
|
Christopher
|
Senior Vice
|
Senior Vice
|
Mr.
McCarthy has served in
|
McCarthy
|
President/Financial
|
President/Financial
|
various capacities within
|
|
Institutions Sales
|
Institutions Sales
|
Delaware Investments
|
Timothy D.
|
Senior Vice
|
Senior Vice
|
Mr.
McGarrity has served in
|
McGarrity
|
President/Financial
|
President/Financial
|
various capacities within
|
|
Services Officer
|
Services Officer
|
Delaware Investments
|
Francis X. Morris
|
Senior Vice
|
Senior Vice
|
Mr.
Morris has served in
|
|
President/Chief
|
President/Chief
|
various capacities within
|
|
Investment Officer - Core
|
Investment Officer - Core
|
Delaware Investments
|
|
Equity
|
Equity
|
|
Brian L. Murray, Jr.
|
Senior Vice President/
|
Senior Vice President/
|
Mr.
Murray has served in
|
|
Chief Compliance Officer
|
Chief Compliance Officer
|
various capacities within
|
|
|
|
Delaware Investments
|
Susan L. Natalini
|
Senior Vice
|
Senior Vice
|
Ms.
Natalini has served in
|
|
President/Head of Equity
|
President/Head of Equity
|
various capacities within
|
|
and
Fixed Income
|
and
Fixed Income
|
Delaware Investments
|
|
Business Operations
|
Business Operations
|
|
D. Tysen Nutt
|
Senior Vice President/
|
Senior Vice President/
|
Mr.
Nutt has served in various
|
|
Senior Portfolio
|
Senior Portfolio
|
capacities within Delaware
|
|
Manager/Team Leader
|
Manager/Team Leader
|
Investments
|
Philip O. Obazee
|
Senior Vice
|
Senior Vice
|
Mr.
Obazee has served in
|
|
President/Structured
|
President/Structured
|
various capacities within
|
|
Products and Derivatives
|
Products and Derivatives
|
Delaware Investments
|
Jeffrey W. Rexford
|
Senior Vice President/
|
Senior Vice
|
Mr.
Rexford has served in
|
|
Financial Institutions
|
President/Financial
|
various capacities within
|
|
Sales
|
Institutions Sales
|
Delaware Investments
|
Richard Salus
|
Senior Vice President/
|
Senior Vice
|
Mr.
Salus has served in various
|
|
Controller/Treasurer
|
President/Chief Financial
|
capacities within Delaware
|
|
|
Officer
|
Investments
|
|
|
|
|
|
|
|
Senior Vice President/Chief
|
|
|
|
Financial Officer Optimum
|
|
|
|
Fund Trust
|
Jeffrey S. Van Harte
|
Senior Vice
|
Senior Vice
|
Mr.
Van Harte has served in
|
|
President/Chief
|
President/Chief
|
various capacities within
|
|
Investment Officer
|
Investment Officer -
|
Delaware Investments
|
|
Focus Growth Equity
|
Focus Growth Equity
|
|
Babak Zenouzi
|
Senior Vice President/
|
Senior Vice President/
|
Mr.
Zenouzi has served in
|
|
Chief Investment
|
Chief Investment Officer-
|
various capacities within
|
|
OfficerReal Estate
|
Real Estate Securities and
|
Delaware Investments
|
|
Securities and Income
|
Income Solutions
|
|
|
Solutions
|
|
|
7
Name and
Principal
|
Positions and
Offices
|
Positions and
Offices
|
Other
Positions and Offices
|
Business
Address
|
with
Manager
|
with
Registrant
|
Held
|
Gary T. Abrams
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Abrams has served in
|
|
Equity Trader
|
Equity Trader
|
various capacities within
|
|
|
|
Delaware Investments
|
Christopher S.
|
Vice President/Portfolio
|
Vice President/Portfolio
|
Mr.
Adams has served in
|
Adams
|
Manager/Senior Equity
|
Manager/Senior Equity
|
various capacities within
|
|
Analyst
|
Analyst
|
Delaware Investments
|
Damon J. Andres
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Andres has served in
|
|
Portfolio Manager
|
Portfolio Manager
|
various capacities within
|
|
|
|
Delaware Investments
|
Wayne A. Anglace
|
Vice President/
Senior
|
Vice President/ Senior
|
Mr.
Anglace has served in
|
|
Portfolio Manager
|
Portfolio Manager
|
various capacities within
|
|
|
|
Delaware Investments
|
Margaret MacCarthy
|
Vice President/Investment
|
Vice President/Investment
|
Ms.
Bacon has served in various
|
Bacon
|
Specialist
|
Specialist
|
capacities within Delaware
|
|
|
|
Investments
|
Patricia L. Bakely
|
Vice President/Assistant
|
Vice President/Assistant
|
Ms.
Bakely has served in
|
|
Controller
|
Controller
|
various capacities within
|
|
|
|
Delaware Investments
|
Kristen E.
|
Vice President/Senior
|
Vice President/Senior
|
Ms.
Bartholdson has served in
|
Bartholdson
|
Portfolio Manager
|
Portfolio Manager
|
various capacities within
|
|
|
|
Delaware Investments
|
Todd Bassion
|
Vice President/Portfolio
|
Vice President/Portfolio
|
Mr.
Bassion has served in
|
|
Manager
|
Manager
|
various capacities within
|
|
|
|
Delaware Investments
|
Jo Anne Bennick
|
Vice President/15(c)
|
Vice President/15(c)
|
Ms.
Bennick has served in
|
|
Reporting
|
Reporting
|
various capacities within
|
|
|
|
Delaware Investments
|
Richard E. Biester
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Biester has served in
|
|
Equity Trader
|
Equity Trader
|
various capacities within
|
|
|
|
Delaware Investments
|
Sylvie S. Blender
|
Vice President/Financial
|
Vice President/Financial
|
Ms.
Blender has served in
|
|
Institutions Client
|
Institutions Client
|
various capacities within
|
|
Services
|
Services
|
Delaware Investments
|
Christopher J.
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Bonavico has served in
|
Bonavico
|
Portfolio Manager/Equity
|
Portfolio Manager, Equity
|
various capacities within
|
|
Analyst
|
Analyst
|
Delaware Investments
|
Zoe Bradley
|
Vice President/Fixed
|
Vice President/Fixed
|
Ms.
Bradley has served in
|
|
Income Portfolio Analyst
|
Income Portfolio Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Vincent A.
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Brancaccio has served in
|
Brancaccio
|
Equity Trader
|
Equity Trader
|
various capacities within
|
|
|
|
Delaware Investments
|
Kenneth F. Broad
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Broad has served in various
|
|
Portfolio Manager/Equity
|
Portfolio Manager, Equity
|
capacities within Delaware
|
|
Analyst
|
Analyst
|
Investments
|
Adam H. Brown
|
Vice President/Portfolio
|
Vice President/Portfolio
|
Mr.
Brown has served in
|
|
Manager
|
Manager
|
various capacities within
|
|
|
|
Delaware Investments
|
Kevin J. Brown
|
Vice President/
|
Vice President/
|
Mr.
Brown has served in
|
|
Senior Investment
|
Senior Investment
|
various capacities within
|
|
Specialist
|
Specialist
|
Delaware Investments
|
Mathew J. Calabro
|
Vice President/Deputy
|
Vice President/Deputy
|
Mr.
Calabro has served in
|
|
Chief Compliance Officer
|
Chief Compliance Officer
|
various capacities within
|
|
|
|
Delaware
Investments
|
8
Name and
Principal
|
Positions and
Offices
|
Positions and
Offices
|
Other
Positions and Offices
|
Business
Address
|
with
Manager
|
with
Registrant
|
Held
|
Mary Ellen M.
|
Vice President/Client
|
Vice President/Client
|
Ms.
Carrozza has served in
|
Carrozza
|
Services
|
Services
|
various capacities within
|
|
|
|
Delaware Investments
|
Steven G. Catricks
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Catricks has served in
|
|
Equity Analyst
|
Equity Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Wen-Dar Chen
|
Vice President/Portfolio
|
Vice President/Portfolio
|
Mr.
Chen has served in various
|
|
ManagerInternational
|
Manager - International
|
capacities within Delaware
|
|
Debt
|
Debt
|
Investments
|
Anthony G.
|
Vice President/Associate
|
Vice President/Associate
|
Mr.
Ciavarelli has served in
|
Ciavarelli
|
General Counsel/Assistant
|
General Counsel/Assistant
|
various capacities within
|
|
Secretary
|
Secretary
|
Delaware Investments
|
David F. Connor
|
Vice President/Deputy
|
Vice President/Deputy
|
Mr.
Connor has served in
|
|
General Counsel/Secretary
|
General Counsel/Secretary
|
various capacities within
|
|
|
|
Delaware Investments
|
|
|
|
|
|
|
|
Vice President/Deputy General
|
|
|
|
Counsel/Secretary Optimum
|
|
|
|
Fund Trust
|
Michael Costanzo
|
Vice President/
|
Vice President/
|
Mr.
Costanzo has served in
|
|
Performance Analyst
|
Performance Analyst
|
various capacities within
|
|
Manager
|
Manager
|
Delaware Investments
|
Kishor K. Daga
|
Vice President/
|
Vice President/
|
Mr.
Daga has served in various
|
|
Derivatives Operations
|
Derivatives Operations
|
capacities within Delaware
|
|
|
|
Investments
|
Ion Dan
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Dan has served in various
|
|
Structured Products
|
Structured Products
|
capacities within Delaware
|
|
Analyst/Trader
|
Analyst/Trader
|
Investments
|
Cori E. Daggett
|
Vice President/Counsel/
|
Vice President/
|
Ms.
Daggett has served in
|
|
Assistant Secretary
|
Counsel/Assistant
|
various capacities within
|
|
|
Secretary
|
Delaware Investments
|
Craig C. Dembek
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Dembek has served in
|
|
Research Analyst
|
Research Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Kevin C. Donegan
|
Vice President/Business
|
Vice President/Business
|
Mr.
Donegan has served in
|
|
Manager
|
Manager
|
various capacities within
|
|
|
|
Delaware Investments and/or its
|
|
|
|
affiliates since 1994
|
Camillo DOrazio
|
Vice President/Investment
|
Vice President/Investment
|
Mr.
DOrazio has served in
|
|
Accounting
|
Accounting
|
various capacities within
|
|
|
|
Delaware Investments
|
Michael E. Dresnin
|
Vice President/Associate
|
Vice President/Associate
|
Mr.
Dresnin has served in
|
|
General Counsel/Assistant
|
General Counsel/Assistant
|
various capacities within
|
|
Secretary
|
Secretary
|
Delaware Investments
|
Christopher M.
|
Vice President/Portfolio
|
Vice President/Portfolio
|
Mr. Ericksen
has served in
|
Ericksen
|
Manager/Equity Analyst
|
Manager/Equity Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Joel A. Ettinger
|
Vice President/Taxation
|
Vice President Taxation
|
Mr.
Ettinger has served in
|
|
|
|
various capacities within
|
|
|
|
Delaware
Investments
|
9
Name and
Principal
|
Positions and
Offices
|
Positions and
Offices
|
Other
Positions and Offices
|
Business
Address
|
with
Manager
|
with
Registrant
|
Held
|
Devon K. Everhart
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Everhart has served in
|
|
Research Analyst
|
Research Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Joseph Fiorilla
|
Vice President Trading
|
Vice President Trading
|
Mr.
Fiorilla has served in
|
|
Operations
|
Operations
|
various capacities within
|
|
|
|
Delaware Investments
|
Charles E. Fish
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Fish has served in various
|
|
Equity Trader
|
Equity Trader
|
capacities within Delaware
|
|
|
|
Investments
|
Clifford M. Fisher
|
Vice President/Credit
|
Vice President/Credit
|
Mr.
Fisher has served in various
|
|
Analyst
|
Analyst
|
capacities within Delaware
|
|
|
|
Investments
|
Patrick G. Fortier
|
Vice President/Portfolio
|
Vice President/Portfolio
|
Mr.
Fortier has served in
|
|
Manager/Equity Analyst
|
Manager/Equity Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Jamie Fox
|
Vice President/Head of
|
Vice President/Head of
|
Mr.
Fox has served in various
|
|
Financial Institutions
|
Financial Institutions
|
capacities within Delaware
|
|
Defined Contributions
|
Defined Contributions
|
Investments
|
|
Investment-Only
|
Investment-Only
|
|
Denise A. Franchetti
|
Vice President/Portfolio
|
Vice President/Portfolio
|
Ms.
Franchetti has served in
|
|
Manager/Senior Research
|
Manager/Senior Research
|
various capacities within
|
|
Analyst (since June 2010)
|
Analyst
|
Delaware Investments
|
Lawrence G. Franko
|
Vice President/ Senior
|
Vice President/Senior
|
Mr.
Franko has served in
|
|
Equity Analyst
|
Equity Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Michael Friedman
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Friedman has served in
|
|
Equity Analyst
|
Equity Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Daniel V. Geatens
|
Vice President/Director of
|
Vice President/Treasurer
|
Mr.
Geatens has served in
|
|
Financial Administration
|
|
various capacities within
|
|
|
|
Delaware Investments
|
Gregory A. Gizzi
|
Vice President/ Head of
|
Vice President/Portfolio
|
Mr.
Gizzi has served in various
|
|
Convertible and
|
Manager/Head of
|
capacities with Delaware
|
|
Municipal Bond Trading
|
Convertible and Municipal
|
Investments
|
|
|
Bond Trading
|
|
Gregg J. Gola
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Gola has served in various
|
|
High Yield Trader
|
High Yield Trader
|
capacities within Delaware
|
|
|
|
Investments
|
Christopher
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Gowlland has served in
|
Gowlland
|
Quantitative Analyst
|
Quantitative Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
David J. Hamilton
|
Vice President/Research
|
Vice President/Research
|
Mr.
Hamilton has served in
|
|
Analyst
|
Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Lisa L. Hansen
|
Vice President/Head of
|
Vice President/Head of
|
Ms.
Hansen has served in
|
|
Focus Growth Equity
|
Focus Growth Trading
|
various capacities within
|
|
Trading
|
|
Delaware Investments
|
Scott Hastings
|
Vice President/Equity
|
Vice President/Equity
|
Mr.
Hastings has served in
|
|
Analyst
|
Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
10
Name and
Principal
|
Positions and
Offices
|
Positions and
Offices
|
Other
Positions and Offices
|
Business
Address
|
with
Manager
|
with
Registrant
|
Held
|
Sharon L. Hayman
|
Vice President/Head of
|
Vice President/Head of
|
Ms.
Hayman has served in
|
|
Financial Institutions
|
Financial Institutions
|
various capacities within
|
|
Client Services
|
Client Services
|
Delaware Investments
|
Gregory M.
|
Vice President/Portfolio
|
Vice President/Portfolio
|
Mr.
Heywood has served in
|
Heywood
|
Manager/Equity Analyst
|
Manager/Equity Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
J. David Hillmeyer
|
Vice President/Portfolio
|
Vice President/Portfolio
|
Mr.
Hillmeyer has served in
|
|
Manager/Head of
|
Manager/Head of
|
various capacities within
|
|
Investment Grade
|
Investment Grade
|
Delaware Investments
|
|
Corporate Trading
|
Corporate Trading
|
|
Jerel A. Hopkins
|
Vice President/Associate
|
Vice President/Associate
|
Mr.
Hopkins has served in
|
|
General Counsel/Assistant
|
General Counsel/Assistant
|
various capacities within
|
|
Secretary
|
Secretary
|
Delaware Investments
|
Chungwei Hsia
|
Vice President/Emerging
|
Vice President/Emerging
|
Mr.
Hsia has served in various
|
|
and
Developed Markets
|
and
Developed Markets
|
capacities within Delaware
|
|
Analyst
|
Analyst
|
Investments
|
Duane Hewlett
|
Vice President/Trader
|
Vice President/Trader
|
Mr.
Ishaq has served in various
|
|
(Since February 2011)
|
|
capacities within Delaware
|
|
|
|
Investments
|
Michael E. Hughes
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Hughes has served in
|
|
Equity Analyst
|
Equity Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Kashif Ishaq
|
Vice President/Trader
|
Vice President/Trader
|
Mr.
Ishaq has served in various
|
|
(Since February 2011)
|
|
capacities within Delaware
|
|
|
|
Investments
|
Cynthia Isom
|
Vice President/Portfolio
|
Vice President/Portfolio
|
Ms.
Isom has served in various
|
|
Manager
|
Manager
|
capacities within Delaware
|
|
|
|
Investments
|
Stephen M.
|
Vice President/ Portfolio
|
Vice President/Portfolio
|
Mr.
Juszczyszyn has served in
|
Juszczyszyn
|
Manager/Senior
|
Manager/Senior
|
various capacities within
|
|
Structured Products
|
Structured Products
|
Delaware Investments
|
|
Analyst/Trader
|
Analyst/Trader
|
|
William F. Keelan
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Keelan has served in
|
|
Quantitative Analyst
|
Senior Quantitative
|
various capacities within
|
|
|
Analyst
|
Delaware Investments
|
Nancy Keenan
|
Vice President/Product
|
Vice President/Product
|
Ms.
Keenan has served in
|
|
Manager
|
Manager
|
various capacities within
|
|
|
|
Delaware Investments
|
Anu B. Kothari
|
Vice President/ Senior
|
Vice President/ Senior
|
Ms.
Kothari has served in
|
|
Equity Analyst
|
Equity Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Roseanne L. Kropp
|
Vice President/ Senior
|
Vice President/Senior
|
Ms.
Kropp has served in various
|
|
Portfolio Manager
|
Portfolio Manager
|
capacities within Delaware
|
|
|
|
Investments
|
Nikhil G. Lalvani
|
Vice President/ Portfolio
|
Vice President/Portfolio
|
Mr.
Lalvani has served in
|
|
Manager
|
Manager
|
various capacities within
|
|
|
|
Delaware Investments
|
Jamie LaScala
|
Vice President/Senior
|
Vice President/Senior
|
Ms.
LaScala has served in
|
|
Product Manager
|
Product Manager
|
various capacities within
|
|
|
|
Delaware Investments
|
Kevin Lam
|
Vice President/Portfolio
|
Vice President/Portfolio
|
Mr.
Lam has served in various
|
|
Manager-Fixed Income
|
Manager - Fixed Income
|
capacities within Delaware
|
|
Separately Managed
|
Separately Managed
|
Investments
|
|
Accounts
|
Accounts
|
|
11
Name and
Principal
|
Positions and
Offices
|
Positions and
Offices
|
Other
Positions and Offices
|
Business
Address
|
with
Manager
|
with
Registrant
|
Held
|
Anthony A.
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Lombardi has served in
|
Lombardi
|
Portfolio Manager
|
Portfolio Manager
|
various capacities within
|
|
|
|
Delaware Investments
|
Kent Madden
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Madden has served in
|
|
Equity Analyst
|
Equity Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
John P. McCarthy
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
McCarthy has served in
|
|
Research Analyst
|
Research Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Brian McDonnell
|
Vice President/Portfolio
|
Vice President/Portfolio
|
Mr.
McDonnell has served in
|
|
Manager/Senior
|
Manager/Senior
|
various capacities within
|
|
Structured Products
|
Structured Products
|
Delaware Investments
|
|
Analyst/Trader
|
Analyst/Trader
|
|
Kelley McKee
|
Vice President/Equity
|
Vice President/Equity
|
Ms.
McKee has served in
|
|
Analyst
|
Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Michael S. Morris
|
Vice President/Portfolio
|
Vice President/Portfolio
|
Mr.
Morris has served in
|
|
Manager/Senior Equity
|
Manager/Senior Equity
|
various capacities within
|
|
Analyst
|
Analyst
|
Delaware Investments
|
Constantine
|
Vice President/Product
|
Vice President/Product
|
Mr.
Mylonas has served in
|
(Charlie) Mylonas
|
Manager (Since June
|
Manager
|
various capacities within
|
|
2010)
|
|
Delaware Investments
|
Terrance M. OBrien
|
Vice President/Head of
|
Vice President/Head of
|
Mr.
OBrien has served in
|
|
Fixed Income Quantitative
|
Fixed Income Quantitative
|
various capacities with
|
|
Analysis Department
|
Analysis Department
|
Delaware Investments
|
Donald G. Padilla
|
Vice President/Portfolio
|
Vice President/Portfolio
|
Mr.
Padilla has served in
|
|
Manager/Senior Equity
|
Manager/Senior Equity
|
various capacities within
|
|
Analyst
|
Analyst
|
Delaware Investments
|
Marlene Petter
|
Vice President/Marketing
|
Vice President/Marketing
|
Ms.
Petter has served in various
|
|
Communications
|
Communications
|
capacities within Delaware
|
|
|
|
Investments
|
Daniel J. Prislin
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Prislin has served in various
|
|
Portfolio Manager/
|
Portfolio Manager/Equity
|
capacities within Delaware
|
|
Equity Analyst
|
Analyst
|
Investments
|
Gretchen Regan
|
Vice President/
|
Vice President/
|
Ms.
Regan has served in various
|
|
Quantitative Analyst
|
Quantitative Analyst
|
capacities within Delaware
|
|
|
|
Investments
|
Carl Rice
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Rice has served in various
|
|
Investment Specialist,
|
Investment Specialist
|
capacities within Delaware
|
|
Large Cap Value Focus
|
|
Investments
|
|
Equity
|
|
|
Joseph T. Rogina
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Rogina has served in
|
|
Equity Trader
|
Equity Trader
|
various capacities within
|
|
|
|
Delaware Investments
|
Deborah A. Sabo
|
Vice President/Senior
|
Vice President/Senior
|
Ms.
Sabo has served in various
|
|
Equity Trader/Focus
|
Equity Trader/Focus-
|
capacities within Delaware
|
|
Growth Equity
|
Growth Equity
|
Investments
|
12
Name and
Principal
|
Positions and
Offices
|
Positions and
Offices
|
Other
Positions and Offices
|
Business
Address
|
with
Manager
|
with
Registrant
|
Held
|
Kevin C. Schildt
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Schildt has served in
|
|
Research Analyst
|
Research Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Bruce Schoenfeld
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Schoenfeld has served in
|
|
Equity Analyst
|
Equity Analyst
|
various capacities within
|
|
|
|
Delaware Investments
|
Brian Scotto
|
Vice President/
|
Vice President/
|
Mr.
Scotto has served in various
|
|
Government and Agency
|
Government and Agency
|
capacities within Delaware
|
|
Trader
|
Trader
|
Investments
|
Richard D. Seidel
|
Vice President/Assistant
|
Vice President/Assistant
|
Mr.
Seidel has served in various
|
|
Controller/Assistant
|
Controller/Assistant
|
capacities within Delaware
|
|
Treasurer
|
Treasurer
|
Investments
|
Catherine A. Seklecki
|
Vice President/Sub-
|
Vice President/Sub-
|
Ms.
Seklecki has served in
|
|
Advisory Client Services
|
Advisory Client Services
|
various capacities within
|
|
|
|
Delaware Investments
|
Parshv V. Shah
|
Vice President/ Portfolio
|
Vice President/Portfolio
|
Mr.
Shah has served in various
|
|
Manager/Equity Analyst
|
Manager/Equity Analyst
|
capacities within Delaware
|
|
|
|
Investments
|
Barry Slawter
|
Vice President/Editorial
|
Vice President/Editorial
|
Mr.
Slawter has served in
|
|
Services
|
Services
|
various capacities within
|
|
|
|
Delaware Investments.
|
Antonio (Junee)
|
Vice President/ Structured
|
Vice President/ Structured
|
Mr.
Tan-Torres has served in
|
Tan-Torres
|
Solutions Group
|
Solutions Group
|
various capacities within
|
|
|
|
Delaware Investments
|
Molly Thompson
|
Vice President/Product
|
Vice President/Product
|
Ms.
Thompson has served in
|
|
Manager
|
Manager
|
various capacities within
|
|
|
|
Delaware Investments
|
Robert A. Vogel, Jr.
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Vogel has served in various
|
|
Portfolio Manager
|
Portfolio Manager
|
capacities within Delaware
|
|
|
|
Investments
|
Nael H. Wahaidi
|
Vice
|
Vice
|
Mr.
Wahaidi has served in
|
|
President/Quantitative
|
President/Quantitative
|
various capacities within
|
|
Analyst
|
Analyst
|
Delaware Investments
|
Jeffrey S. Wang
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Wang has served in various
|
|
Equity Analyst
|
Equity Analyst
|
capacities within Delaware
|
|
|
|
Investments
|
Michael G. Wildstein
|
Vice President/ Portfolio
|
Vice President/ Portfolio
|
Mr.
Wildstein has served in
|
|
Manager
|
Manager
|
various capacities within
|
|
|
|
Delaware Investments
|
Kathryn R. Williams
|
Vice President/Associate
|
Vice President/Associate
|
Ms.
Williams has served in
|
|
General Counsel/Assistant
|
General Counsel/Assistant
|
various capacities within
|
|
Secretary
|
Secretary
|
Delaware Investments
|
Wei Xiao
|
Vice President/Senior
|
Vice President/Senior
|
Mr.
Xiao has served in various
|
|
Equity Analyst
|
Equity Analyst
|
capacities within Delaware
|
|
|
|
Investments
|
Douglas A. Zinser
|
Vice President/Senior
|
None
|
Mr.
Zinser has served in various
|
|
Research Analyst
|
|
capacities within Delaware
|
|
|
|
Investments
|
Item 32.
|
|
Principal Underwriters
.
|
|
|
|
(a)
|
|
Delaware Distributors,
L.P. serves as principal underwriter for all the mutual funds in the
Delaware Investments Family of Funds and the Optimum Fund
Trust.
|
13
|
|
(b)
|
|
Information with respect to each
officer and partner of the principal underwriter and the Registrant is
provided below. Unless otherwise noted, the principal business address of
each officer and partner of Delaware Distributors, L.P. is 2005 Market
Street, Philadelphia, PA 19103-7094.
|
Name and
Principal
|
Positions and
Offices with
|
Positions and
Offices with
|
Business
Address
|
Underwriter
|
Registrant
|
Delaware Distributors, Inc.
|
General Partner
|
None
|
Delaware Capital
|
Limited Partner
|
None
|
Management
|
|
|
Delaware Investment Advisers
|
Limited Partner
|
None
|
J. Scott Coleman
|
President
|
None
|
Philip N. Russo
|
Executive Vice President
|
None
|
David P. OConnor
|
Executive Vice President/General
|
Executive Vice President/Strategic
|
|
Counsel
|
Investment Relationships and
|
|
|
Initiatives/General Counsel
|
Jeffrey G. Klepacki
|
Senior Vice President (Since June
|
None
|
|
2010)
|
|
Brian L. Murray, Jr.
|
Senior Vice President
|
Senior Vice President/Chief
|
|
|
Compliance Officer
|
Aiden J. Redmond, Jr.
|
Senior Vice President (Since Sept.
|
None
|
|
2011)
|
|
Richard Salus
|
Senior Vice
|
Senior Vice President/Chief
|
|
President/Controller/Treasurer/
|
Financial Officer
|
|
Financial Operations Principal
|
|
Mathew J. Calabro
|
Vice President (Since Sept. 2011)
|
None
|
Mary Ellen M. Carrozza
|
Vice President
|
Vice President/Client Services
|
Anthony G. Ciavarelli
|
Vice President/Assistant Secretary
|
Vice President/Associate General
|
|
|
Counsel/Assistant Secretary
|
David F. Connor
|
Vice President/Secretary
|
Vice President/Deputy General
|
|
|
Counsel/Secretary
|
Cori E. Daggett
|
Vice President/Assistant Secretary
|
Vice President/Associate General
|
|
|
Counsel/Assistant Secretary
|
Daniel V. Geatens
|
Vice President
|
Vice President
|
John L. Greico
|
Vice President (Since June 2010)
|
None
|
Robert T. Haenn
|
Vice President (Since June 2010)
|
None
|
Marlene D. Petter
|
Vice President
|
None
|
Richard D. Seidel
|
Vice President/Assistant
|
None
|
|
Controller/Assistant Treasurer
|
|
Stephen R. Shamut
|
Vice President (Since June 2010)
|
None
|
Kathryn R. Williams
|
Vice President/Assistant Secretary
|
Vice President/Associate General
|
|
|
Counsel/Assistant Secretary
|
Antoinette C. Robbins
|
Interim Chief Compliance
|
Anti-Money Laundering Officer
|
|
Officer/Anti-Money Laundering
|
(Since Aug. 2011)
|
|
Officer (Since Sept. 2011)
|
|
|
|
(c)
|
|
Not applicable.
|
|
Item 33.
|
|
Location
of Accounts and Records
. All accounts and records required to be maintained by
Section 31 (a) of the Investment Company Act of 1940 and the rules under
that section are maintained by the following entities: Delaware Management
Company, Delaware Service Company, Inc. and Delaware Distributors, L.P.
(2005 Market Street, Philadelphia, PA 19103-7094); BNY Mellon Investment
Servicing (US) Inc. (4400 Computer Drive, Westborough, MA 01581-1722); and
The Bank of New York Mellon (One Wall Street, New York, NY
10286-0001).
|
|
|
|
|
Item 34.
|
|
Management Services
. None.
|
|
|
|
Item 35.
|
|
Undertakings
. Not
applicable.
|
14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement under Rule 485(b)
under the Securities Act of 1933 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Philadelphia and Commonwealth of Pennsylvania on this 28th day of
November, 2012.
|
DELAWARE GROUP INCOME FUNDS
|
|
|
|
|
|
|
|
By:
|
/s/
Patrick P. Coyne
|
|
|
Patrick P. Coyne
|
|
|
Chairman/President/Chief Executive
Officer
|
Pursuant to the requirements of the
Securities Act of 1933, this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated:
Signature
|
|
|
Title
|
|
Date
|
/s/
Patrick P. Coyne
|
|
|
Chairman/President/Chief Executive
Officer
|
|
November 28, 2012
|
Patrick P. Coyne
|
|
|
(Principal Executive Officer) and
Trustee
|
|
|
|
Thomas L. Bennett
|
*
|
|
Trustee
|
|
November 28, 2012
|
Thomas L. Bennett
|
|
|
|
|
|
|
John A. Fry
|
*
|
|
Trustee
|
|
November 28, 2012
|
John A. Fry
|
|
|
|
|
|
|
Anthony D. Knerr
|
*
|
|
Trustee
|
|
November 28, 2012
|
Anthony D. Knerr
|
|
|
|
|
|
|
Lucinda S. Landreth
|
*
|
|
Trustee
|
|
November 28, 2012
|
Lucinda S. Landreth
|
|
|
|
|
|
|
Frances A. Sevilla-Sacasa
|
*
|
|
Trustee
|
|
November 28, 2012
|
Frances A. Sevilla-Sacasa
|
|
|
|
|
|
|
Janet L. Yeomans
|
*
|
|
Trustee
|
|
November 28, 2012
|
Janet L. Yeomans
|
|
|
|
|
|
|
J.
Richard Zecher
|
*
|
|
Trustee
|
|
November 28, 2012
|
J. Richard Zecher
|
|
|
|
|
|
|
Richard Salus
|
*
|
|
Senior Vice President/Chief Financial
Officer
|
|
November 28, 2012
|
Richard Salus
|
|
|
(Principal Financial Officer)
|
|
|
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*By:
/s/ Patrick P.
Coyne
Patrick P. Coyne
as Attorney-in-Fact for
each of the
persons indicated
(Pursuant to Powers
of Attorney previously filed and filed herewith)
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15
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
EXHIBITS
TO
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
INDEX TO EXHIBITS
(Delaware Group
®
Income Funds N-1A)
Exhibit
No.
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Exhibit
|
EX-99.d.4
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|
Executed Investment Advisory Expense Limitation Letter
(November 2012) between Delaware Management Company (a series of Delaware
Management Business Trust) and the Registrant
|
|
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EX-99.e.1.iv
|
|
Executed Distribution Expense Limitation Letter (November
2012) between Delaware Distributors, L.P. and the Registrant
|
|
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EX-99.j
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|
Consent of Independent Registered Public Accounting Firm
(November 2012)
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EX-99.n.1.i
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|
Appendix A (October 1, 2012) to Plan under Rule
18f-3
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EX-99.p.1
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|
Code of Ethics for the Delaware Investments Family of Funds
(December 1, 2011)
|
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EX-99.p.2
|
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Code of Ethics for Delaware Investments (Delaware Management
Company, a series of Delaware Management Business Trust, and Delaware
Distributors, L.P.) (December 1, 2011)
|
|
|
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EX-99.q.2
|
|
Power of Attorney (September 1,
2011)
|
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