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As Of Filer Filing For·On·As Docs:Size Issuer Agent 2/28/11 Delaware Group Adviser Funds 485BPOS 2/28/11 6:2.7M DG3/FA → Delaware Diversified Income Fund ⇒ Class A (DPDFX) — Class B (DPBFX) — Class C (DPCFX) — Class R (DPRFX) — Institutional Class (DPFFX) → Delaware U.S. Growth Fund ⇒ Class A (DUGAX) — Class B (DEUBX) — Class C (DEUCX) — Class R (DEURX) — Institutional Class (DEUIX) |
Document/Exhibit Description Pages Size 1: 485BPOS Post-Effective Amendment Filed Pursuant to HTML 1.93M Securities Act Rule 485(B) 2: EX-99.D.2 Executed Investment Advisory Expense Limitation HTML 18K Letter (February 25, 2011) 3: EX-99.E.1.II Executed Distribution Expense Limitation Letter HTML 14K (February 25, 2011) 4: EX-99.G.2.I Executed Amendment (September 22, 2009) HTML 124K 5: EX-99.H.3.I Amendment No. 2 (January 31, 2011) HTML 26K 6: EX-99.J Consent of Independent Registered Public HTML 9K Accounting Firm (February 2011)
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | /X/ | |
Pre-Effective Amendment No. _____ | / / | |
Post-Effective Amendment No. 32 | /X/ | |
and/or | ||
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | /X/ | |
Amendment No. 34 |
(Check appropriate box or boxes.) | |||
DELAWARE GROUP ADVISER FUNDS | |||
(Exact Name of Registrant as Specified in Charter) | |||
2005 Market Street, Philadelphia, Pennsylvania | 19103-7094 | ||
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, including Area Code: | (800) 523-1918 | ||
David F. Connor, Esq., 2005 Market Street, Philadelphia, PA 19103-7094 | |||
(Name and Address of Agent for Service) | |||
Approximate Date of Proposed Public Offering: | February 28, 2011 |
/X/ | immediately upon filing pursuant to paragraph (b) | |||
/ / | on F(date) pursuant to paragraph (b) | |||
/ / | 60 days after filing pursuant to paragraph (a)(1) | |||
/ / | on (date) pursuant to paragraph (a)(1) | |||
/ / | 75 days after filing pursuant to paragraph (a)(2) | |||
/ / | on (date) pursuant to paragraph (a)(2) of Rule 485. |
/ / | this post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
1. | Facing Page | ||
2. | Contents Page | ||
3. | Part A - Prospectuses | ||
4. | Part B - Statement of Additional Information | ||
5. | Part C - Other Information | ||
6. | Signatures | ||
7. | Exhibits |
Prospectus
Fixed income
Delaware Diversified Income Fund
Nasdaq ticker symbols |
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Class A |
DPDFX |
Class B |
DPBFX |
Class C |
DPCFX |
Class R |
DPRFX |
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.
</R> <R>
Get shareholder reports and prospectuses online instead of in the mail.
Visit www.delawareinvestments.com/edelivery.
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<R>
Delaware Diversified Income Fund
</R>What is the Fund's investment objective?
Delaware Diversified Income Fund seeks maximum long-term total return, consistent with reasonable risk.
What are the Fund's fees and expenses?
<R>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 this prospectus under the section entitled "About your account," and in the Fund's statement of additional information under the section entitled "Purchasing shares."
</R> <R>Shareholder fees (fees paid directly from your investment) | |||||||
Class | A | B | C | R | |||
Maximum sales charge (load) imposed on purchases as a percentage of offering price | 4.50% | 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 | |||
Annual fund operating expenses (expenses that you pay each year as a percentage of the value of your investment) | |||||||
Class | A | B | C | R | |||
Management fees | 0.45% | 0.45% | 0.45% | 0.45% | |||
Distribution and service (12b-1) fees | 0.30% | 1.00% | 1.00% | 0.60% | |||
Other expenses | 0.23% | 0.23% | 0.23% | 0.23% | |||
Total annual fund operating expenses | 0.98% | 1.68% | 1.68% | 1.28% | |||
Fee waivers and expense reimbursements | (0.05%)2 | — | — | (0.10%)2 | |||
Total annual fund operating expenses after fee waivers and expense reimbursements | 0.93% | 1.68% | 1.68% | 1.18% |
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 3.25% during the second year, 2.75% during the third year, 2.25% during the fourth and fifth years, 1.50% 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 distributor, Delaware Distributors, L.P. (Distributor), has also contracted to limit the Class A and Class R shares' 12b-1 fees from February 28, 2011 through February 28, 2012 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
</R> <R>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:
</R> <R>(if not redeemed) | (if not redeemed) | ||||||||
Class | A | B | B | C | C | R | |||
1 year | $541 | $101 | $571 | $171 | $271 | $120 | |||
3 years | $743 | $530 | $805 | $530 | $530 | $396 | |||
5 years | $963 | $913 | $1,138 | $913 | $913 | $693 | |||
10 years | $1,593 | $1,801 | $1,801 | $1,987 | $1,987 | $1,536 |
Portfolio turnover
<R>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 232% of the average value of its portfolio.
</R> <R>What are the Fund's principal investment strategies?
</R>The Fund allocates its investments principally among the following four sectors of the fixed income securities markets: the U.S. investment grade sector, the U.S. high yield sector, the international developed markets sector, and the emerging markets sector. Under normal circumstances, the Fund will invest at least 80% of its net assets in fixed income securities (the 80% policy). The Fund's investment manager, Delaware Management Company (Manager or we), will determine how much of the Fund to allocate to each of the four sectors, based on our evaluation of economic and market conditions and our assessment of the returns and potential for appreciation that can be achieved from investments in each of the four sectors. We will periodically reallocate the Fund's assets, as deemed necessary.
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. The Fund may also use a wide range of hedging instruments, including options, futures contracts, and options on futures contracts subject to certain limitations. The Fund's 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'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.
<R>What are the principal risks of investing in the Fund?
</R> <R></R> <R>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:
</R> <R></R> <R>Investment 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 (the "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.
</R> <R></R> <R>Market risk — The risk that all or a majority of the securities in a certain market — like 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.
</R> <R></R> <R>Credit risk — The risk that a bond's issuer will be unable to make timely payments of interest and principal. Investing in so-called "junk" or "high yield" bonds entails greater risk of principal loss than the risk involved in investment grade bonds.
</R> <R></R>Interest rate risk — The risk that securities, particularly bonds with longer maturities, will decrease in value if interest rates rise.
<R></R> <R></R> <R>Bank loans and other direct 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.
</R> <R></R> <R>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.
</R> <R></R> <R>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.
</R> <R></R> <R>Currency risk — The risk that the value of a portfolio's investments may be negatively affected by changes in foreign currency exchange rates.
</R> <R></R> <R>Derivatives risk — Derivatives may involve additional expenses and are subject to the risk that a security or a securities index to which the derivative is associated 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 transactions rely upon the counterparty's ability to fulfill its contractual obligations.
</R> <R></R> <R>Liquidity risk — The possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them.
</R> <R></R> <R>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.
</R> <R></R> <R>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.
</R> <R></R>How has Delaware Diversified Income Fund performed?
<R>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 1, 5, and 10 years 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 web site at www.delawareinvestments.com/performance.
</R> <R>On October 28, 2002, the Fund acquired all of the assets and assumed all of the liabilities of The Diversified Core Fixed Income Portfolio of Delaware Pooled® Trust (Predecessor Fund), which had investment objectives and policies identical to those of the Fund. The Fund had no operations prior to October 28, 2002. Shareholders of the Predecessor Fund received Class A shares of the Fund in connection with this transaction. As a result of this transaction, Class A shares of the Fund assumed the performance history of the Predecessor Fund for periods prior to the closing date of the transaction. The average annual total returns of the Fund in the table below for periods prior to October 28, 2002 have been restated to reflect the maximum sales charge applicable to Class A shares, but not to reflect the distribution and service (12b-1), higher management, and transfer agency fees borne by Class A shares of the Fund.
</R>Year-by-year total return (Class A)
<R>
|
During the periods illustrated in this bar chart, Class A's highest quarterly return was 10.21% for the quarter ended June 30, 2009 and its lowest quarterly return was -3.93% 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.
</R> <R>Average annual total returns for periods ended December 31, 2010
</R> <R>1 year | 5 years | 10 years or lifetime | |
Class A return before taxes | 2.91% | 7.47% | 7.88% |
Class A return after taxes on distributions | 0.10% | 5.10% | 5.20% |
Class A return after taxes on distributions and sale of Fund shares | 2.10% | 4.99% | 5.14% |
Class B return before taxes (lifetime: 10/28/02-12/31/10) | 2.91% | 7.41% | 7.71% |
Class C return before taxes (lifetime: 10/28/02-12/31/10) | 5.98% | 7.65% | 7.71% |
Class R return before taxes (lifetime: 06/02/03-12/31/10) | 7.62% | 8.19% | 7.01% |
Barclays Capital U.S. Aggregate Index (reflects no deduction for fees, expenses, or taxes) | 6.54% | 5.80% | 5.84% |
After-tax performance is only presented 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 Fund's lifetime and do not reflect the impact of state and local taxes.
</R>Who manages the Fund?
Investment manager
Delaware Management Company
<R>
Portfolio managers |
Title with Delaware Management Company |
Start date on the Fund |
Roger A. Early, CPA, CFA, CFP |
Senior Vice President, Co-Chief Investment Officer – Total Return Fixed Income Strategy |
May 2007 |
Paul Grillo, CFA |
Senior Vice President, Co-Chief Investment Officer – Total Return Fixed Income Strategy |
February 2001 |
Wen-Dar Chen, Ph.D. |
Vice President, Portfolio Manager – International Debt |
May 2007 |
Thomas H. Chow, CFA |
Senior Vice President, Senior Portfolio Manager |
May 2007 |
Kevin P. Loome, CFA |
Senior Vice President, Senior Portfolio Manager, Head of High Yield Investments |
August 2007 |
J. David Hillmeyer, CFA |
Vice President, Portfolio Manager, Head of Investment Grade Corporate Trading |
February 2011 |
Laura A. Ostrander |
Vice President, Senior Portfolio Manager |
February 2011 |
Purchase and redemption of Fund shares
<R>
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; by regular mail (c/o Delaware Investments, P.O. Box 219691, Kansas City, MO 64121-9691); by overnight courier service (c/o Delaware Service Center, 430 W. 7th Street, Kansas City, MO 64105);
by telephone to our Shareholder Service Center at 800 523-1918 weekdays from 8:30 a.m. to 6:00 p.m. Eastern time; by telephone to our automated telephone service at
800 362-3863 at any time; through our web site at www.delawareinvestments.com; or by wire.
In most cases, the minimum initial investment is $1,000 and subsequent investments can be made for as little as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act, or through a direct deposit purchase plan or an automatic investment plan, the minimum initial investment is $250 and subsequent investments can be made for as little as $25. The minimum initial purchase for a Coverdell Education Savings Account is $500 and subsequent investments can be made for as little as $25. There is no minimum initial purchase requirement for Class R shares, but certain eligibility requirements must be met. The minimums vary for retirement plans other than IRAs, Roth IRAs, or Coverdell Education Savings Accounts. We may reduce or waive the above minimums in certain cases. As of May 31, 2007, no new or subsequent investments 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 are generally taxable, and will be taxed 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.
</R>
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 web site for more information.
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. The following are descriptions of how the portfolio management team pursues the Fund's investment objective.
The Fund allocates its investments principally among the U.S. investment grade, U.S. high yield, international developed markets, and emerging markets sectors. The relative proportion of the Fund's assets to be allocated among these sectors is described below:
U.S. investment grade sector
Under normal circumstances, there is no limit to the amount of the Fund's total assets that will be invested in the U.S. investment grade sector. In managing the Fund's assets allocated to the investment grade sector, we will invest principally in debt obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, and by U.S. corporations. The corporate debt obligations in which the Fund may invest include bonds, notes, debentures, and commercial paper of U.S. companies. 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 sponsored by the U.S. government.
The investment grade sector of 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.
Securities purchased by the Fund within this sector will be rated in one of the four highest rating categories or will be unrated securities that we determine are of comparable quality.
U.S. high yield sector
Under normal circumstances, between 5% and 50% of the Fund's total assets will be allocated to the U.S. high yield sector. We will invest the Fund's assets that are allocated to the domestic high yield sector primarily in those securities having a liberal and consistent yield and those tending to reduce the risk of market fluctuations. The Fund may invest in domestic corporate debt obligations, including notes, which may be convertible or nonconvertible, commercial paper, units consisting of bonds with stock or warrants to buy stock attached, debentures, convertible debentures, zero coupon bonds, and pay-in-kind securities.
The Fund will invest in both rated and unrated bonds. The rated bonds that the Fund may purchase in this sector will generally be rated BB or lower by Standard & Poor's (S&P) or Fitch, Inc. (Fitch), Ba or lower 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.
International developed markets sector
Under normal circumstances, between 5% and 50% of the Fund's total assets will be invested, in the aggregate, in the international developed markets and emerging markets sectors. The international developed markets sector invests primarily in fixed income securities of issuers organized or having a majority of their assets or deriving a majority of their operating income in international developed 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-American Development Bank, and the Asian Development Bank. The international developed markets sector will be subject to certain risks, including, but not limited to, the risk that securities within this sector may be adversely affected by political instability, changes in currency exchange rates, foreign economic conditions, or inadequate regulatory and accounting standards.
Emerging markets sector
The Fund may purchase securities of issuers in any foreign country, developed and underdeveloped. These investments may include direct obligations of issuers located in emerging markets countries. As with the international sector, the fixed income securities in the emerging markets sector may include foreign government securities, debt obligations of foreign companies, and securities issued by supranational entities. In addition to the risks associated with investing in all foreign securities, emerging markets debt is subject to specific risks, particularly those that result from emerging markets generally being less stable, politically and economically, than developed markets. There is substantially less publicly available information about issuers in emerging markets than there is about issuers in developed markets, and the information that is available tends to be of a lesser quality. Also, emerging markets are typically less mature, less liquid, and subject to greater price volatility than are developed markets. Investments in the emerging markets sector will, in the aggregate, be limited to no more than 15% of the Fund's total assets.
The Fund may invest in sponsored and unsponsored American depositary receipts (ADRs), European depositary receipts (EDRs), or global depositary receipts (GDRs). The Fund may also invest in zero coupon bonds and may purchase shares of other investment companies.
The Fund will invest in both rated and unrated foreign securities.
The Fund may invest in securities issued in any currency and may hold foreign 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 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. Currency considerations carry a special risk for a portfolio that allocates a significant portion of its assets to foreign securities. The Manager will limit non-U.S.-dollar-denominated securities to no more than 50% of the Fund's net assets, but total non-U.S.-dollar currency exposure will be limited, in the aggregate, to no more than 25% of the Fund's net assets.
The Fund's investment objective is nonfundamental. This means that the Board may change the Fund's objective without obtaining shareholder approval. If the objective were changed, shareholders would receive at least 60 days' notice 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.
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 for the Fund's U.S. investment grade sector, and we may invest in bonds rated BB or lower by S&P or Fitch and Ba or lower by Moody's for the Fund's U.S. high yield sector and international developed markets sector.
<R>High yield corporate bonds (junk bonds)
</R> <R></R> <R>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.
</R> <R></R>How the Fund uses them: Emphasis is typically on those rated BB or Ba by an NRSRO.
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.
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 Federal Home Loan Mortgage Corporation, Fannie Mae, and the Government National Mortgage Association. 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.
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 the Fund's limit on illiquid securities. In addition, subject to certain quality and collateral limitations, we may invest up to 20% of the Fund's 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."
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 rated in one of the four highest rating categories by an NRSRO.
U.S. government securities
<R>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.
</R>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.
Foreign government securities
Foreign government securities are debts issued by a government other than the United States or by an agency, instrumentality or political subdivision of such government.
How the Fund uses them: The fixed income securities in which the Fund may invest include those issued by foreign governments.
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.
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.
Short-term debt instruments
These instruments include: (1) time deposits, certificates of deposit and bankers 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 pending investment in its 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.
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 which 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.
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.
<R>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 its purchaser exercises the option.
</R>Certain options and futures may be considered derivative securities.
How the Fund uses them : The Fund may invest in futures, options, and closing transactions related thereto. These activities will be entered into for hedging purposes and to facilitate the ability to quickly deploy into the market the Fund's cash, short-term debt securities, and other money market instruments at times when its assets are not fully invested. We may only enter into these transactions for hedging purposes if they are consistent with the Fund's investment objective and policies. We may not engage in such transactions to the extent that obligations resulting from these activities, in the aggregate, exceed 25% of the Fund's assets. In addition, we may enter into futures contracts, purchase or sell options on futures contracts, trade in options on foreign currencies, and enter into closing transactions with respect to such activities to hedge or "cross hedge" the currency risks associated with the Fund's investments. Generally, futures contracts on foreign currencies operate similarly to futures contracts concerning securities, and options on foreign currencies operate similarly to options on securities. See also "Foreign currency transactions" below. To the extent that we sell or "write" put and call options, we will designate assets sufficient to "cover" these obligations and mark them to market daily.
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.
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 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. 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.
Interest rate swap, index swap, and credit default swap agreements
<R></R>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.
<R>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.
</R>Interest rate swaps, index swaps, and credit default swaps may be considered illiquid.
<R></R>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 it 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.
Bank loans
Bank loans represent an interest in a loan or other direct indebtedness, such as an assignment, that entitles the acquiring 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 perform its own independent credit analysis on each borrower and on the collateral securing each loan. The portfolio managers 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. The Fund will not use bank loans for reasons inconsistent with its investment objective.
Other investment strategies
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.
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.
Purchasing securities on a when-issued 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 table 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
<R>Market risk is the risk that all or a majority of the securities in a certain market — like the stock or bond market — will decline in value because of economic conditions, future expectations, investor confidence, or heavy institutional selling.
</R>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 these 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. 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.
<R>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.
</R> <R>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 45% of net assets in fixed income securities rated below investment grade.
</R> <R></R> <R></R> <R></R> <R></R> <R></R> <R></R>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.
<R>How the Fund strives to manage it: The Manager attempts to reduce the risks presented by such investments by conducting worldwide fundamental research, including country visits. In addition, the Manager monitors 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, the Fund may hedge exposure to those currencies for defensive purposes.
</R>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 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. If and when we invest in forward foreign currency contracts or use other investments to hedge against currency risks, the Fund will be subject to special risks, including counterparty risk.
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: We may invest a portion of the Fund's assets in securities of issuers located in emerging markets. We cannot eliminate these risks but 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's investments in emerging markets will, in the aggregate, be limited to no more than 15% of the Fund's total assets.
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.
The high yield secondary market is particularly susceptible to liquidity problems when institutional investors, such as mutual funds and certain other financial institutions, temporarily stop buying bonds for regulatory, financial, or other reasons.
How the Fund strives to manage it: The Fund limits exposure to illiquid securities to no more than 15% of its net assets.
Futures contracts, options on futures contracts, forward contracts, and certain options risk
Futures contracts, options on futures contracts, forward contracts, and certain options used as investments for hedging and other nonspeculative purposes involve certain risks. For example, a lack of correlation between price changes of an option or futures contract and the assets being hedged could render a fund's hedging strategy unsuccessful and could result in losses. The same results could occur if movements of foreign currencies do not correlate as expected by the investment manager at a time when a fund is using a hedging instrument denominated in one foreign currency to protect the value of a security denominated in a second foreign currency against changes caused by fluctuations in the exchange rate for the dollar and the second currency. If the direction of securities prices, interest rates, or foreign currency prices is incorrectly predicted, a fund will be in a worse position than if such transactions had not been entered into. In addition, since there can be no assurance that a liquid secondary market will exist for any contract purchased or sold, a fund may be required to maintain a position (and in the case of written options may be required to continue to hold the securities used as cover) until exercise or expiration, which could result in losses. Further, options and futures contracts on foreign currencies, and forward contracts, entail particular risks related to conditions affecting the underlying currency. Over-the-counter transactions in options and forward contracts also involve risks arising from the lack of an organized exchange trading environment.
How the Fund strives to manage it: We may use certain options strategies or may use futures contracts and options on futures contracts. We will not enter into futures contracts and options thereon to the extent that more than 5% of the Fund's total 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 20% of the Fund's total assets.
We may also use options and futures to gain exposure to a particular market segment without purchasing individual securities in the segment.
See also "Foreign risk" and "Currency risk" above.
Zero coupon and pay-in-kind bonds
<R>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 which 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.
</R>How the Fund strives to manage it: We may invest in zero coupon and PIK bonds to the extent consistent with the Fund's 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.
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 may invest in mortgage-backed securities, CMOs, and REMICs. We take into consideration the likelihood of prepayment when mortgages are selected. 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.
Transaction costs risk
Transaction costs risk is the risk that the costs of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions.
How the Fund strives to manage it: The Fund is subject to transaction costs risk to the extent that its objective and policies permit it to invest, and it actually does invest, in foreign securities. We strive to monitor transaction costs and to choose an efficient trading strategy for the Fund.
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: We attempt to reduce the risks associated with investing in foreign governments by limiting the portion of portfolio assets that may be invested in such securities.
Valuation risk
<R></R> <R>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.
</R> <R></R>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.
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, 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.
Derivatives risk
<R>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.
</R>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.
Loans and other indebtedness risk
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 an unsecured loan 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 onto 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 are illiquid, these would be subject to the Fund's restrictions 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 only obtain 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 will 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.
<R>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 of 0.44% of average daily net assets during the last fiscal year.
</R> <R>A discussion of the basis for the Board's approval of the Fund's investment advisory contract is available in the Fund's annual report to shareholders for the fiscal year ended October 31, 2010.
</R> <R>
Roger A. Early, Paul Grillo, Wen-Dar Chen, Thomas H. Chow, Kevin P. Loome, J. David Hillmeyer, and Laura Ostrander have primary responsibility for making day-to-day investment decisions for the Fund.
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 served as 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.
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 served as 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.
Wen-Dar Chen, Ph.D.
,
Vice President, Portfolio Manager — International Debt
Wen-Dar Chen, Ph.D., is a member of the firm's taxable fixed income portfolio management team with primary responsibility for international portfolio construction and strategic asset allocation. He has specialized in quantitative fixed income investments since 1986. Before he joined Delaware Investments in mid-2004 as a senior international debt analyst, he was a quantitative analyst in global asset-backed securities, credit strategies, and portfolio strategies at J.P. Morgan Securities. Since 1998, he has worked to promote the asset-backed securities business in Asia, and published the book, Asset-Backed Securitization - Theory and Practice, in Asia in 2002. He worked at Salomon Brothers from 1993 to 1996, and Lehman Brothers from 1990 to 1993, during which time he gained experience with government securities trading desks, proprietary trading of structured products, financial strategies, and index strategies
groups. Dr. Chen's degrees include a bachelor's degree in atmospheric sciences from the National Taiwan University, a master's degree in meteorology from the South Dakota School of Mines and Technology, and a Ph.D. in geophysical fluid dynamics from Princeton University.
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, 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.
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, Portfolio Manager, Head of Investment Grade Corporate Trading
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 diversified floating rate strategies. In addition, he is responsible for bank loans and is a member of the fixed income trading team. Prior to joining Delaware Investments in August 2007, 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.
Laura A. Ostrander,
Vice President, Senior Portfolio Manager
Laura A. Ostrander joined Delaware Investments in August 2010 as a senior portfolio manager specializing in emerging markets debt. Before joining the firm, she worked at Columbia Management, serving as lead portfolio manager on the firm's multi-sector product since 2002, and as co-portfolio manager of the product since 1999. As lead portfolio manager, Ostrander was responsible for the overall asset allocation across U.S. government, emerging market, developed market foreign government, and high yield corporate bonds, and was directly responsible for the investment of assets in the U.S. and foreign sectors of the product. She was head of the Columbia Management international team from 1996 until her departure. Earlier on, Ostrander held portfolio management roles at American Express Financial, American Express Bank, and Offitbank. She has more than 20 years of experience in the financial services industry and more
than 10 years of experience managing global fixed income portfolios. She earned her bachelor's degree in economics from St. John Fisher College.
</R> <R></R> <R></R>
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.
<R>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 Fund's 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 Fund's 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.
</R> <R>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.
</R> <R>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. The Fund relies on certain exemptive rules adopted by the SEC that require the board of trustees to be composed of a majority of trustees independent of a fund's investment manager and distributor.
</R>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.
<R>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 contributions into existing 403(b) custodial accounts .
</R>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, which is lower than the 12b-1 fee for Class C, and Class R shares. 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
<R></R> <R>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 NAV, the percentage rate of the sales charge, and rounding.
</R> <R></R>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.
</R> <R></R>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 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 in the Fund. 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.
Because of the higher 12b-1 fee, Class B shares have higher expenses and any dividends paid on these shares are generally lower than dividends on Class A and Class R shares.
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.
Because of their higher 12b-1 fee, Class C shares have higher expenses and any dividends paid on these shares are generally lower than dividends on Class A and Class R shares.
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
<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, which is lower than the 12b-1 fee for Class C shares.
Because of the higher 12b-1 fee, Class R shares have higher expenses and any dividends paid on these shares are generally lower than dividends paid on Class A shares.
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, etc.). 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 June 2, 2003 (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.
Each share class may be eligible for purchase through programs sponsored by financial intermediaries that require the purchase of a specific class of shares.
Each share class of the Fund has 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.
<R>
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.
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.
Class A1 | Class B2 | Class C3 | Class R4 | |
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 re-allows 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 0.30%. However, the Distributor has contracted to limit this amount to 0.25% from February 28, 2011 through February 28, 2012.
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 February 28, 2011 through February 28, 2012.
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). The level of payments made to a qualifying Financial Intermediary in any given year will 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.
</R>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. 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 NAV or the price of the Fund's shares.
For more information, please see the SAI.
How to reduce your sales charge
<R>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. Class R shares have no up-front sales charge or CDSC. We reserve the right to determine whether any purchase is entitled, by virtue of the foregoing, to the reduced sales charge.
</R>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 will 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.
<R>
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 have entered into a Class A NAV 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 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
<R>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' web site at www.delawareinvestments.com. Additional information on sales charges can be found in the SAI, which is available upon request.
</R>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 A1, B, and C |
Available |
Redemptions that result from the right to liquidate a shareholder's account
<R></R> <R>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.
</R> <R></R>Classes A1, 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 (Code).
Class A1 | 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 Code with respect to that retirement plan.
Class A1 | Classes B and C |
Available | Not available |
Periodic distributions from an individual retirement account
<R>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 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 Code.
</R>Classes A1, B, and C |
Available |
Returns of excess contributions due to any regulatory limit
<R>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).
</R>Classes A1, B, and C |
Available |
Distributions by other employee benefit plans
Distributions by other employee benefit plans to pay benefits.
Class A1 | Classes B and C |
Available | Not available |
Systematic withdrawals from a retirement account or qualified plan
<R>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 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 Code. The systematic withdrawal may be pursuant to the systematic withdrawal plan for the Delaware Investments ® Funds or a systematic withdrawal permitted by the Code.
</R>Classes A1, B, and C |
Available |
Distributions from an account of a redemption resulting from death or disability
<R>Distributions from an account of a redemption resulting from the death or disability (as defined in Section 72(t)(2)(A) of the 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.
</R>Classes A1, 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 A1 | Class B | Class C |
Available | Not available | Available |
Redemptions by the classes of shareholders who are permitted to purchase shares at NAV
<R>Redemptions by the classes of shareholders who are permitted to purchase shares at NAV, regardless of the size of the purchase.
</R>Class A1 | Classes B and C |
Available | Not available |
1The 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.
2Qualified 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.
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, P.O. Box 219691, Kansas City, MO 64121-9691 or 430 W. 7th Street, Kansas City, MO 64105-1407 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 orders are received by Delaware Investments at P.O. Box 219691, Kansas City, MO 64121-9691 for investments by regular mail or 430 W. 7th Street, Kansas City, MO 64105-1407 for investments by overnight courier service. Please do not send purchase orders to 2005 Market Street, Philadelphia, PA 19103-7094.
By wire
Ask your bank to wire the amount you want to invest to The Bank of New York Mellon, ABA #021000018, bank account number 8900403748. 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
<R>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.
</R>Through automated shareholder services
<R>You may purchase or exchange shares through Delaphone, our automated telephone service, or through our web site, www.delawareinvestments.com. For more information about how to sign up for these services, call our Shareholder Service Center at 800 523-1918.
</R>Once you have completed an application, you can open an account with an initial investment of $1,000 and make additional investments at any time for as little as $100. The minimum initial purchase is $250, and you can make additional investments of $25 or more, if you are buying shares in an IRA or Roth IRA, under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act, or through an Automatic Investing Plan. The minimum initial purchase for a Coverdell Education Savings Account (formerly, an "Education IRA") is $500. The minimums vary for retirement plans other than IRAs, Roth IRAs, or Coverdell Education Savings Accounts.
<R>The price you pay for shares will depend on when we receive your purchase order. If an authorized agent or we receive your order 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 the 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.
</R> <R>We determine the NAV per share for each class of the Fund at the close of regular trading on the NYSE on each Business Day. The NAV per share for each class of the 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 value.
</R>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 price 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.
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.
<R></R>If you have an account in the same Delaware Investments ® Fund as another member of your household, we send your household one copy of the Fund's prospectus and annual and semiannual reports unless you opt otherwise. This will help us reduce the printing and mailing expenses associated with the Fund. We will continue to send one copy of each of these documents to your household until you notify us that you wish to receive individual materials. If you wish to receive individual materials, please call our Shareholder Service Center at 800 523-1918 or your financial advisor. We will begin sending you individual copies of these documents 30 days after receiving your request.
<R></R> <R></R> <R>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.
</R>Through your financial advisor
Your financial advisor can handle all the details of redeeming your shares (selling them back to the 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 219691, Kansas City, MO 64121-9691 or 430 W. 7th Street, Kansas City, MO 64105-1407 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 accepted until such orders are received by Delaware Investments at P.O. Box 219691, Kansas City, MO 64121-9691 for redemptions by regular mail or 430 W. 7th Street, Kansas City, MO 64105-1407 for redemptions by overnight courier service. Please do not send redemption requests to 2005 Market Street, Philadelphia, PA 19103-7094.
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
<R>You may redeem shares through Delaphone, our automated telephone service, or through our web site, www.delawareinvestments.com. For more information about how to sign up for these services, call our Shareholder Service Center at 800 523-1918.
</R>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.
When you send us a properly completed request to redeem or exchange shares and an authorized agent or we receive the request 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, we will wait until your check has cleared, which can take up to 15 days, before we send 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.
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.
<R>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 shares does not reach the minimum balance, we may redeem your account after 60 days' written notice to you.
</R>To help make investing with us as easy as possible, and to help you build your investments, we offer the following special 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
<R></R> <R>Online account access is a password-protected area of the Delaware Investments ® Funds' web site that gives you access to your account information and allows you to perform transactions in a secure internet environment.
</R> <R></R>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
<R></R> <R>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 or from Class R shares of any fund, 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. 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. The Fund may refuse the purchase side of any exchange request, if, in the Manager's judgment, the Fund would be unable to invest effectively in accordance with its investment objective and policies or would otherwise potentially be adversely affected.
</R> <R></R>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
<R></R> <R>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.
</R> <R></R>Systematic withdrawal plan
Through the systematic withdrawal plan, 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.
<R>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.
</R>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.
<R>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.
</R>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.
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
<R></R> <R>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 search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
</R> <R></R>Avoid "buying a dividend"
<R>At the time you purchase your Fund shares, the Fund's net asset value 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."
</R>Tax considerations
<R>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.
</R> <R>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 taxable years of the Fund beginning before January 1, 2013, unless such provision is extended or made permanent, a portion of income dividends designated 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 primarily is 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.
</R> <R>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.
</R> <R></R> <R>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.
</R> <R></R> <R>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.
</R> <R></R> <R>Other . 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. Exemptions from U.S. withholding tax are provided for capital gain dividends paid by the Fund from long-term capital gains, if any, and, with respect to taxable years of the Fund that began before January 1, 2012 (unless such sunset date is extended 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 such dividends and distributions of income and capital gains will be subject to backup withholding at a rate of 28% if you fail to properly certify that you are not a U.S. person.
</R> <R></R> <R>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.
</R>
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 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.
<R></R> <R>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 2010 fiscal year 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.
</R> <R></R>Delaware Diversified Income Fund
<R>Class A Shares | 2010 | 2009 | 2008 | 2007 |
Year ended Oct. 31, 2006 |
Net asset value, beginning of period | $9.270 | $7.740 | $8.930 | $8.690 | $8.540 |
Income (loss) from investment operations: | |||||
Net investment income 1 | 0.444 | 0.500 | 0.411 | 0.391 | 0.427 |
Net realized and unrealized gain (loss) on investments and foreign currencies | 0.598 | 1.611 | (1.053) | 0.307 | 0.175 |
Total from investment operations | 1.042 | 2.111 | (0.642) | 0.698 | 0.602 |
Less dividends and distributions from: | |||||
Net investment income | (0.474) | (0.581) | (0.467) | (0.458) | (0.420) |
Net realized gain on investments | (0.068) | — | (0.081) | — | — |
Return of capital | — | — | — | — | (0.032) |
Total dividends and distributions | (0.542) | (0.581) | (0.548) | (0.458) | (0.452) |
Net asset value, end of period | $9.770 | $9.270 | $7.740 | $8.930 | $8.690 |
Total return2 | 11.60% | 28.42% | (7.69%) | 8.22% | 7.27% |
Ratios and supplemental data: | |||||
Net assets, end of period (000 omitted) | $4,423,278 | $3,658,355 | $2,361,034 | $1,795,553 | $960,616 |
Ratio of expenses to average net assets | 0.93% | 0.97% | 0.97% | 0.99% | 1.00% |
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly | 0.98% | 1.02% | 1.02% | 1.05% | 1.13% |
Ratio of net investment income to average net assets | 4.68% | 5.96% | 4.75% | 4.43% | 5.01% |
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly | 4.63% | 5.91% | 4.70% | 4.37% | 4.88% |
Portfolio turnover | 232% | 213% | 251% | 277% | 296% |
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 waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
Delaware Diversified Income Fund
<R>Class B Shares | 2010 | 2009 | 2008 | 2007 |
Year ended Oct. 31, 2006 |
Net asset value, beginning of period | $9.260 | $7.730 | $8.920 | $8.680 | $8.540 |
Income (loss) from investment operations: | |||||
Net investment income 1 | 0.372 | 0.438 | 0.346 | 0.325 | 0.362 |
Net realized and unrealized gain (loss) on investments and foreign currencies | 0.589 | 1.610 | (1.053) | 0.307 | 0.166 |
Total from investment operations | 0.961 | 2.048 | (0.707) | 0.632 | 0.528 |
Less dividends and distributions from: | |||||
Net investment income | (0.403) | (0.518) | (0.402) | (0.392) | (0.356) |
Net realized gain on investments | (0.068) | — | (0.081) | — | — |
Return of capital | — | — | — | — | (0.032) |
Total dividends and distributions | (0.471) | (0.518) | (0.483) | (0.392) | (0.388) |
Net asset value, end of period | $9.750 | $9.260 | $7.730 | $8.920 | $8.680 |
Total return2 | 10.78% | 27.51% | (8.39%) | 7.43% | 6.35% |
Ratios and supplemental data: | |||||
Net assets, end of period (000 omitted) | $45,741 | $50,608 | $50,501 | $58,799 | $56,570 |
Ratio of expenses to average net assets | 1.68% | 1.72% | 1.72% | 1.74% | 1.75% |
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly | 1.68% | 1.72% | 1.72% | 1.75% | 1.83% |
Ratio of net investment income to average net assets | 3.93% | 5.21% | 4.00% | 3.68% | 4.26% |
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly | 3.93% | 5.21% | 4.00% | 3.67% | 4.18% |
Portfolio turnover | 232% | 213% | 251% | 277% | 296% |
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 some of the periods shown reflects waivers by the manager. Performance would have been lower had the waiver not been in effect. |
Delaware Diversified Income Fund
<R>Class C Shares | 2010 | 2009 | 2008 | 2007 |
Year ended Oct. 31, 2006 |
Net asset value, beginning of period | $9.270 | $7.740 | $8.930 | $8.690 | $8.540 |
Income (loss) from investment operations: | |||||
Net investment income 1 | 0.373 | 0.437 | 0.346 | 0.326 | 0.363 |
Net realized and unrealized gain (loss) on investments and foreign currencies | 0.588 | 1.611 | (1.054) | 0.306 | 0.175 |
Total from investment operations | 0.961 | 2.048 | (0.708) | 0.632 | 0.538 |
Less dividends and distributions from: | |||||
Net investment income | (0.403) | (0.518) | (0.401) | (0.392) | (0.356) |
Net realized gain on investments | (0.068) | — | (0.081) | — | — |
Return of capital | — | — | — | — | (0.032) |
Total dividends and distributions | (0.471) | (0.518) | (0.482) | (0.392) | (0.388) |
Net asset value, end of period | $9.760 | $9.270 | $7.740 | $8.930 | $8.690 |
Total return2 | 10.65% | 27.47% | (8.39%) | 7.42% | 6.47% |
Ratios and supplemental data: | |||||
Net assets, end of period (000 omitted) | $2,097,340 | $1,375,429 | $717,511 | $489,431 | $264,265 |
Ratio of expenses to average net assets | 1.68% | 1.72% | 1.72% | 1.74% | 1.75% |
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly | 1.68% | 1.72% | 1.72% | 1.75% | 1.83% |
Ratio of net investment income to average net assets | 3.93% | 5.21% | 4.00% | 3.68% | 4.26% |
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly | 3.93% | 5.21% | 4.00% | 3.67% | 4.18% |
Portfolio turnover | 232% | 213% | 251% | 277% | 296% |
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 some of the periods shown reflects waivers by the manager. Performance would have been lower had the waiver not been in effect. |
Delaware Diversified Income Fund
<R>Class R Shares | 2010 | 2009 | 2008 | 2007 |
Year ended Oct. 31, 2006 |
Net asset value, beginning of period | $9.270 | $7.730 | $8.930 | $8.690 | $8.540 |
Income (loss) from investment operations: | |||||
Net investment income 1 | 0.420 | 0.479 | 0.390 | 0.369 | 0.406 |
Net realized and unrealized gain (loss) on investments and foreign currencies | 0.589 | 1.621 | (1.064) | 0.307 | 0.174 |
Total from investment operations | 1.009 | 2.100 | (0.674) | 0.676 | 0.580 |
Less dividends and distributions from: | |||||
Net investment income | (0.451) | (0.560) | (0.445) | (0.436) | (0.398) |
Net realized gain on investments | (0.068) | — | (0.081) | — | — |
Return of capital | — | — | — | — | (0.032) |
Total dividends and distributions | (0.519) | (0.560) | (0.526) | (0.436) | (0.430) |
Net asset value, end of period | $9.760 | $9.270 | $7.730 | $8.930 | $8.690 |
Total return2 | 11.33% | 28.27% | (8.04%) | 7.95% | 7.00% |
Ratios and supplemental data: | |||||
Net assets, end of period (000 omitted) | $172,642 | $137,179 | $96,238 | $75,112 | $43,247 |
Ratio of expenses to average net assets | 1.18% | 1.22% | 1.22% | 1.24% | 1.25% |
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly | 1.28% | 1.32% | 1.32% | 1.35% | 1.43% |
Ratio of net investment income to average net assets | 4.43% | 5.71% | 4.50% | 4.18% | 4.76% |
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly | 4.33% | 5.61% | 4.40% | 4.07% | 4.58% |
Portfolio turnover | 232% | 213% | 251% | 277% | 296% |
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 periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers 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.
Web site: www.delawareinvestments.com
E-mail: service@delinvest.com
Shareholder Service Center: 800 523-1918
Call the Shareholder Service Center 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.
Delaphone Service: 800 362-FUND (800 362-3863)
For convenient access to account information or current performance information on all Delaware Investments
®
Funds seven days a week, 24 hours a day, use this touch-tone service.
Written correspondence: P.O. Box 219691, Kansas City, MO 64121-9691 or
430 W. 7th Street, Kansas City, MO 64105-1407.
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,
You can find reports and other information about the Fund on the EDGAR database on the SEC web site (www.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,
PR-189 [10/10] PDF 16186 [2/11] Investment Company Act number: 811-07972 |
Prospectus
Fixed income
Delaware Diversified Income Fund
Nasdaq ticker symbol |
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Institutional Class |
DPFFX |
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.
</R> <R>
Get shareholder reports and prospectuses online instead of in the mail.
Visit www.delawareinvestments.com/edelivery.
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<R>
Delaware Diversified Income Fund
</R>What is the Fund's investment objective?
Delaware Diversified Income 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.
Annual fund operating expenses (expenses that you pay each year as a percentage of the value of your investment) | ||||
Class | Institutional | |||
Management fees | 0.45% | |||
Distribution and service (12b-1) fees | none | |||
Other expenses | 0.23% | |||
Total annual fund operating expenses | 0.68% |
Example
</R> <R>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 Manager's expense 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:
</R> <R></R> <R></R> <R>
Class | Institutional |
1 year | $70 |
3 years | $218 |
5 years | $379 |
10 years | $847 |
Portfolio turnover
<R>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 232% of the average value of its portfolio.
</R> <R>What are the Fund's principal investment strategies?
</R>The Fund allocates its investments principally among the following four sectors of the fixed income securities markets: the U.S. investment grade sector, the U.S. high yield sector, the international developed markets sector, and the emerging markets sector. Under normal circumstances, the Fund will invest at least 80% of its net assets in fixed income securities (the 80% policy). The Fund's investment manager, Delaware Management Company (Manager or we), will determine how much of the Fund to allocate to each of the four sectors, based on our evaluation of economic and market conditions and our assessment of the returns and potential for appreciation that can be achieved from investments in each of the four sectors. We will periodically reallocate the Fund's assets, as deemed necessary.
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. The Fund may also use a wide range of hedging instruments, including options, futures contracts, and options on futures contracts subject to certain limitations. The Fund's 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'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.
<R>What are the principal risks of investing in the Fund?
</R> <R></R> <R>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:
</R> <R></R> <R>Investment 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 (the "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.
</R> <R></R> <R>Market risk — The risk that all or a majority of the securities in a certain market — like 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.
</R> <R></R> <R>Credit risk — The risk that a bond's issuer will be unable to make timely payments of interest and principal. Investing in so-called "junk" or "high yield" bonds entails greater risk of principal loss than the risk involved in investment grade bonds.
</R> <R></R>Interest rate risk — The risk that securities, particularly bonds with longer maturities, will decrease in value if interest rates rise.
<R></R> <R></R> <R>Bank loans and other direct 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.
</R> <R></R> <R>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.
</R> <R></R> <R>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.
</R> <R></R> <R>Currency risk — The risk that the value of a portfolio's investments may be negatively affected by changes in foreign currency exchange rates.
</R> <R></R> <R>Derivatives risk — Derivatives may involve additional expenses and are subject to the risk that a security or a securities index to which the derivative is associated 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 transactions rely upon the counterparty's ability to fulfill its contractual obligations.
</R> <R></R> <R>Liquidity risk — The possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them.
</R> <R></R> <R>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.
</R> <R></R> <R>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.
</R> <R></R>How has Delaware Diversified Income Fund performed?
<R>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 1-year, 5-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 800 362-7500 or by visiting our web site at www.delawareinvestments.com/performance.
</R>Year-by-year total return (Institutional Class)
<R>
|
During the periods illustrated in this bar chart, the Institutional Class' highest quarterly return was 10.14% for the quarter ended June 30, 2009 and its lowest quarterly return was -3.86% for the quarter ended September 30, 2008.
<R>Average annual total returns for periods ended December 31, 2010
</R> <R>1 year | 5 years |
Lifetime (10/28/02- 12/31/10) |
|
Return before taxes | 8.15% | 8.72% | 8.78% |
Return after taxes on distributions | 5.11% | 6.23% | 5.87% |
Return after taxes on distributions and sale of Fund shares | 5.51% | 6.01% | 5.77% |
Barclays Capital U.S. Aggregate Index (reflects no deduction for fees, expenses, or taxes) | 6.54% | 5.80% | 5.13% |
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.
</R>Who manages the Fund?
Investment manager
Delaware Management Company
<R>
Portfolio managers |
Title with Delaware Management Company |
Start date on the Fund |
Roger A. Early, CPA, CFA, CFP |
Senior Vice President, Co-Chief Investment Officer – Total Return Fixed Income Strategy |
May 2007 |
Paul Grillo, CFA |
Senior Vice President, Co-Chief Investment Officer – Total Return Fixed Income Strategy |
February 2001 |
Wen-Dar Chen, Ph.D. |
Vice President, Portfolio Manager – International Debt |
May 2007 |
Thomas H. Chow, CFA |
Senior Vice President, Senior Portfolio Manager |
May 2007 |
Kevin P. Loome, CFA |
Senior Vice President, Senior Portfolio Manager, Head of High Yield Investments |
August 2007 |
J. David Hillmeyer, CFA |
Vice President, Portfolio Manager, Head of Investment Grade Corporate Trading |
February 2011 |
Laura A. Ostrander |
Vice President, Senior Portfolio Manager |
February 2011 |
Purchase and redemption of Fund shares
<R>
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; by regular mail (c/o Delaware Investments, P.O. Box 219691, Kansas City, MO 64121-9691); by overnight courier service (c/o Delaware Service Center, 430 W. 7th Street,
Kansas City, MO 64105); by telephone to your Client Services Representative at 800 362-7500 weekdays from 8:30 a.m. to 6:00 p.m. Eastern time; by telephone to our automated telephone service at 800 362-3863 at any time; through our web site at www.delawareinvestments.com; or by wire.
There is no minimum initial purchase requirement for Institutional Class shares, but Institutional Class shares are available for purchase only by the following: (1) retirement plans introduced by persons not associated with brokers or dealers that are primarily engaged in the retail securities business and rollover IRAs from such plans; (2) tax-exempt employee benefit plans of the Fund's Manager or its affiliates and of securities dealer firms with a selling agreement with Delaware Distributors, L.P. (Distributor); (3) 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 accounts; (4) 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 shares of the Class, except where the investment is part of a program that requires payment to the financial institution of a Rule 12b-1 Plan fee; (5) registered investment advisors (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); (6) certain plans qualified under Section 529 of the Internal Revenue Code of 1986, as amended (Code), for which the Fund's Manager, Distributor, or service agent, or one or more of their affiliates provide recordkeeping, administrative, investment management, marketing, distribution, or similar services; (7) programs sponsored by financial intermediaries where: (a) such programs allow or require the purchase of Institutional Class shares, (b) the financial intermediary has entered into an agreement covering the arrangement with the Distributor and/or the Fund's transfer agent, and (c) the financial intermediary (i) charges clients an ongoing fee for advisory, investment consulting or similar service, or (ii) offers the Institutional Class shares through a no-commission network or platform; or (8) private investment vehicles, including, but not limited to, foundations and endowments.
</R>
Tax information
The Fund's distributions are generally taxable, and will be taxed 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.
</R>
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 web site for more information.
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. The following are descriptions of how the portfolio management team pursues the Fund's investment objective.
The Fund allocates its investments principally among the U.S. investment grade, U.S. high yield, international developed markets, and emerging markets sectors. The relative proportion of the Fund's assets to be allocated among these sectors is described below:
U.S. investment grade sector
Under normal circumstances, there is no limit to the amount of the Fund's total assets that will be invested in the U.S. investment grade sector. In managing the Fund's assets allocated to the investment grade sector, we will invest principally in debt obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, and by U.S. corporations. The corporate debt obligations in which the Fund may invest include bonds, notes, debentures, and commercial paper of U.S. companies. 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 sponsored by the U.S. government.
The investment grade sector of 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.
Securities purchased by the Fund within this sector will be rated in one of the four highest rating categories or will be unrated securities that we determine are of comparable quality.
U.S. high yield sector
Under normal circumstances, between 5% and 50% of the Fund's total assets will be allocated to the U.S. high yield sector. We will invest the Fund's assets that are allocated to the domestic high yield sector primarily in those securities having a liberal and consistent yield and those tending to reduce the risk of market fluctuations. The Fund may invest in domestic corporate debt obligations, including notes, which may be convertible or nonconvertible, commercial paper, units consisting of bonds with stock or warrants to buy stock attached, debentures, convertible debentures, zero coupon bonds, and pay-in-kind securities.
The Fund will invest in both rated and unrated bonds. The rated bonds that the Fund may purchase in this sector will generally be rated BB or lower by Standard & Poor's (S&P) or Fitch, Inc. (Fitch), Ba or lower 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.
International developed markets sector
Under normal circumstances, between 5% and 50% of the Fund's total assets will be invested, in the aggregate, in the international developed markets and emerging markets sectors. The international developed markets sector invests primarily in fixed income securities of issuers organized or having a majority of their assets or deriving a majority of their operating income in international developed 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-American Development Bank, and the Asian Development Bank. The international developed markets sector will be subject to certain risks, including, but not limited to, the risk that securities within this sector may be adversely affected by political instability, changes in currency exchange rates, foreign economic conditions, or inadequate regulatory and accounting standards.
Emerging markets sector
The Fund may purchase securities of issuers in any foreign country, developed and underdeveloped. These investments may include direct obligations of issuers located in emerging markets countries. As with the international sector, the fixed income securities in the emerging markets sector may include foreign government securities, debt obligations of foreign companies, and securities issued by supranational entities. In addition to the risks associated with investing in all foreign securities, emerging markets debt is subject to specific risks, particularly those that result from emerging markets generally being less stable, politically and economically, than developed markets. There is substantially less publicly available information about issuers in emerging markets than there is about issuers in developed markets, and the information that is available tends to be of a lesser quality. Also, emerging markets are typically less mature, less liquid, and subject to greater price volatility than are developed markets. Investments in the emerging markets sector will, in the aggregate, be limited to no more than 15% of the Fund's total assets.
The Fund may invest in sponsored and unsponsored American depositary receipts (ADRs), European depositary receipts (EDRs), or global depositary receipts (GDRs). The Fund may also invest in zero coupon bonds and may purchase shares of other investment companies.
The Fund will invest in both rated and unrated foreign securities.
The Fund may invest in securities issued in any currency and may hold foreign 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 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. Currency considerations carry a special risk for a portfolio that allocates a significant portion of its assets to foreign securities. The Manager will limit non-U.S.-dollar-denominated securities to no more than 50% of the Fund's net assets, but total non-U.S.-dollar currency exposure will be limited, in the aggregate, to no more than 25% of the Fund's net assets.
The Fund's investment objective is nonfundamental. This means that the Board may change the Fund's objective without obtaining shareholder approval. If the objective were changed, shareholders would receive at least 60 days' notice 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.
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 for the Fund's U.S. investment grade sector, and we may invest in bonds rated BB or lower by S&P or Fitch and Ba or lower by Moody's for the Fund's U.S. high yield sector and international developed markets sector.
<R>High yield corporate bonds (junk bonds)
</R> <R></R> <R>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.
</R> <R></R>How the Fund uses them: Emphasis is typically on those rated BB or Ba by an NRSRO.
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.
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 Federal Home Loan Mortgage Corporation, Fannie Mae, and the Government National Mortgage Association. 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.
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 the Fund's limit on illiquid securities. In addition, subject to certain quality and collateral limitations, we may invest up to 20% of the Fund's 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."
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 rated in one of the four highest rating categories by an NRSRO.
U.S. government securities
<R>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.
</R>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.
Foreign government securities
Foreign government securities are debts issued by a government other than the United States or by an agency, instrumentality or political subdivision of such government.
How the Fund uses them: The fixed income securities in which the Fund may invest include those issued by foreign governments.
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.
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.
Short-term debt instruments
These instruments include: (1) time deposits, certificates of deposit and bankers 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 pending investment in its 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.
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 which 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.
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.
<R>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 its purchaser exercises the option.
</R>Certain options and futures may be considered derivative securities.
How the Fund uses them : The Fund may invest in futures, options, and closing transactions related thereto. These activities will be entered into for hedging purposes and to facilitate the ability to quickly deploy into the market the Fund's cash, short-term debt securities, and other money market instruments at times when its assets are not fully invested. We may only enter into these transactions for hedging purposes if they are consistent with the Fund's investment objective and policies. We may not engage in such transactions to the extent that obligations resulting from these activities, in the aggregate, exceed 25% of the Fund's assets. In addition, we may enter into futures contracts, purchase or sell options on futures contracts, trade in options on foreign currencies, and enter into closing transactions with respect to such activities to hedge or "cross hedge" the currency risks associated with the Fund's investments. Generally, futures contracts on foreign currencies operate similarly to futures contracts concerning securities, and options on foreign currencies operate similarly to options on securities. See also "Foreign currency transactions" below. To the extent that we sell or "write" put and call options, we will designate assets sufficient to "cover" these obligations and mark them to market daily.
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.
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 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. 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.
Interest rate swap, index swap, and credit default swap agreements
<R></R>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.
<R>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.
</R>Interest rate swaps, index swaps, and credit default swaps may be considered illiquid.
<R></R>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 it 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.
Bank loans
Bank loans represent an interest in a loan or other direct indebtedness, such as an assignment, that entitles the acquiring 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 perform its own independent credit analysis on each borrower and on the collateral securing each loan. The portfolio managers 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. The Fund will not use bank loans for reasons inconsistent with its investment objective.
Other investment strategies
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.
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.
Purchasing securities on a when-issued 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 table 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
<R>Market risk is the risk that all or a majority of the securities in a certain market — like the stock or bond market — will decline in value because of economic conditions, future expectations, investor confidence, or heavy institutional selling.
</R>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 these 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. 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.
<R>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.
</R> <R>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 45% of net assets in fixed income securities rated below investment grade.
</R> <R></R> <R></R> <R></R> <R></R> <R></R> <R></R>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.
<R>How the Fund strives to manage it: The Manager attempts to reduce the risks presented by such investments by conducting worldwide fundamental research, including country visits. In addition, the Manager monitors 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, the Fund may hedge exposure to those currencies for defensive purposes.
</R>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 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. If and when we invest in forward foreign currency contracts or use other investments to hedge against currency risks, the Fund will be subject to special risks, including counterparty risk.
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: We may invest a portion of the Fund's assets in securities of issuers located in emerging markets. We cannot eliminate these risks but 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's investments in emerging markets will, in the aggregate, be limited to no more than 15% of the Fund's total assets.
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.
The high yield secondary market is particularly susceptible to liquidity problems when institutional investors, such as mutual funds and certain other financial institutions, temporarily stop buying bonds for regulatory, financial, or other reasons.
How the Fund strives to manage it: The Fund limits exposure to illiquid securities to no more than 15% of its net assets.
Futures contracts, options on futures contracts, forward contracts, and certain options risk
Futures contracts, options on futures contracts, forward contracts, and certain options used as investments for hedging and other nonspeculative purposes involve certain risks. For example, a lack of correlation between price changes of an option or futures contract and the assets being hedged could render a fund's hedging strategy unsuccessful and could result in losses. The same results could occur if movements of foreign currencies do not correlate as expected by the investment manager at a time when a fund is using a hedging instrument denominated in one foreign currency to protect the value of a security denominated in a second foreign currency against changes caused by fluctuations in the exchange rate for the dollar and the second currency. If the direction of securities prices, interest rates, or foreign currency prices is incorrectly predicted, a fund will be in a worse position than if such transactions had not been entered into. In addition, since there can be no assurance that a liquid secondary market will exist for any contract purchased or sold, a fund may be required to maintain a position (and in the case of written options may be required to continue to hold the securities used as cover) until exercise or expiration, which could result in losses. Further, options and futures contracts on foreign currencies, and forward contracts, entail particular risks related to conditions affecting the underlying currency. Over-the-counter transactions in options and forward contracts also involve risks arising from the lack of an organized exchange trading environment.
How the Fund strives to manage it: We may use certain options strategies or may use futures contracts and options on futures contracts. We will not enter into futures contracts and options thereon to the extent that more than 5% of the Fund's total 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 20% of the Fund's total assets.
We may also use options and futures to gain exposure to a particular market segment without purchasing individual securities in the segment.
See also "Foreign risk" and "Currency risk" above.
Zero coupon and pay-in-kind bonds
<R>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 which 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.
</R>How the Fund strives to manage it: We may invest in zero coupon and PIK bonds to the extent consistent with the Fund's 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.
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 may invest in mortgage-backed securities, CMOs, and REMICs. We take into consideration the likelihood of prepayment when mortgages are selected. 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.
Transaction costs risk
Transaction costs risk is the risk that the costs of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions.
How the Fund strives to manage it: The Fund is subject to transaction costs risk to the extent that its objective and policies permit it to invest, and it actually does invest, in foreign securities. We strive to monitor transaction costs and to choose an efficient trading strategy for the Fund.
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: We attempt to reduce the risks associated with investing in foreign governments by limiting the portion of portfolio assets that may be invested in such securities.
Valuation risk
<R></R> <R>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.
</R> <R></R>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.
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, 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.
Derivatives risk
<R>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.
</R>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.
Loans and other indebtedness risk
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 an unsecured loan 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 onto 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 are illiquid, these would be subject to the Fund's restrictions 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 only obtain 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 will 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.
<R>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 of 0.44% of average daily net assets during the last fiscal year.
</R> <R>A discussion of the basis for the Board's approval of the Fund's investment advisory contract is available in the Fund's annual report to shareholders for the fiscal year ended October 31, 2010.
</R> <R>
Roger A. Early, Paul Grillo, Wen-Dar Chen, Thomas H. Chow, Kevin P. Loome, J. David Hillmeyer, and Laura Ostrander have primary responsibility for making day-to-day investment decisions for the Fund.
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 served as 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.
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 served as 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.
Wen-Dar Chen, Ph.D.
,
Vice President, Portfolio Manager — International Debt
Wen-Dar Chen, Ph.D., is a member of the firm's taxable fixed income portfolio management team with primary responsibility for international portfolio construction and strategic asset allocation. He has specialized in quantitative fixed income investments since 1986. Before he joined Delaware Investments in mid-2004 as a senior international debt analyst, he was a quantitative analyst in global asset-backed securities, credit strategies, and portfolio strategies at J.P. Morgan Securities. Since 1998, he has worked to promote the asset-backed securities business in Asia, and published the book, Asset-Backed Securitization - Theory and Practice, in Asia in 2002. He worked at Salomon Brothers from 1993 to 1996, and Lehman Brothers from 1990 to 1993, during which time he gained experience with government securities trading desks, proprietary trading of structured products, financial strategies, and index strategies
groups. Dr. Chen's degrees include a bachelor's degree in atmospheric sciences from the National Taiwan University, a master's degree in meteorology from the South Dakota School of Mines and Technology, and a Ph.D. in geophysical fluid dynamics from Princeton University.
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, 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.
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, Portfolio Manager, Head of Investment Grade Corporate Trading
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 diversified floating rate strategies. In addition, he is responsible for bank loans and is a member of the fixed income trading team. Prior to joining Delaware Investments in August 2007, 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.
Laura A. Ostrander,
Vice President, Senior Portfolio Manager
Laura A. Ostrander joined Delaware Investments in August 2010 as a senior portfolio manager specializing in emerging markets debt. Before joining the firm, she worked at Columbia Management, serving as lead portfolio manager on the firm's multi-sector product since 2002, and as co-portfolio manager of the product since 1999. As lead portfolio manager, Ostrander was responsible for the overall asset allocation across U.S. government, emerging market, developed market foreign government, and high yield corporate bonds, and was directly responsible for the investment of assets in the U.S. and foreign sectors of the product. She was head of the Columbia Management international team from 1996 until her departure. Earlier on, Ostrander held portfolio management roles at American Express Financial, American Express Bank, and Offitbank. She has more than 20 years of experience in the financial services industry and more
than 10 years of experience managing global fixed income portfolios. She earned her bachelor's degree in economics from St. John Fisher College.
</R> <R></R> <R></R>
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.
<R>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 Fund's 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 Fund's 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.
</R> <R>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.
</R> <R>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. The Fund relies on certain exemptive rules adopted by the SEC that require the board of trustees to be composed of a majority of trustees independent of a fund's investment manager and distributor.
</R>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.
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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.
<R></R> <R></R>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.
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.
Institutional Class shares are available for purchase only by the following:
<R>
retirement plans introduced by persons not associated with brokers or dealers that are primarily engaged in the retail securities business and rollover IRAs from such plans;
tax-exempt employee benefit plans of the Manager or its affiliates and of securities dealer firms with 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 accounts;
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 shares of the Class, 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 Code, for which the the Manager, Distributor, or the Fund's service agent, 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 the Fund's transfer agent; 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.
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). The level of payments made to a qualifying Financial Intermediary in any given year will 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.
</R>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. 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 NAV or the price of the Fund's shares.
For more information, please see the SAI.
By mail
<R>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 219691, Kansas City, MO 64121-9691 or 430 W. 7th Street, Kansas City, MO 64105-1407 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.
</R>
Please note that purchase orders submitted by mail will not be accepted until such orders are received by Delaware Investments at P.O. Box 219691, Kansas City, MO 64121-9691 for investments by regular mail or 430 W. 7th Street, Kansas City, MO 64105-1407 for investments
by overnight courier service. Please do not send purchase orders to 2005 Market Street, Philadelphia, PA 19103-7094.
By wire
Ask your bank to wire the amount you want to invest to The Bank of New York Mellon, ABA #021000018, bank account number 8900403748. 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 800 362-7500 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 you may not exchange your shares for Class A shares, other than Delaware Cash Reserve ® Fund. You may not exchange shares for Class B, Class C, or Class R shares. To open an account by exchange, call your Client Services Representative at 800 362-7500.
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.
<R>The price you pay for shares will depend on when we receive your purchase order. If an authorized agent or we receive your order 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 the 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.
</R>We determine the NAV per share for each class of the Fund at the close of regular trading on the NYSE on each Business Day. The NAV per share for each class of the 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 in foreign securities, the fund's NAV may change on days when a shareholder will not be able to purchase or sell 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 value.
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 price 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.
<R>If you have an account in the same Delaware Investments® Fund as another person or entity at your address, we send one copy of the Fund's prospectus and annual and semiannual reports to that address, unless you opt otherwise. This will help us reduce the printing and mailing expenses associated with the Fund. We will continue to send one copy of each of these documents to that address until you notify us that you wish to receive individual materials. If you wish to receive individual materials, please call your Client Services Representative at 800 362-7500. We will begin sending you individual copies of these documents 30 days after receiving your request.
</R> <R></R> <R>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.
</R>By mail
<R>You may redeem your shares by mail by writing to: Delaware Investments at P.O. Box 219691, Kansas City, MO 64121-9691 or 430 W. 7th Street, Kansas City, MO 64105-1407 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.
</R>Please note that redemption orders submitted by mail will not be accepted until such orders are received by Delaware Investments at P.O. Box 219691, Kansas City, MO 64121-9691 for redemptions by regular mail or 430 W. 7th Street, Kansas City, MO 64105-1407 for redemptions by overnight courier service. Please do not send redemption requests to 2005 Market Street, Philadelphia, PA 19103-7094.
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 your financial advisor
Your financial advisor can handle all the details of redeeming your shares (selling them back to the Fund). Your financial advisor may charge a separate fee for this service.
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.
<R>When you send us a properly completed request to redeem or exchange shares, and an authorized agent or we receive the request 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. 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, we will wait until your check has cleared, which can take up to 15 days, before we send your redemption proceeds.
</R>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.
<R></R> <R>If you redeem shares and your account balance falls below $250, the Fund may redeem your shares after 60 days' written notice to you.
</R> <R></R>You may generally exchange all or part of your shares for shares of the same class of another Delaware Investments ® Fund. If you exchange shares to a fund that has a sales charge, you will pay any applicable sales charges on your new shares. 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. You may not exchange your shares for Class A shares of another Delaware Investments ® Fund, other than Delaware Cash Reserve ® Fund. You may not exchange your shares for Class B, Class C, or Class R shares of another Delaware Investments ® Fund. The Fund may refuse the purchase side of any exchange request, if, in the Manager's judgment, the Fund would be unable to invest effectively in accordance with its investment objective and policies or would otherwise potentially be adversely affected.
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.
<R>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.
</R>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.
<R>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.
</R>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.
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
<R></R> <R>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 search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
</R> <R></R>Avoid "buying a dividend"
<R>At the time you purchase your Fund shares, the Fund's net asset value 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."
</R>Tax considerations
<R>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.
</R> <R>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 taxable years of the Fund beginning before January 1, 2013, unless such provision is extended or made permanent, a portion of income dividends designated 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 primarily is 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.
</R> <R>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.
</R> <R></R> <R>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.
</R> <R></R> <R>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.
</R> <R></R> <R>Other . 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. Exemptions from U.S. withholding tax are provided for capital gain dividends paid by the Fund from long-term capital gains, if any, and, with respect to taxable years of the Fund that began before January 1, 2012 (unless such sunset date is extended 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 such dividends and distributions of income and capital gains will be subject to backup withholding at a rate of 28% if you fail to properly certify that you are not a U.S. person.
</R> <R></R> <R>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.
</R>
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 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.
<R>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 2010 fiscal year 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 800 362-7500. For the fiscal years prior to 2010, the Fund's prior independent registered public accounting firm audited the Fund's financial statements.
</R>Delaware Diversified Income Fund
<R>Institutional Class Shares | 2010 | 2009 | 2008 | 2007 | Year ended Oct. 30, 2006 |
Net asset value, beginning of period | $9.280 | $7.740 | $8.940 | $8.700 | $8.550 |
Income (loss) from investment operations: | |||||
Net investment income 1 | 0.470 | 0.521 | 0.433 | 0.413 | 0.449 |
Net realized and unrealized gain (loss) on investments and foreign currencies | 0.586 | 1.621 | (1.064) | 0.307 | 0.173 |
Total from investment operations | 1.056 | 2.142 | (0.631) | 0.720 | 0.622 |
Less dividends and distributions from: | |||||
Net investment income | (0.498) | (0.602) | (0.488) | (0.480) | (0.440) |
Net realized gain on investments | (0.068) | — | (0.081) | — | — |
Return of capital | — | — | — | — | (0.032) |
Total dividends and distributions | (0.566) | (0.602) | (0.569) | (0.480) | (0.472) |
Net asset value, end of period | $9.770 | $9.280 | $7.740 | $8.940 | $8.700 |
Total return2 | 11.76% | 28.87% | (7.57%) | 8.48% | 7.52% |
Ratios and supplemental data: | |||||
Net assets, end of period (000 omitted) | $1,242,001 | $323,134 | $85,857 | $40,881 | $40,813 |
Ratio of expenses to average net assets | 0.68% | 0.72% | 0.72% | 0.74% | 0.75% |
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly | 0.68% | 0.72% | 0.72% | 0.75% | 0.83% |
Ratio of net investment income to average net assets | 4.93% | 6.21% | 5.00% | 4.68% | 5.26% |
Ratio of net investment income to average net assets prior to fees waived and expense paid indirectly | 4.93% | 6.21% | 5.00% | 4.67% | 5.18% |
Portfolio turnover | 232% | 213% | 251% | 277% | 296% |
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 periodand assumes reinvestment of dividends and distributions at net asset value. Total investmentreturn during some of the periods shown reflects a waiver by the manager. Performance would have been lowerhad 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.
Web site: www.delawareinvestments.com
E-mail: service@delinvest.com
Client Services Representative: 800 362-7500
Delaphone Service: 800 362-FUND (800 362-3863)
For convenient access to account information or current performance information on all Delaware Investments ® Funds seven days a week, 24 hours a day, use this touch-tone service.
<R>
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,
You can find reports and other information about the Fund on the EDGAR database on the SEC web site (www.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,
PR-195 [10/10] PDF 16187 [2/11] Investment Company Act number: 811-07972 |
Prospectus
<R>U.S. growth equity funds
</R>
Delaware U.S. Growth Fund
Nasdaq ticker symbols |
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Class A |
DUGAX |
Class B |
DEUBX |
Class C |
DEUCX |
Class R |
DEURX |
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.
</R> <R>
Get shareholder reports and prospectuses online instead of in the mail.
Visit www.delawareinvestments.com/edelivery.
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<R></R>
What is the Fund's investment objective?
Delaware U.S. Growth Fund seeks long-term capital appreciation by investing in equity securities of companies we believe have the potential for sustainable free cash flow growth.
What are the Fund's fees and expenses?
<R>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 $50,000 in Delaware Investments® Funds. More information about these and other discounts is available from your financial advisor, in this prospectus under the section entitled "About your account," and in the Fund's statement of additional information under the section entitled "Purchasing shares."
</R> <R>Shareholder fees (fees paid directly from your investment) | |||||||
Class | A | B | C | R | |||
Maximum sales charge (load) imposed on purchases as a percentage of offering price | 5.75% | 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 | |||
Annual fund operating expenses (expenses that you pay each year as a percentage of the value of your investment) | |||||||
Class | A | B | C | R | |||
Management fees | 0.64% | 0.64% | 0.64% | 0.64% | |||
Distribution and service (12b-1) fees | 0.30% | 1.00% | 1.00% | 0.60% | |||
Other expenses | 0.32% | 0.32% | 0.32% | 0.32% | |||
Total annual fund operating expenses | 1.26% | 1.96% | 1.96% | 1.56% | |||
Fee waivers and expensereimbursements | (0.16%) 2 | (0.11%) 2 | (0.11%) 2 | (0.21%) 2 | |||
Total annual fund operating expenses after fee waivers and expense reimbursements | 1.10% | 1.85% | 1.85% | 1.35% |
1 |
If you redeem Class B shares during the first year after you buy them, you will pay a 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 0.00% thereafter. 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 total annual fund operating expenses from exceeding 0.85% of the Fund's average daily net assets from February 28, 2011 through February 28, 2012. The Fund's distributor, Delaware Distributors, L.P. (Distributor), has also contracted to limit the Fund's Class A and Class R shares' 12b-1 fees from February 28, 2011 through February 28, 2012 to no more than 0.25% and 0.50% of average daily net assets, respectively. These waivers and reimbursements may be terminated only by agreement of the Manager or Distributor, as applicable, and the Fund. |
Example
</R> <R>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:
</R> <R>(if not redeemed) | (if not redeemed) | ||||||||
Class | A | B | B | C | C | R | |||
1 year | $678 | $185 | $585 | $185 | $285 | $134 | |||
3 years | $934 | $602 | $877 | $602 | $602 | $469 | |||
5 years | $1,210 | $1,044 | $1,269 | $1,044 | $1,044 | $827 | |||
10 years | $1,994 | $2,092 | $2,092 | $2,274 | $2,274 | $1,836 |
Portfolio turnover
<R>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 22% of the average value of its portfolio.
</R> <R>What are the Fund's principal investment strategies?
</R>We invest primarily in common stocks. The Fund invests primarily in companies that we believe have long-term capital appreciation potential and are expected to grow faster than the U.S. economy. Using a bottom up approach, we seek to select securities we believe have large end-market potential, dominant business models, and strong free cash flow generation that are attractively priced compared to the intrinsic value of the securities. We also consider a company's operational efficiencies, management's plans for capital allocation, and the company's shareholder orientation. All of these factors give us insight into the outlook for a company, helping identify companies poised for sustainable free cash flow growth. We believe that sustainable free cash flow growth, if it occurs, may result in price appreciation for the company's stock. We may sell a security if we no longer believe that the security is likely to contribute to meeting the investment objective of the Fund or if there are other opportunities that appear more attractive.
Under normal circumstances, the Fund will invest at least 80% of its net assets in U.S. investments. This policy is not a fundamental investment policy and may be changed without shareholder approval. However, shareholders will be given at least 60 days' notice prior to any such change. We may also invest up to 20% of the Fund's assets in debt securities and bonds. In addition, we may invest in convertible bonds, preferred stocks, and convertible preferred stocks, provided that these investments, when aggregated with the Fund's debt securities and bonds, do not exceed 35% of the Fund's assets.
<R>What are the principal risks of investing in the Fund?
</R> <R></R> <R>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:
</R> <R></R> <R>Investment 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 (the "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.
</R> <R></R>Market risk — The risk that all or a majority of the securities in a certain market — like 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.
<R></R> <R></R> <R>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.
</R> <R></R> <R>Currency risk — The risk that the value of a portfolio's investments may be negatively affected by changes in foreign currency exchange rates.
</R> <R></R> <R>Futures and options risk — The possibility that a fund may experience a loss if it employs an options or futures strategy related to a security or a market index and that security or index moves in the opposite direction from what the manager anticipated. Futures and options also involve additional expenses, which could reduce any benefit or increase any loss that a fund gains from using the strategy.
</R> <R></R> <R>Credit risk — The risk that a bond's issuer will be unable to make timely payments of interest and principal. Investing in so-called "junk" or "high yield" bonds entails greater risk of principal loss than the risk involved in investment grade bonds.
</R> <R></R> <R>Liquidity risk — The possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them, which may prevent the Manager from disposing of securities at a favorable time or price during periods of infrequent trading of such securities.
</R> <R></R>How has Delaware U.S. Growth Fund performed?
<R>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 1, 5, and 10 years 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 web site at www.delawareinvestments.com/performance.
</R>Year-by-year total return (Class A)
<R>
|
During the periods illustrated in this bar chart, Class A's highest quarterly return was 15.50% for the quarter ended June 30, 2009 and its lowest quarterly return was -22.40% for the quarter ended December 31, 2008. The maximum Class A sales charge of 5.75%, which is normally deducted when you purchase shares, is not reflected in the highest/lowest quarterly returns or in the bar chart. If this fee were included, the returns would be less than those shown. The average annual returns in the table below do include the sales charge.
</R> <R>Average annual total returns for periods ended December 31, 2010
</R> <R>1 year | 5 years | 10 years | |
Class A return before taxes | 7.47% | 0.11% | -2.46% |
Class A return after taxes on distributions | 7.47% | 0.11% | -2.46% |
Class A return after taxes on distributions and sale of Fund shares | 4.86% | 0.10% | -2.05% |
Class B return before taxes | 7.47% | 0.12% | -2.44% |
Class C return before taxes | 12.07% | 0.56% | -2.58% |
Class R return before taxes | 13.71% | 1.09% | 4.22% |
Russell 1000® Growth Index (reflects no deduction for fees, expenses, or taxes) | 16.71% | 3.75% | 0.02% |
After-tax performance is only presented 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 Fund's lifetime and do not reflect the impact of state and local taxes.
</R>Who manages the Fund?
Investment manager
Delaware Management Company
<R>
Portfolio managers |
Title with Delaware Management Company |
Start date on the Fund |
Jeffrey S. Van Harte, CFA |
Senior Vice President, Chief Investment Officer — Focus Growth Equity |
April 2005 |
Christopher J. Bonavico, CFA |
Vice President, Senior Portfolio Manager, Equity Analyst |
April 2005 |
Daniel J. Prislin, CFA |
Vice President, Senior Portfolio Manager, Equity Analyst |
April 2005 |
Christopher M. Ericksen, CFA |
Vice President, Portfolio Manager, Equity Analyst |
September 2005 |
Purchase and redemption of Fund shares
<R>
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; by regular mail (c/o Delaware Investments, P.O. Box 219691, Kansas City, MO 64121-9691); by overnight courier service (c/o Delaware Service Center, 430 W. 7th Street, Kansas City, MO 64105);
by telephone to our Shareholder Service Center at 800 523-1918 weekdays from 8:30 a.m. to 6:00 p.m. Eastern time; by telephone to our automated telephone service at
800 362-3863 at any time; through our web site at www.delawareinvestments.com; or by wire.
In most cases, the minimum initial investment is $1,000 and subsequent investments can be made for as little as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act, or through a direct deposit purchase plan or an automatic investment plan, the minimum initial investment is $250 and subsequent investments can be made for as little as $25. The minimum initial purchase for a Coverdell Education Savings Account is $500 and subsequent investments can be made for as little as $25. There is no minimum initial purchase requirement for Class R shares, but certain eligibility requirements must be met. The minimums vary for retirement plans other than IRAs, Roth IRAs, or Coverdell Education Savings Accounts. We may reduce or waive the above minimums in certain cases. As of May 31, 2007, no new or subsequent investments 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 are generally 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.
</R>
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 web site for more information.
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
<R>We analyze economic and market conditions, seeking to identify the securities or market sectors that we think are the best investments for the Fund. The following are descriptions of how the portfolio management team pursues the Fund's investment objective.
</R> <R>The Fund allocates its investments principally among the U.S. investment grade, U.S. high yield, international developed markets, and emerging markets sectors. The relative proportion of the Fund's assets to be allocated among these sectors is described below:
</R> <R></R> <R>U.S. investment grade sector
</R> <R></R> <R>Under normal circumstances, there is no limit to the amount of the Fund's total assets that will be invested in the U.S. investment grade sector. In managing the Fund's assets allocated to the U.S. investment grade sector, we will invest principally in debt obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, and by U.S. corporations. The corporate debt obligations in which the Fund may invest include bonds, notes, debentures, and commercial paper of U.S. companies. 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 which have been established or sponsored by the U.S. government.
</R> <R></R> <R>The investment grade sector of 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.
</R> <R></R> <R>Securities purchased by the Fund within this sector will be rated in one of the four highest rating categories or will be unrated securities that we determine are of comparable quality.
</R> <R></R> <R>U.S. high yield sector
</R> <R></R> <R>Under normal circumstances, between 5% and 50% of the Fund's total assets will be allocated to the U.S. high yield sector. We will invest the Fund's assets that are allocated to the domestic high yield sector primarily in those securities having a liberal and consistent yield and those tending to reduce the risk of market fluctuations. The Fund may invest in domestic corporate debt obligations, including notes, which may be convertible or nonconvertible, commercial paper, units consisting of bonds with stock or warrants to buy stock attached, debentures, convertible debentures, zero-coupon bonds, and pay-in-kind securities.
</R> <R></R> <R>The Fund will invest in both rated and unrated bonds. The rated bonds that the Fund may purchase in this sector will generally be rated BB or lower by Standard & Poor's (S&P) or Fitch, Inc. (Fitch), Ba or lower 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.
</R> <R></R> <R>International developed markets sector
</R> <R></R> <R>Under normal circumstances, between 5% and 50% of the Fund's total assets will be invested, in the aggregate, in the international developed markets and emerging markets sectors. The international developed markets sector invests primarily in fixed income securities of issuers organized or having a majority of their assets or deriving a majority of their operating income in international developed 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-American Development Bank, and the Asian Development Bank. The international developed markets sector will be subject to certain risks, including, but not limited to, the risk that securities within this sector may be adversely affected by political instability, changes in currency exchange rates, foreign economic conditions, or inadequate regulatory and accounting standards.
</R> <R>Emerging markets sector
</R> <R></R>The Fund may purchase securities of issuers in any foreign country, developed and underdeveloped. These investments may include direct obligations of issuers located in emerging markets countries. As with the international sector, the fixed income securities in the emerging markets sector may include foreign government securities, debt obligations of foreign companies, and securities issued by supranational entities. In addition to the risks associated with investing in all foreign securities, emerging markets debt is subject to specific risks, particularly those that result from emerging markets generally being less stable, politically and economically, than developed markets. There is substantially less publicly available information about issuers in emerging markets than there is about issuers in developed markets, and the information that is available tends to be of a lesser quality. Also, emerging markets are typically less mature, less liquid, and subject to greater price volatility than are developed markets. Investments in the emerging markets sector will, in the aggregate, be limited to no more than 15% of the Fund's total assets.
<R>The Fund may invest in sponsored and unsponsored American depositary receipts (ADRs), European depositary receipts (EDRs), or global depositary receipts (GDRs). The Fund may also invest in zero-coupon bonds and may purchase shares of other investment companies.
</R>The Fund will invest in both rated and unrated foreign securities.
<R>The Fund may invest in securities issued in any currency and may hold foreign 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 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. Currency considerations carry a special risk for a portfolio that allocates a significant portion of its assets to foreign securities. The Manager will limit non-U.S.-dollar-denominated securities to no more than 50% of the Fund's net assets, but total non-U.S.-dollar currency exposure will be limited, in the aggregate, to no more than 25% of the Fund's net assets.
</R> <R>The Fund's investment objective is nonfundamental. This means that the Board may change the Fund's objective without obtaining shareholder approval. If the objective were changed, shareholders would receive at least 60 days' notice before the change in the objective became effective.
</R>The securities in which the Fund typically invests
Stocks offer investors the potential for capital appreciation. Certain stocks that we invest in may pay dividends as well. 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.
Common stocks
Common stocks are securities that represent shares of ownership in a corporation. Stockholders may participate in a corporation's profits through its distribution of dividends to stockholders, proportionate to the number of shares they own.
How the Fund uses them: Generally, we invest 85% to 100% of the Fund's net assets in common stock of companies that we think have appreciation potential. We may invest in companies of all sizes, but typically focus on medium- and large-size companies.
Foreign securities and American depositary receipts (ADRs)
Foreign securities are issued directly by non-U.S. entities. ADRs are typically issued by a U.S. bank and represent the bank's holdings of a stated number of shares of a foreign corporation. An ADR entitles the holder to all dividends and capital gains earned by the underlying foreign shares. ADRs are typically bought and sold on U.S. securities exchanges in the same way as other U.S. securities. Sponsored ADRs are issued jointly by the issuer of the underlying security and the depositary, and unsponsored ADRs are issued by the depositary without the participation of the issuer of the underlying security.
How the Fund uses them: We may invest up to 20% of the Fund's net assets in securities of foreign issuers. Such foreign securities may be traded on a foreign exchange, or they may be in the form of ADRs. Direct ownership of foreign securities will typically not be a significant part of our strategy. We may, however, own ADRs when we think they offer greater appreciation potential than U.S. securities.
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.
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.
Fixed income securities
Securities that may include debt securities, bonds, and convertible bonds, as well as noninvestment grade fixed income securities.
How the Fund uses them: We may invest up to 20% of the Fund's assets in debt securities and bonds. We may also invest up to 15% of this portion in noninvestment grade bonds if we believe that doing so would help us to meet the Fund's objective. We may also invest in convertible bonds, preferred stocks, and convertible preferred stock, provided that these investments, when aggregated with the Fund's investments in debt securities and bonds, do not exceed 35% of the Fund's assets.
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.
<R>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 its purchaser exercises the option.
</R>Certain options and futures may be considered derivative securities.
<R>How the Fund uses them: If we have stocks that have unrealized gains, we may want to protect those gains when we anticipate adverse conditions. We might use options or futures to neutralize the effect of any anticipated price declines, without selling the security. We may also use options or futures to gain exposure to a particular market segment without purchasing individual securities in that segment, particularly if we had excess cash that we wanted to invest quickly.
</R>We might use covered call options if we believe that doing so would help the Fund to meet its investment objective.
<R>Use of these strategies can increase the operating costs of the Fund and can lead to loss of principal.
</R> <R>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.
</R>Other investment strategies
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.
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.
Initial public offerings (IPOs)
Under certain market conditions, the Fund may invest in companies at the time of their IPO. Companies involved in IPOs generally have limited operating histories, and prospects for future profitability are uncertain. Prices of IPOs may also be unstable because of the absence of a prior public market, the small number of shares available for trading, and limited investor information. IPOs may be sold within 12 months of purchase. This may result in increased short-term capital gains, which will be taxable to shareholders as ordinary income.
Purchasing securities on a when-issued 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 table 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
<R>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, or investor confidence.
</R>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 time frame regardless of interim market fluctuations. We do not try to predict overall market movements. Although we may hold securities for any amount of time, we generally do not trade for short-term purposes.
We may hold a substantial part of the Fund's assets in cash or cash equivalents as a temporary, defensive strategy.
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.
<R>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).
</R>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.
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 are permitted to invest up to 20% of the Fund's portfolio in foreign securities. When we do purchase foreign securities, they are generally ADRs, which are denominated in U.S. dollars and traded on U.S. stock exchanges.
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 Fund strives to manage it: The Fund limits exposure to illiquid securities to no more than 15% of its net assets.
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. Bonds rated below investment grade are particularly subject to this risk.
<R>How the Fund strives to manage it: Fixed income securities are not typically a significant component of our strategy. However, when we do invest in fixed income securities, we will not hold more than 15% of the Fund's net assets in high yield, noninvestment grade bonds. This limitation, combined with our careful, credit-oriented bond selection and our commitment to hold a diversified selection of high yield bonds, is designed to manage this risk.
</R>Futures and options risk
Futures and options risk is the possibility that a fund may experience a significant loss if it employs an options or futures strategy related to a security or a market index and that security or index moves in the opposite direction from what the portfolio manager anticipated. Futures and options 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 may use options and futures to protect gains in the portfolio without actually selling a security. We may also use options and futures to quickly invest excess cash so that the portfolio is generally fully invested.
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 in emerging market securities. Striving to manage this risk for the Fund, the Manager carefully screens securities within emerging markets and attempts to consider material risks associated with an individual company or bond issuer.
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 attempts to mitigate this risk through diversification across multiple countries in the portfolio. In addition, under certain circumstances, the Manager may try to hedge the Fund's currency risk by purchasing foreign currency exchange contracts. The Fund may use forward currency exchange contracts only for defensive or protective measures, not to enhance portfolio returns. However, there is no assurance that such a strategy will be successful. Hedging is typically less practical in emerging markets.
Information risk
Information risk is the risk that foreign companies may be subject to different accounting, auditing, and financial reporting standards than U.S. companies. There may be less information available about foreign issuers than domestic issuers. Furthermore, regulatory oversight of foreign issuers may be less stringent or less consistently applied than in the U.S.
How the Fund strives to manage it: The Manager conducts fundamental research on the companies that the Fund invests in rather than relying solely on information available through financial reporting. As part of its worldwide research process, the Manager emphasizes company visits. The Manager believes this will help it to better uncover any potential weaknesses in individual companies.
Inefficient market risk
Inefficient market risk is the risk that foreign markets may be less liquid, have greater price volatility, less regulation, and higher transaction costs than U.S. markets.
How the Fund strives to manage it: The Fund will attempt to reduce this risk by investing in a number of different countries, noting trends in the economy, industries, and financial markets.
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 only obtain 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 will 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.
<R>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 0.50% of average daily net assets during the last fiscal year.
</R> <R>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 fiscal year ended April 30, 2010.
</R>
Jeffrey S. Van Harte has primary responsibility for making day-to-day investment decisions for Delaware U.S. Growth Fund. In making investment decisions for the Fund, Mr. Van Harte regularly consults with Christopher J. Bonavico, Daniel J. Prislin, and Christopher M. Ericksen.
</R> <R></R> <R>
Jeffrey S. Van Harte, CFA,
Senior Vice President, Chief Investment Officer — Focus Growth Equity
Jeffrey S. Van Harte is the chief investment officer for the Focus Growth Equity team, which manages large-cap growth, smid-cap growth, all-cap growth, and global growth portfolios. Prior to joining Delaware Investments in April 2005 in his current position, he was a principal and executive vice president at Transamerica Investment Management. Van Harte has been managing portfolios and separate accounts for more than 20 years. Before becoming a portfolio manager, Van Harte was a securities analyst and trader for Transamerica Investment Services, which he joined in 1980. Van Harte received his bachelor's degree in finance from California State University at Fullerton.
Christopher J. Bonavico, CFA,
Vice President, Senior Portfolio Manager, Equity Analyst
Christopher J. Bonavico joined Delaware Investments in April 2005 as a senior portfolio manager on the firm's Focus Growth Equity team, which manages large-cap growth, smid-cap growth, all-cap growth, and global growth portfolios. He was most recently a principal and portfolio manager at Transamerica Investment Management, where he managed sub-advised funds and institutional separate accounts. Before joining Transamerica in 1993, he was a research analyst for Salomon Brothers. Bonavico received his bachelor's degree in economics from the University of Delaware.
Daniel J. Prislin, CFA,
Vice President, Senior Portfolio Manager, Equity Analyst
Daniel J. Prislin joined Delaware Investments in April 2005 as a senior portfolio manager on the firm's Focus Growth Equity team, which manages large-cap growth, smid-cap growth, all-cap growth, and global growth portfolios. He was most recently a principal and portfolio manager at Transamerica Investment Management, where he also managed sub-advised funds and institutional separate accounts. Prior to joining Transamerica in 1998, he was a portfolio manager with The Franklin Templeton Group. Prislin received an MBA and bachelor's degree in business administration from the University of California at Berkeley.
Christopher M. Ericksen, CFA,
Vice President, Portfolio Manager, Equity Analyst
Christopher M. Ericksen joined Delaware Investments in April 2005 as a portfolio manager on the firm's Focus Growth Equity team, which manages large-cap growth, smid-cap growth, all-cap growth, and global growth portfolios. He was most recently a portfolio manager at Transamerica Investment Management, where he also managed institutional separate accounts. Before joining Transamerica in 2004, he was a vice president at Goldman Sachs. During his 10 years there, he worked in investment banking as well as investment management. Ericksen received his bachelor's degree from Carnegie Mellon University, with majors in industrial management, economics, and political science.
The SAI provides additional information about the portfolio managers' compensation, other funds managed by the portfolio managers, and the portfolio managers' ownership of Fund shares.
</R> <R>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 Fund's 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 Fund's 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.
</R> <R>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.
</R> <R>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. The Fund relies on certain exemptive rules adopted by the SEC that require the board of trustees to be composed of a majority of trustees independent of a fund's investment manager and distributor.
</R>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.
<R>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 contributions into existing 403(b) custodial accounts .
</R>Class A
Class A shares have an up-front sales charge of up to 5.75% that you pay when you buy the shares.
If you invest $50,000 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, which is lower than the 12b-1 fee for Class C and Class R shares. 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
<R></R> <R>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 NAV, the percentage rate of the sales charge, and rounding.
</R> <R></R>Amount of purchase |
Sales charge as % of offering price |
Sales charge as % of net amount invested |
||
Less than $50,000 | 5.75% | 6.54% | ||
$50,000 but less than $100,000 | 4.75% | 5.41% | ||
$100,000 but less than $250,000 | 3.75% | 4.31% | ||
$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.
</R> <R></R>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 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.
<R>
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 3.25% during the second year, 2.75% during the third year, 2.25% during the fourth and fifth years, 1.50% 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.
Because of the higher 12b-1 fee, Class B shares have higher expenses and any dividends paid on these shares are generally lower than dividends on Class A and Class R shares.
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 0.30%. 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.
Because of their higher 12b-1 fee, Class C shares have higher expenses and any dividends paid on these shares are generally lower than dividends on Class A and Class R shares.
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
<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, which is lower than the 12b-1 fee for Class C shares.
Because of the higher 12b-1 fee, Class R shares have higher expenses and any dividends paid on these shares are generally lower than dividends paid on Class A shares.
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, etc.). 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 June 2, 2003 (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.
Each share class may be eligible for purchase through programs sponsored by financial intermediaries that require the purchase of a specific class of shares.
Each share class of the Fund has 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.
<R>
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.
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.
Class A1 | Class B2 | Class C3 | Class R4 | |
Commission (%) | — | 4.00% | 1.00% | — |
Investment less than $50,000 | 5.00% | — | — | — |
$50,000 but 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 re-allows 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 0.30%. However, the Distributor has contracted to limit this amount to 0.25% from February 28, 2011 through February 28, 2012. |
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 February 28, 2011 through February 28, 2012. |
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). The level of payments made to a qualifying Financial Intermediary in any given year will 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.
</R>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. 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 NAV or the price of the Fund's shares.
For more information, please see the SAI.
How to reduce your sales charge
<R>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. Class R shares have no up-front sales charge or CDSC. We reserve the right to determine whether any purchase is entitled, by virtue of the foregoing, to the reduced sales charge.
</R>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 will 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.
<R>
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 have entered into a Class A NAV 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 their spouses whose plan assets will be rolled over into Foundation ® IRA accounts.
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
<R>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' web site at www.delawareinvestments.com. Additional information on sales charges can be found in the SAI, which is available upon request.
</R>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 A1, B, and C |
Available |
Redemptions that result from the right to liquidate a shareholder's account
<R></R> <R>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.
</R> <R></R>Classes A1, 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 (Code).
Class A1 | 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 Code with respect to that retirement plan.
Class A1 | Classes B and C |
Available | Not available |
Periodic distributions from an individual retirement account
<R>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 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 Code.
</R>Classes A1, B, and C |
Available |
Returns of excess contributions due to any regulatory limit
<R>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).
</R>Classes A1, B, and C |
Available |
Distributions by other employee benefit plans
Distributions by other employee benefit plans to pay benefits.
Class A1 | Classes B and C |
Available | Not available |
Systematic withdrawals from a retirement account or qualified plan
<R>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 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 Code. The systematic withdrawal may be pursuant to the systematic withdrawal plan for the Delaware Investments ® Funds or a systematic withdrawal permitted by the Code.
</R>Classes A1, B, and C |
Available |
Distributions from an account of a redemption resulting from death or disability
<R>Distributions from an account of a redemption resulting from the death or disability (as defined in Section 72(t)(2)(A) of the 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.
</R>Classes A1, 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 A1 | Class B | Class C |
Available | Not available | Available |
Redemptions by the classes of shareholders who are permitted to purchase shares at NAV
<R>Redemptions by the classes of shareholders who are permitted to purchase shares at NAV, regardless of the size of the purchase.
</R>Class A1 | Classes B and C |
Available | Not available |
1The 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.
2Qualified 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.
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, P.O. Box 219691, Kansas City, MO 64121-9691 or 430 W. 7th Street, Kansas City, MO 64105-1407 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 orders are received by Delaware Investments at P.O. Box 219691, Kansas City, MO 64121-9691 for investments by regular mail or 430 W. 7th Street, Kansas City, MO 64105-1407 for investments by overnight courier service. Please do not send purchase orders to 2005 Market Street, Philadelphia, PA 19103-7094.
By wire
Ask your bank to wire the amount you want to invest to The Bank of New York Mellon, ABA #021000018, bank account number 8900403748. 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
<R>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.
</R>Through automated shareholder services
<R>You may purchase or exchange shares through Delaphone, our automated telephone service, or through our web site, www.delawareinvestments.com. For more information about how to sign up for these services, call our Shareholder Service Center at 800 523-1918.
</R>Once you have completed an application, you can open an account with an initial investment of $1,000 and make additional investments at any time for as little as $100. The minimum initial purchase is $250, and you can make additional investments of $25 or more, if you are buying shares in an IRA or Roth IRA, under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act, or through an Automatic Investing Plan. The minimum initial purchase for a Coverdell Education Savings Account (formerly, an "Education IRA") is $500. The minimums vary for retirement plans other than IRAs, Roth IRAs, or Coverdell Education Savings Accounts.
<R>The price you pay for shares will depend on when we receive your purchase order. If an authorized agent or we receive your order 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 the 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.
</R> <R>We determine the NAV per share for each class of the Fund at the close of regular trading on the NYSE on each Business Day. The NAV per share for each class of the 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 value.
</R>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.
<R>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 price 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.
</R>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.
<R></R>If you have an account in the same Delaware Investments ® Fund as another member of your household, we send your household one copy of the Fund's prospectus and annual and semiannual reports unless you opt otherwise. This will help us reduce the printing and mailing expenses associated with the Fund. We will continue to send one copy of each of these documents to your household until you notify us that you wish to receive individual materials. If you wish to receive individual materials, please call our Shareholder Service Center at 800 523-1918 or your financial advisor. We will begin sending you individual copies of these documents 30 days after receiving your request.
<R></R> <R></R> <R>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.
</R>Through your financial advisor
Your financial advisor can handle all the details of redeeming your shares (selling them back to the Fund). Your financial advisor may charge a separate fee for this service.
By mail
<R>You may redeem your shares by mail by writing to: Delaware Investments at P.O. Box 219691, Kansas City, MO 64121-9691 or 430 W. 7th Street, Kansas City, MO 64105-1407 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.
</R>Please note that redemption orders submitted by mail will not be accepted until such orders are received by Delaware Investments at P.O. Box 219691, Kansas City, MO 64121-9691 for redemptions by regular mail or 430 W. 7th Street, Kansas City, MO 64105-1407 for redemptions by overnight courier service. Please do not send redemption requests to 2005 Market Street, Philadelphia, PA 19103-7094.
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
<R>You may redeem shares through Delaphone, our automated telephone service, or through our web site, www.delawareinvestments.com. For more information about how to sign up for these services, call our Shareholder Service Center at 800 523-1918.
</R>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.
When you send us a properly completed request to redeem or exchange shares and an authorized agent or we receive the request 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, we will wait until your check has cleared, which can take up to 15 days, before we send 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.
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.
<R>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 shares after 60 days' written notice to you.
</R>To help make investing with us as easy as possible, and to help you build your investments, we offer the following special 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
<R></R> <R>Online account access is a password-protected area of the Delaware Investments ® Funds' web site that gives you access to your account information and allows you to perform transactions in a secure internet environment.
</R> <R></R>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 or from Class R shares of any fund, 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. 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 to 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
Through the systematic withdrawal plan, 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.
<R>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.
</R>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.
<R>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.
</R>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.
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 and distribute all of its net investment income, if any, to shareholders as dividends annually. 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
<R></R> <R>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 search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
</R> <R></R>Avoid "buying a dividend"
<R>At the time you purchase your Fund shares, the Fund's net asset value 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."
</R>Tax considerations
<R>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.
</R> <R>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 taxable years of the Fund beginning before January 1, 2013, unless such provision is extended or made permanent, a portion of income dividends designated 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.
</R> <R>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.
</R> <R></R> <R>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.
</R> <R></R> <R>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.
</R> <R></R> <R>Other. 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. Exemptions from U.S. withholding tax are provided for capital gain dividends paid by the Fund from long-term capital gains, if any, and, with respect to taxable years of the Fund that begin before January 1, 2012 (unless such sunset date is extended 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 such dividends and distributions of income and capital gains will be subject to backup withholding at a rate of 28% if you fail to properly certify that you are not a U.S. person.
</R> <R></R> <R>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.
</R>
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 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.
<R>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 2010 fiscal year 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. For the fiscal years prior to 2010, the Fund's prior independent registered public accounting firm audited the Fund's financial statements.
</R>Delaware U.S. Growth Fund
<R>Class A Shares | 2010 | 2009 | 2008 | 2007 |
Year ended Oct. 31, 2006 |
Net asset value, beginning of period | $11.100 | $9.380 | $15.760 | $13.110 | $12.700 |
Income (loss) from investment operations: | |||||
Net investment income (loss)1 | (0.038) | 0.001 | (0.019) | (0.036) | (0.043) |
Net realized and unrealized gain (loss) on investments | 2.388 | 1.719 | (6.361) | 2.686 | 0.453 |
Total from investment operations | 2.350 | 1.720 | (6.380) | 2.650 | 0.410 |
Net asset value, end of period | $13.450 | $11.100 | $9.380 | $15.760 | $13.110 |
Total return2 | 21.17% | 18.34% | (40.49%) | 20.21% | 3.23% |
Ratios and supplemental data: | |||||
Net assets, end of period (000 omitted) | $89,259 | $128,702 | $127,819 | $193,287 | $109,854 |
Ratio of expenses to average net assets | 1.07% | 1.00% | 1.01% | 1.05% | 1.05% |
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly | 1.26% | 1.31% | 1.18% | 1.18% | 1.22% |
Ratio of net investment income (loss) to average net assets | (0.31%) | — | (0.15%) | (0.26%) | (0.34%) |
Ratio of net investment loss to average net assets prior to fees waived and expense paid indirectly | (0.50%) | (0.31%) | (0.32%) | (0.39%) | (0.51%) |
Portfolio turnover | 22% | 30% | 35% | 30% | 25% |
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 waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
Delaware U.S. Growth Fund
<R>Class B Shares | 2010 | 2009 | 2008 | 2007 |
Year ended Oct. 31, 2006 |
Net asset value, beginning of period | $9.760 | $8.310 | $14.070 | $11.790 | $11.500 |
Income (loss) from investment operations: | |||||
Net investment loss1 | (0.114) | (0.058) | (0.106) | (0.121) | (0.123) |
Net realized and unrealized gain (loss) on investments | 2.094 | 1.508 | (5.654) | 2.401 | 0.413 |
Total from investment operations | 1.980 | 1.450 | (5.760) | 2.280 | 0.290 |
Net asset value, end of period | $11.740 | $9.760 | $8.310 | $14.070 | $11.790 |
Total return2 | 20.29% | 17.45% | (40.94%) | 19.34% | 2.52% |
Ratios and supplemental data: | |||||
Net assets, end of period (000 omitted) | $4,428 | $5,564 | $8,352 | $19,350 | $22,563 |
Ratio of expenses to average net assets | 1.82% | 1.75% | 1.76% | 1.76% | 1.75% |
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly | 1.96% | 2.01% | 1.88% | 1.84% | 1.87% |
Ratio of net investment loss to average net assets | (1.06%) | (0.75%) | (0.90%) | (0.97%) | (1.04%) |
Ratio of net investment loss to average net assets prior to fees waived and expense paid indirectly | (1.20%) | (1.01%) | (1.02%) | (1.05%) | (1.16%) |
Portfolio turnover | 22% | 30% | 35% | 30% | 25% |
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 not been in effect. |
Delaware U.S. Growth Fund
<R>Class C Shares | 2010 | 2009 | 2008 | 2007 |
Year ended Oct. 31, 2006 |
Net asset value, beginning of period | $10.580 | $9.010 | $15.250 | $12.780 | $12.460 |
Income (loss) from investment operations: | |||||
Net investment loss1 | (0.123) | (0.065) | (0.115) | (0.131) | (0.131) |
Net realized and unrealized gain (loss) on investments | 2.263 | 1.635 | (6.125) | 2.601 | 0.451 |
Total from investment operations | 2.140 | 1.570 | (6.240) | 2.470 | 0.320 |
Net asset value, end of period | $12.720 | $10.580 | $9.010 | $15.250 | $12.780 |
Total return2 | 20.23% | 17.43% | (40.92%) | 19.33% | 2.57% |
Ratios and supplemental data: | |||||
Net assets, end of period (000 omitted) | $12,535 | $13,112 | $14,536 | $24,406 | $22,641 |
Ratio of expenses to average net assets | 1.82% | 1.75% | 1.76% | 1.76% | 1.75% |
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly | 1.96% | 2.01% | 1.88% | 1.84% | 1.87% |
Ratio of net investment loss to average net assets | (1.06%) | (0.75%) | (0.90%) | (0.97%) | (1.04%) |
Ratio of net investment loss to average net assets prior to fees waived and expense paid indirectly | (1.20%) | (1.01%) | (1.02%) | (1.05%) | (1.16%) |
Portfolio turnover | 22% | 30% | 35% | 30% | 25% |
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 not been in effect. |
Delaware U.S. Growth Fund
<R>Class R Shares | 2010 | 2009 | 2008 | 2007 |
Year ended Oct. 31, 2006 |
Net asset value, beginning of period | $10.930 | $9.260 | $15.600 | $13.000 | $12.620 |
Income (loss) from investment operations: | |||||
Net investment loss1 | (0.067) | (0.022) | (0.050) | (0.065) | (0.070) |
Net realized and unrealized gain (loss) on investments | 2.347 | 1.692 | (6.290) | 2.665 | 0.450 |
Total from investment operations | 2.280 | 1.670 | (6.340) | 2.600 | 0.380 |
Net asset value, end of period | $13.210 | $10.930 | $9.260 | $15.600 | $13.000 |
Total return2 | 20.86% | 18.03% | (40.64%) | 20.00% | 3.01% |
Ratios and supplemental data: | |||||
Net assets, end of period (000 omitted) | $2,375 | $2,336 | $2,055 | $1,529 | $669 |
Ratio of expenses to average net assets | 1.32% | 1.25% | 1.26% | 1.26% | 1.25% |
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly | 1.56% | 1.61% | 1.48% | 1.44% | 1.47% |
Ratio of net investment loss to average net assets | (0.56%) | (0.25%) | (0.40%) | (0.47%) | (0.54%) |
Ratio of net investment loss to average net assets prior to fees waived and expense paid indirectly | (0.80%) | (0.61%) | (0.62%) | (0.65%) | (0.76%) |
Portfolio turnover | 22% | 30% | 35% | 30% | 25% |
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. |
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.
Web site: www.delawareinvestments.com
E-mail: service@delinvest.com
Shareholder Service Center: 800 523-1918
Call the Shareholder Service Center 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.
Delaphone Service: 800 362-FUND (800 362-3863)
For convenient access to account information or current performance information on all Delaware Investments
®
Funds seven days a week, 24 hours a day, use this touch-tone service.
Written correspondence: P.O. Box 219691, Kansas City, MO 64121-9691 or
430 W. 7th Street, Kansas City, MO 64105-1407.
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,
You can find reports and other information about the Fund on the EDGAR database on the SEC web site (www.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,
PR-101 [10/10] PDF 16190 [2/11] Investment Company Act number: 811-07972 |
Prospectus
<R>U.S. growth equity funds
</R>
Delaware U.S. Growth Fund
Nasdaq ticker symbols |
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Institutional Class |
DEUIX |
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.
</R> <R>
Get shareholder reports and prospectuses online instead of in the mail.
Visit www.delawareinvestments.com/edelivery.
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<R></R>
What is the Fund's investment objective?
Delaware U.S. Growth Fund seeks long-term capital appreciation by investing in equity securities of companies we believe have the potential for sustainable free cash flow growth.
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.
Annual fund operating expenses (expenses that you pay each year as a percentage of the value of your investment) | ||||
Class | Institutional | |||
Management fees | 0.64% | |||
Distribution and service (12b-1) fees | none | |||
Other expenses | 0.32% | |||
Total annual fund operating expenses | 0.96% | |||
Fee waivers and expense reimbursements | (0.11%) 1 | |||
Total annual fund operating expenses after fee waivers andexpense reimbursements | 0.85% |
1 |
The Fund's investment manager, Delaware Management Company (Manager), has contractually agreed to waive all or a portion of its investment advisory fees and/or pay/reimburse expenses (excluding any 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 total annual fund operating expenses from exceeding 0.85% of the Fund's average daily net assets from February 28, 2011 through February 28, 2012. These waivers and reimbursements may be terminated only by agreement of the Manager and the Fund. |
Example
</R> <R>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 Manager's expense 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:
</R> <R></R> <R></R> <R>
Class | Institutional |
1 year | $84 |
3 years | $292 |
5 years | $517 |
10 years | $1,165 |
Portfolio turnover
<R>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 22% of the average value of its portfolio.
</R> <R>What are the Fund's principal investment strategies?
</R>We invest primarily in common stocks. The Fund invests primarily in companies that we believe have long-term capital appreciation potential and are expected to grow faster than the U.S. economy. Using a bottom up approach, we seek to select securities we believe have large end-market potential, dominant business models, and strong free cash flow generation that are attractively priced compared to the intrinsic value of the securities. We also consider a company's operational efficiencies, management's plans for capital allocation, and the company's shareholder orientation. All of these factors give us insight into the outlook for a company, helping identify companies poised for sustainable free cash flow growth. We believe that sustainable free cash flow growth, if it occurs, may result in price appreciation for the company's stock. We may sell a security if we no longer believe that the security is likely to contribute to meeting the investment objective of the Fund or if there are other opportunities that appear more attractive.
Under normal circumstances, the Fund will invest at least 80% of its net assets in U.S. investments. This policy is not a fundamental investment policy and may be changed without shareholder approval. However, shareholders will be given at least 60 days' notice prior to any such change. We may also invest up to 20% of the Fund's assets in debt securities and bonds. In addition, we may invest in convertible bonds, preferred stocks, and convertible preferred stocks, provided that these investments, when aggregated with the Fund's debt securities and bonds, do not exceed 35% of the Fund's assets.
<R>What are the principal risks of investing in the Fund?
</R> <R></R> <R>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:
</R> <R></R> <R>Investment 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 (the "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.
</R> <R></R>Market risk — The risk that all or a majority of the securities in a certain market — like 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.
<R></R> <R></R> <R>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.
</R> <R></R> <R>Currency risk — The risk that the value of a portfolio's investments may be negatively affected by changes in foreign currency exchange rates.
</R> <R></R> <R>Futures and options risk — The possibility that a fund may experience a loss if it employs an options or futures strategy related to a security or a market index and that security or index moves in the opposite direction from what the manager anticipated. Futures and options also involve additional expenses, which could reduce any benefit or increase any loss that a fund gains from using the strategy.
</R> <R></R> <R>Credit risk — The risk that a bond's issuer will be unable to make timely payments of interest and principal. Investing in so-called "junk" or "high yield" bonds entails greater risk of principal loss than the risk involved in investment grade bonds.
</R> <R></R> <R>Liquidity risk — The possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them, which may prevent the Manager from disposing of securities at a favorable time or price during periods of infrequent trading of such securities.
</R> <R></R>How has Delaware U.S. Growth Fund performed?
<R>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 1, 5, and 10 years 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 800 362-7500 or by visiting our web site at www.delawareinvestments.com/performance.
</R>Year-by-year total return (Institutional Class)
<R>
|
During the periods illustrated in this bar chart, the Institutional Class' highest quarterly return was 15.60% for the quarter ended June 30, 2009 and its lowest quarterly return was -22.31% for the quarter ended December 31, 2008.
<R>Average annual total returns for periods ended December 31, 2010
</R> <R>1 year | 5 years | 10 years | |
Return before taxes | 14.27% | 1.58% | -1.60% |
Return after taxes on distributions | 14.21% | 1.57% | -1.60% |
Return after taxes on distributions and sale of Fund shares | 9.27% | 1.34% | -1.35% |
Russell 1000® Growth Index (reflects no deduction for fees, expenses, or taxes) | 16.71% | 3.75% | 0.02% |
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.
</R>Who manages the Fund?
Investment manager
Delaware Management Company
<R>
Portfolio managers |
Title with Delaware Management Company |
Start date on the Fund |
Jeffrey S. Van Harte, CFA |
Senior Vice President, Chief Investment Officer — Focus Growth Equity |
April 2005 |
Christopher J. Bonavico, CFA |
Vice President, Senior Portfolio Manager, Equity Analyst |
April 2005 |
Daniel J. Prislin, CFA |
Vice President, Senior Portfolio Manager, Equity Analyst |
April 2005 |
Christopher M. Ericksen, CFA |
Vice President, Portfolio Manager, Equity Analyst |
September 2005 |
Purchase and redemption of Fund shares
<R>
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; by regular mail (c/o Delaware Investments, P.O. Box 219691, Kansas City, MO 64121-9691); by overnight courier service (c/o Delaware Service Center, 430 W. 7th Street,
Kansas City, MO 64105); by telephone to your Client Services Representative at 800 362-7500 weekdays from 8:30 a.m. to 6:00 p.m. Eastern time; by telephone to our automated telephone service at 800 362-3863 at any time; through our web site at www.delawareinvestments.com; or by wire.
There is no minimum initial purchase requirement for Institutional Class shares, but Institutional Class shares are available for purchase only by the following: (1) retirement plans introduced by persons not associated with brokers or dealers that are primarily engaged in the retail securities business and rollover IRAs from such plans; (2) tax-exempt employee benefit plans of the Fund's Manager or its affiliates and of securities dealer firms with a selling agreement with Delaware Distributors, L.P. (Distributor); (3) 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 accounts; (4) 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 shares of the Class, except where the investment is part of a program that requires payment to the financial institution of a Rule 12b-1 Plan fee; (5) registered investment advisors (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); (6) certain plans qualified under Section 529 of the Internal Revenue Code of 1986, as amended (Code), for which the Fund's Manager, Distributor, or service agent, or one or more of their affiliates provide recordkeeping, administrative, investment management, marketing, distribution, or similar services; (7) programs sponsored by financial intermediaries where: (a) such programs allow or require the purchase of Institutional Class shares, (b) the financial intermediary has entered into an agreement covering the arrangement with the Distributor and/or the Fund's transfer agent, and (c) the financial intermediary (i) charges clients an ongoing fee for advisory, investment consulting or similar service, or (ii) offers the Institutional Class shares through a no-commission network or platform; or (8) private investment vehicles, including, but not limited to, foundations and endowments.
</R>
Tax information
The Fund's distributions are generally 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.
</R>
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 web site for more information.
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
<R>We analyze economic and market conditions, seeking to identify the securities or market sectors that we think are the best investments for the Fund. The following are descriptions of how the portfolio management team pursues the Fund's investment objective.
</R> <R>The Fund allocates its investments principally among the U.S. investment grade, U.S. high yield, international developed markets, and emerging markets sectors. The relative proportion of the Fund's assets to be allocated among these sectors is described below:
</R> <R></R> <R>U.S. investment grade sector
</R> <R></R> <R>Under normal circumstances, there is no limit to the amount of the Fund's total assets that will be invested in the U.S. investment grade sector. In managing the Fund's assets allocated to the U.S. investment grade sector, we will invest principally in debt obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, and by U.S. corporations. The corporate debt obligations in which the Fund may invest include bonds, notes, debentures, and commercial paper of U.S. companies. 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 which have been established or sponsored by the U.S. government.
</R> <R></R> <R>The investment grade sector of 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.
</R> <R></R> <R>Securities purchased by the Fund within this sector will be rated in one of the four highest rating categories or will be unrated securities that we determine are of comparable quality.
</R> <R></R> <R>U.S. high yield sector
</R> <R></R> <R>Under normal circumstances, between 5% and 50% of the Fund's total assets will be allocated to the U.S. high yield sector. We will invest the Fund's assets that are allocated to the domestic high yield sector primarily in those securities having a liberal and consistent yield and those tending to reduce the risk of market fluctuations. The Fund may invest in domestic corporate debt obligations, including notes, which may be convertible or nonconvertible, commercial paper, units consisting of bonds with stock or warrants to buy stock attached, debentures, convertible debentures, zero-coupon bonds, and pay-in-kind securities.
</R> <R></R> <R>The Fund will invest in both rated and unrated bonds. The rated bonds that the Fund may purchase in this sector will generally be rated BB or lower by Standard & Poor's (S&P) or Fitch, Inc. (Fitch), Ba or lower 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.
</R> <R></R> <R>International developed markets sector
</R> <R></R> <R>Under normal circumstances, between 5% and 50% of the Fund's total assets will be invested, in the aggregate, in the international developed markets and emerging markets sectors. The international developed markets sector invests primarily in fixed income securities of issuers organized or having a majority of their assets or deriving a majority of their operating income in international developed 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-American Development Bank, and the Asian Development Bank. The international developed markets sector will be subject to certain risks, including, but not limited to, the risk that securities within this sector may be adversely affected by political instability, changes in currency exchange rates, foreign economic conditions, or inadequate regulatory and accounting standards.
</R> <R>Emerging markets sector
</R> <R></R>The Fund may purchase securities of issuers in any foreign country, developed and underdeveloped. These investments may include direct obligations of issuers located in emerging markets countries. As with the international sector, the fixed income securities in the emerging markets sector may include foreign government securities, debt obligations of foreign companies, and securities issued by supranational entities. In addition to the risks associated with investing in all foreign securities, emerging markets debt is subject to specific risks, particularly those that result from emerging markets generally being less stable, politically and economically, than developed markets. There is substantially less publicly available information about issuers in emerging markets than there is about issuers in developed markets, and the information that is available tends to be of a lesser quality. Also, emerging markets are typically less mature, less liquid, and subject to greater price volatility than are developed markets. Investments in the emerging markets sector will, in the aggregate, be limited to no more than 15% of the Fund's total assets.
<R>The Fund may invest in sponsored and unsponsored American depositary receipts (ADRs), European depositary receipts (EDRs), or global depositary receipts (GDRs). The Fund may also invest in zero-coupon bonds and may purchase shares of other investment companies.
</R>The Fund will invest in both rated and unrated foreign securities.
<R>The Fund may invest in securities issued in any currency and may hold foreign 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 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. Currency considerations carry a special risk for a portfolio that allocates a significant portion of its assets to foreign securities. The Manager will limit non-U.S.-dollar-denominated securities to no more than 50% of the Fund's net assets, but total non-U.S.-dollar currency exposure will be limited, in the aggregate, to no more than 25% of the Fund's net assets.
</R> <R>The Fund's investment objective is nonfundamental. This means that the Board may change the Fund's objective without obtaining shareholder approval. If the objective were changed, shareholders would receive at least 60 days' notice before the change in the objective became effective.
</R>The securities in which the Fund typically invests
Stocks offer investors the potential for capital appreciation. Certain stocks that we invest in may pay dividends as well. 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.
Common stocks
Common stocks are securities that represent shares of ownership in a corporation. Stockholders may participate in a corporation's profits through its distribution of dividends to stockholders, proportionate to the number of shares they own.
How the Fund uses them: Generally, we invest 85% to 100% of the Fund's net assets in common stock of companies that we think have appreciation potential. We may invest in companies of all sizes, but typically focus on medium- and large-size companies.
Foreign securities and American depositary receipts (ADRs)
Foreign securities are issued directly by non-U.S. entities. ADRs are typically issued by a U.S. bank and represent the bank's holdings of a stated number of shares of a foreign corporation. An ADR entitles the holder to all dividends and capital gains earned by the underlying foreign shares. ADRs are typically bought and sold on U.S. securities exchanges in the same way as other U.S. securities. Sponsored ADRs are issued jointly by the issuer of the underlying security and the depositary, and unsponsored ADRs are issued by the depositary without the participation of the issuer of the underlying security.
How the Fund uses them: We may invest up to 20% of the Fund's net assets in securities of foreign issuers. Such foreign securities may be traded on a foreign exchange, or they may be in the form of ADRs. Direct ownership of foreign securities will typically not be a significant part of our strategy. We may, however, own ADRs when we think they offer greater appreciation potential than U.S. securities.
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.
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.
Fixed income securities
Securities that may include debt securities, bonds, and convertible bonds, as well as noninvestment grade fixed income securities.
How the Fund uses them: We may invest up to 20% of the Fund's assets in debt securities and bonds. We may also invest up to 15% of this portion in noninvestment grade bonds if we believe that doing so would help us to meet the Fund's objective. We may also invest in convertible bonds, preferred stocks, and convertible preferred stock, provided that these investments, when aggregated with the Fund's investments in debt securities and bonds, do not exceed 35% of the Fund's assets.
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.
<R>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 its purchaser exercises the option.
</R>Certain options and futures may be considered derivative securities.
<R>How the Fund uses them: If we have stocks that have unrealized gains, we may want to protect those gains when we anticipate adverse conditions. We might use options or futures to neutralize the effect of any anticipated price declines, without selling the security. We may also use options or futures to gain exposure to a particular market segment without purchasing individual securities in that segment, particularly if we had excess cash that we wanted to invest quickly.
</R>We might use covered call options if we believe that doing so would help the Fund to meet its investment objective.
<R>Use of these strategies can increase the operating costs of the Fund and can lead to loss of principal.
</R> <R>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.
</R>Other investment strategies
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.
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.
Initial public offerings (IPOs)
Under certain market conditions, the Fund may invest in companies at the time of their IPO. Companies involved in IPOs generally have limited operating histories, and prospects for future profitability are uncertain. Prices of IPOs may also be unstable because of the absence of a prior public market, the small number of shares available for trading, and limited investor information. IPOs may be sold within 12 months of purchase. This may result in increased short-term capital gains, which will be taxable to shareholders as ordinary income.
Purchasing securities on a when-issued 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 table 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
<R>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, or investor confidence.
</R>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 time frame regardless of interim market fluctuations. We do not try to predict overall market movements. Although we may hold securities for any amount of time, we generally do not trade for short-term purposes.
We may hold a substantial part of the Fund's assets in cash or cash equivalents as a temporary, defensive strategy.
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.
<R>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).
</R>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.
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 are permitted to invest up to 20% of the Fund's portfolio in foreign securities. When we do purchase foreign securities, they are generally ADRs, which are denominated in U.S. dollars and traded on U.S. stock exchanges.
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 Fund strives to manage it: The Fund limits exposure to illiquid securities to no more than 15% of its net assets.
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. Bonds rated below investment grade are particularly subject to this risk.
<R>How the Fund strives to manage it: Fixed income securities are not typically a significant component of our strategy. However, when we do invest in fixed income securities, we will not hold more than 15% of the Fund's net assets in high yield, noninvestment grade bonds. This limitation, combined with our careful, credit-oriented bond selection and our commitment to hold a diversified selection of high yield bonds, is designed to manage this risk.
</R>Futures and options risk
Futures and options risk is the possibility that a fund may experience a significant loss if it employs an options or futures strategy related to a security or a market index and that security or index moves in the opposite direction from what the portfolio manager anticipated. Futures and options 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 may use options and futures to protect gains in the portfolio without actually selling a security. We may also use options and futures to quickly invest excess cash so that the portfolio is generally fully invested.
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 in emerging market securities. Striving to manage this risk for the Fund, the Manager carefully screens securities within emerging markets and attempts to consider material risks associated with an individual company or bond issuer.
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 attempts to mitigate this risk through diversification across multiple countries in the portfolio. In addition, under certain circumstances, the Manager may try to hedge the Fund's currency risk by purchasing foreign currency exchange contracts. The Fund may use forward currency exchange contracts only for defensive or protective measures, not to enhance portfolio returns. However, there is no assurance that such a strategy will be successful. Hedging is typically less practical in emerging markets.
Information risk
Information risk is the risk that foreign companies may be subject to different accounting, auditing, and financial reporting standards than U.S. companies. There may be less information available about foreign issuers than domestic issuers. Furthermore, regulatory oversight of foreign issuers may be less stringent or less consistently applied than in the U.S.
How the Fund strives to manage it: The Manager conducts fundamental research on the companies that the Fund invests in rather than relying solely on information available through financial reporting. As part of its worldwide research process, the Manager emphasizes company visits. The Manager believes this will help it to better uncover any potential weaknesses in individual companies.
Inefficient market risk
Inefficient market risk is the risk that foreign markets may be less liquid, have greater price volatility, less regulation, and higher transaction costs than U.S. markets.
How the Fund strives to manage it: The Fund will attempt to reduce this risk by investing in a number of different countries, noting trends in the economy, industries, and financial markets.
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 only obtain 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 will 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.
<R>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 0.50% of average daily net assets during the last fiscal year.
</R> <R>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 fiscal year ended April 30, 2010.
</R>
Jeffrey S. Van Harte has primary responsibility for making day-to-day investment decisions for Delaware U.S. Growth Fund. In making investment decisions for the Fund, Mr. Van Harte regularly consults with Christopher J. Bonavico, Daniel J. Prislin, and Christopher M. Ericksen.
</R> <R></R> <R>
Jeffrey S. Van Harte, CFA,
Senior Vice President, Chief Investment Officer — Focus Growth Equity
Jeffrey S. Van Harte is the chief investment officer for the Focus Growth Equity team, which manages large-cap growth, smid-cap growth, all-cap growth, and global growth portfolios. Prior to joining Delaware Investments in April 2005 in his current position, he was a principal and executive vice president at Transamerica Investment Management. Van Harte has been managing portfolios and separate accounts for more than 20 years. Before becoming a portfolio manager, Van Harte was a securities analyst and trader for Transamerica Investment Services, which he joined in 1980. Van Harte received his bachelor's degree in finance from California State University at Fullerton.
Christopher J. Bonavico, CFA,
Vice President, Senior Portfolio Manager, Equity Analyst
Christopher J. Bonavico joined Delaware Investments in April 2005 as a senior portfolio manager on the firm's Focus Growth Equity team, which manages large-cap growth, smid-cap growth, all-cap growth, and global growth portfolios. He was most recently a principal and portfolio manager at Transamerica Investment Management, where he managed sub-advised funds and institutional separate accounts. Before joining Transamerica in 1993, he was a research analyst for Salomon Brothers. Bonavico received his bachelor's degree in economics from the University of Delaware.
Daniel J. Prislin, CFA,
Vice President, Senior Portfolio Manager, Equity Analyst
Daniel J. Prislin joined Delaware Investments in April 2005 as a senior portfolio manager on the firm's Focus Growth Equity team, which manages large-cap growth, smid-cap growth, all-cap growth, and global growth portfolios. He was most recently a principal and portfolio manager at Transamerica Investment Management, where he also managed sub-advised funds and institutional separate accounts. Prior to joining Transamerica in 1998, he was a portfolio manager with The Franklin Templeton Group. Prislin received an MBA and bachelor's degree in business administration from the University of California at Berkeley.
Christopher M. Ericksen, CFA,
Vice President, Portfolio Manager, Equity Analyst
Christopher M. Ericksen joined Delaware Investments in April 2005 as a portfolio manager on the firm's Focus Growth Equity team, which manages large-cap growth, smid-cap growth, all-cap growth, and global growth portfolios. He was most recently a portfolio manager at Transamerica Investment Management, where he also managed institutional separate accounts. Before joining Transamerica in 2004, he was a vice president at Goldman Sachs. During his 10 years there, he worked in investment banking as well as investment management. Ericksen received his bachelor's degree from Carnegie Mellon University, with majors in industrial management, economics, and political science.
The SAI provides additional information about the portfolio managers' compensation, other funds managed by the portfolio managers, and the portfolio managers' ownership of Fund shares.
</R> <R>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 Fund's 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 Fund's 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.
</R> <R>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.
</R> <R>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. The Fund relies on certain exemptive rules adopted by the SEC that require the board of trustees to be composed of a majority of trustees independent of a fund's investment manager and distributor.
</R>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.
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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.
<R></R> <R></R>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.
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.
Institutional Class shares are available for purchase only by the following:
<R>
retirement plans introduced by persons not associated with brokers or dealers that are primarily engaged in the retail securities business and rollover IRAs from such plans;
tax-exempt employee benefit plans of the Manager or its affiliates and of securities dealer firms with 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 accounts;
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 shares of the Class, 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 Code, for which the the Manager, Distributor, or the Fund's service agent, 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 the Fund's transfer agent; 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.
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). The level of payments made to a qualifying Financial Intermediary in any given year will 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.
</R>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. 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 NAV or the price of the Fund's shares.
For more information, please see the SAI.
By mail
<R>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 219691, Kansas City, MO 64121-9691 or 430 W. 7th Street, Kansas City, MO 64105-1407 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.
</R>
Please note that purchase orders submitted by mail will not be accepted until such orders are received by Delaware Investments at P.O. Box 219691, Kansas City, MO 64121-9691 for investments by regular mail or 430 W. 7th Street, Kansas City, MO 64105-1407 for investments
by overnight courier service. Please do not send purchase orders to 2005 Market Street, Philadelphia, PA 19103-7094.
By wire
Ask your bank to wire the amount you want to invest to The Bank of New York Mellon, ABA #021000018, bank account number 8900403748. 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 800 362-7500 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 you may not exchange your shares for Class A shares, other than Delaware Cash Reserve ® Fund. You may not exchange shares for Class B, Class C, or Class R shares. To open an account by exchange, call your Client Services Representative at 800 362-7500.
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.
<R>The price you pay for shares will depend on when we receive your purchase order. If an authorized agent or we receive your order 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 the 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.
</R>We determine the NAV per share for each class of the Fund at the close of regular trading on the NYSE on each Business Day. The NAV per share for each class of the 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 in foreign securities, the fund's NAV may change on days when a shareholder will not be able to purchase or sell 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 value.
<R>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 price 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.
</R>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.
<R>If you have an account in the same Delaware Investments® Fund as another person or entity at your address, we send one copy of the Fund's prospectus and annual and semiannual reports to that address, unless you opt otherwise. This will help us reduce the printing and mailing expenses associated with the Fund. We will continue to send one copy of each of these documents to that address until you notify us that you wish to receive individual materials. If you wish to receive individual materials, please call your Client Services Representative at 800 362-7500. We will begin sending you individual copies of these documents 30 days after receiving your request.
</R> <R></R> <R>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.
</R>By mail
<R>You may redeem your shares by mail by writing to: Delaware Investments at P.O. Box 219691, Kansas City, MO 64121-9691 or 430 W. 7th Street, Kansas City, MO 64105-1407 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.
</R>Please note that redemption orders submitted by mail will not be accepted until such orders are received by Delaware Investments at P.O. Box 219691, Kansas City, MO 64121-9691 for redemptions by regular mail or 430 W. 7th Street, Kansas City, MO 64105-1407 for redemptions by overnight courier service. Please do not send redemption requests to 2005 Market Street, Philadelphia, PA 19103-7094.
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 your financial advisor
Your financial advisor can handle all the details of redeeming your shares (selling them back to the Fund). Your financial advisor may charge a separate fee for this service.
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.
<R>When you send us a properly completed request to redeem or exchange shares, and an authorized agent or we receive the request 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. 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, we will wait until your check has cleared, which can take up to 15 days, before we send your redemption proceeds.
</R>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.
<R></R> <R>If you redeem shares and your account balance falls below $250, the Fund may redeem your shares after 60 days' written notice to you.
</R> <R></R>You may generally exchange all or part of your shares for shares of the same class of another Delaware Investments ® Fund. If you exchange shares to a fund that has a sales charge, you will pay any applicable sales charges on your new shares. 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. You may not exchange your shares for Class A shares of another Delaware Investments ® Fund, other than Delaware Cash Reserve ® Fund. You may not exchange your shares for Class B, Class C, or Class R shares of another Delaware Investments ® Fund. The Fund may refuse the purchase side of any exchange request, if, in the Manager's judgment, the Fund would be unable to invest effectively in accordance with its investment objective and policies or would otherwise potentially be adversely affected.
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.
<R>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.
</R>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.
<R>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.
</R>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.
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 and distribute all of its net investment income, if any, to shareholders as dividends annually. 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
<R></R> <R>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 search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
</R> <R></R>Avoid "buying a dividend"
<R>At the time you purchase your Fund shares, the Fund's net asset value 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."
</R>Tax considerations
<R>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.
</R> <R>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 taxable years of the Fund beginning before January 1, 2013, unless such provision is extended or made permanent, a portion of income dividends designated 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.
</R> <R>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.
</R> <R></R> <R>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.
</R> <R></R> <R>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.
</R> <R></R> <R>Other. 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. Exemptions from U.S. withholding tax are provided for capital gain dividends paid by the Fund from long-term capital gains, if any, and, with respect to taxable years of the Fund that begin before January 1, 2012 (unless such sunset date is extended 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 such dividends and distributions of income and capital gains will be subject to backup withholding at a rate of 28% if you fail to properly certify that you are not a U.S. person.
</R> <R></R> <R>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.
</R> <R></R> <R></R>
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 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.
<R>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 2010 fiscal year 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 800 362-7500. For the fiscal years prior to 2010, the Fund's prior independent registered public accounting firm audited the Fund's financial statements.
</R>Delaware U.S. Growth Fund
<R>Institutional Class Shares | 2010 | 2009 | 2008 | 2007 |
Year ended Oct. 31, 2006 |
Net asset value, beginning of period | $11.710 | $9.890 | $16.580 | $13.750 | $13.280 |
Income (loss) from investment operations: | |||||
Net investment income (loss)1 | (0.008) | 0.024 | 0.014 | 0.005 | (0.005) |
Net realized and unrealized gain (loss) on investments | 2.527 | 1.813 | (6.704) | 2.825 | 0.475 |
Total from investment operations | 2.519 | 1.837 | (6.690) | 2.830 | 0.470 |
Less dividends and distributions from: | |||||
Net investment income | (0.009) | (0.017) | — | — | — |
Total dividends and distributions | (0.009) | (0.017) | — | — | — |
Net asset value, end of period | $14.220 | $11.710 | $9.890 | $16.580 | $13.750 |
Total return2 | 21.42% | 18.48% | (40.35%) | 20.58% | 3.54% |
Ratios and supplemental data: | |||||
Net assets, end of period (000 omitted) | $477,361 | $460,756 | $542,554 | $671,819 | $569,335 |
Ratio of expenses to average net assets | 0.82% | 0.75% | 0.76% | 0.76% | 0.75% |
Ratio of expenses to average net assets prior to fees waived and expense paid indirectly | 0.96% | 1.01% | 0.88% | 0.84% | 0.87% |
Ratio of net investment income (loss) to average net assets | (0.06%) | 0.25% | 0.10% | 0.03% | (0.04%) |
Ratio of net investment loss to average net assets prior to fees waived and expense paid indirectly | (0.20%) | (0.01%) | (0.02%) | (0.05%) | (0.16%) |
Portfolio turnover | 22% | 30% | 35% | 30% | 25% |
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.
Web site: www.delawareinvestments.com
E-mail: service@delinvest.com
Client Services Representative: 800 362-7500
Delaphone Service: 800 362-FUND (800 362-3863)
For convenient access to account information or current performance information on all Delaware Investments ® Funds seven days a week, 24 hours a day, use this touch-tone service.
<R>
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,
You can find reports and other information about the Fund on the EDGAR database on the SEC web site (www.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,
PR-104 [10/10] PDF 16191 [2/11] Investment Company Act number: 811-07972 |
Delaware Diversified Income Fund | |
Class A | DPDFX |
Class B | DPBFX |
Class C | DPCFX |
Class R | DPRFX |
Institutional Class | DPFFX |
Delaware U.S. Growth Fund | |
Class A | DUGAX |
Class B | DEUBX |
Class C | DEUCX |
Class R | DEURX |
Institutional Class | DEUIX |
TABLE OF CONTENTS | |||
Page | Page | ||
Organization and Classification | 2 | Purchasing Shares | 41 |
Investment Objectives, Restrictions, and Policies | 2 | Investment Plans | 53 |
Investment Strategies and Risks | 3 | Determining Offering Price and Net Asset Value | 56 |
Disclosure of Portfolio Holdings Information | 22 | Redemption and Exchange | 57 |
Management of the Trust | 23 | Distributions and Taxes | 63 |
Investment Manager and Other Service Providers | 31 | Performance Information | 77 |
Portfolio Managers | 35 | Financial Statements | 77 |
Trading Practices and Brokerage | 39 | Principal Holders | 77 |
Capital Structure | 40 | Appendix A – Description of Ratings | 81 |
ORGANIZATION AND CLASSIFICATION |
INVESTMENT OBJECTIVES, RESTRICTIONS, AND POLICIES |
Fund | 2009 | 2010 | ||
Delaware Diversified Income Fund | 213% | 232% | ||
Delaware U.S. Growth Fund | 30% | 22% |
INVESTMENT STRATEGIES AND RISKS |
DISCLOSURE OF PORTFOLIO HOLDINGS INFORMATION |
MANAGEMENT OF THE TRUST |
Number of | |||||
Funds in | Other | ||||
Position(s) | Fund Complex | Directorships | |||
Name, Address, and | Held with | Length of | Principal Occupation(s) | Overseen by | Held by |
Birthdate | the Trust | Time Served | During Past 5 Years | Trustee | Trustee |
Interested Trustees | |||||
Patrick P. Coyne1 | Chairman, | Chairman and | Patrick P. Coyne has served in | 77 | Director — Kaydon |
2005 Market Street | President, Chief | Trustee since | various executive capacities at | Corp. | |
Philadelphia, PA 19103 | Executive Officer, | August 2006 | different times at Delaware | ||
and Trustee | Investments.2 | Board of Governors | |||
April 1963 | President and | Member — | |||
Chief Executive | Investment Company | ||||
Officer since | Institute (ICI) | ||||
August 2006 | |||||
Finance Committee | |||||
Member — St. John | |||||
Vianney Roman | |||||
Catholic Church | |||||
Board of Trustees — | |||||
Agnes Irwin School | |||||
Member of | |||||
Investment | |||||
Committee — Cradle | |||||
of Liberty Council, | |||||
BSA | |||||
(2007–2010) |
Number of | |||||
Funds in | Other | ||||
Position(s) | Fund Complex | Directorships | |||
Name, Address, and | Held with | Length of | Principal Occupation(s) | Overseen by | Held by |
Birthdate | the Trust | Time Served | During Past 5 Years | Trustee | Trustee |
Independent Trustees | |||||
Thomas L. Bennett | Trustee | Since March | Private Investor — | 77 | Director — Bryn |
2005 Market Street | 2005 | (March 2004–Present) | Mawr Bank Corp. | ||
Philadelphia, PA 19103 | (BMTC) | ||||
Investment Manager — | |||||
October 1947 | Morgan Stanley & Co. | Chairman of | |||
(January 1984–March 2004) | Investment | ||||
Committee — | |||||
Pennsylvania | |||||
Academy of Fine | |||||
Arts | |||||
Investment | |||||
Committee and | |||||
Governance | |||||
Committee Member | |||||
— Pennsylvania | |||||
Horticultural Society | |||||
John A. Fry | Trustee | Since January | President — | 77 | Member, Board of |
2005 Market Street | 2001 | Drexel University | Governors – | ||
Philadelphia, PA 19103 | (August 2010–Present) | NASDAQ OMX | |||
PHLX LLC | |||||
May 1960 | President — | ||||
Franklin & Marshall College | Director — | ||||
(July 2002–July 2010) | Community Health | ||||
Systems | |||||
Executive Vice President — | |||||
University of Pennsylvania | Director — Ecore | ||||
(April 1995–June 2002) | International | ||||
(2009–2010) | |||||
Director — Allied | |||||
Barton Securities | |||||
Holdings | |||||
(2005–2008) | |||||
Anthony D. Knerr | Trustee | Since April | Founder and Managing Director | 77 | None |
2005 Market Street | 1990 | — Anthony Knerr & Associates | |||
Philadelphia, PA 19103 | (Strategic Consulting) | ||||
(1990–Present) | |||||
December 1938 | |||||
Lucinda S. Landreth | Trustee | Since March | Chief Investment Officer — | 77 | None |
2005 Market Street | 2005 | Assurant, Inc. | |||
Philadelphia, PA 19103 | (Insurance) | ||||
(2002–2004) | |||||
June 1947 |
Number of | |||||
Funds in | Other | ||||
Position(s) | Fund Complex | Directorships | |||
Name, Address, and | Held with | Length of | Principal Occupation(s) | Overseen by | Held by |
Birthdate | the Trust | Time Served | During Past 5 Years | Trustee | Trustee |
Independent Trustees | |||||
Ann R. Leven | Trustee | Since October | Consultant — | 77 | Director and Audit |
2005 Market Street | 1989 | ARL Associates | Committee Chair — | ||
Philadelphia, PA 19103 | (Financial Planning) | Systemax Inc. | |||
(1983–Present) | (2001–2009) | ||||
November 1940 | |||||
Director and Audit | |||||
Committee | |||||
Chairperson — | |||||
Andy Warhol | |||||
Foundation | |||||
(1999–2007) | |||||
Thomas F. Madison | Trustee | Since May | President and Chief Executive | 77 | Director and Chair |
2005 Market Street | 19973 | Officer — MLM Partners, Inc. | of Compensation | ||
Philadelphia, PA 19103 | (Small Business Investing & | Committee, | |||
Consulting) | Governance | ||||
February 1936 | (January 1993–Present) | Committee Member | |||
— CenterPoint | |||||
Energy | |||||
Lead Director and | |||||
Chair of Audit and | |||||
Governance | |||||
Committees, | |||||
Member of | |||||
Compensation | |||||
Committee — | |||||
Digital River Inc. | |||||
Director and Chair | |||||
of Governance | |||||
Committee, Audit | |||||
Committee Member | |||||
— | |||||
Rimage Corporation | |||||
Director and Chair | |||||
of Compensation | |||||
Committee — | |||||
Spanlink | |||||
Communications | |||||
Lead Director and | |||||
Member of | |||||
Compensation and | |||||
Governance | |||||
Committees — | |||||
Valmont Industries, | |||||
Inc. | |||||
(1987–2010) | |||||
Director — Banner | |||||
Health | |||||
(1996–2007) |
Number of | |||||
Funds in | Other | ||||
Position(s) | Fund Complex | Directorships | |||
Name, Address, and | Held with | Length of | Principal Occupation(s) | Overseen by | Held by |
Birthdate | the Trust | Time Served | During Past 5 Years | Trustee | Trustee |
Independent Trustees | |||||
Janet L. Yeomans | Trustee | Since April | Vice President and Treasurer | 77 | Director — |
2005 Market Street | 1999 | (January 2006–Present) | Okabena Company | ||
Philadelphia, PA 19103 | |||||
Vice President — Mergers & | |||||
July 1948 | Acquisitions | ||||
(January 2003–January 2006), | |||||
and Vice President | |||||
(July 1995–January 2003) | |||||
3M Corporation | |||||
J. Richard Zecher | Trustee | Since March | Founder — | 77 | Director and Audit |
2005 Market Street | 2005 | Investor Analytics | Committee | ||
Philadelphia, PA 19103 | (Risk Management) | Member — | |||
(May 1999–Present) | Investor Analytics | ||||
July 1940 | |||||
Founder — | Director — | ||||
Sutton Asset Management | Oxigene Inc. | ||||
(Hedge Fund) | (2003–2008) | ||||
(September 1996–Present) |
Number of | |||||
Funds in | Other | ||||
Position(s) | Fund Complex | Directorships | |||
Name, Address, and | Held with | Length of | Principal Occupation(s) | Overseen by | Held by |
Birthdate | the Trust | Time Served | During Past 5 Years | Officer | Officer |
Officers | |||||
David F. Connor | Vice President, | Vice President | David F. Connor has served as | 77 | None4 |
2005 Market Street | Deputy General | since | Vice President and Deputy | ||
Philadelphia, PA 19103 | Counsel, and | September | General Counsel at Delaware | ||
Secretary | 2000 and | Investments since 2000. | |||
December 1963 | Secretary since | ||||
October 2005 | |||||
Daniel V. Geatens | Vice President and | Treasurer since | Daniel V. Geatens has served in | 77 | None4 |
2005 Market Street | Treasurer | October 2007 | various capacities at different | ||
Philadelphia, PA 19103 | times at Delaware Investments. | ||||
October 1972 | |||||
David P. O’Connor | Senior Vice | Senior Vice | David P. O’Connor has served in | 77 | None4 |
2005 Market Street | President, General | President, | various executive and legal | ||
Philadelphia, PA 19103 | Counsel, and Chief | General | capacities at different times at | ||
Legal Officer | Counsel, and | Delaware Investments. | |||
February 1966 | Chief Legal | ||||
Officer since | |||||
October 2005 | |||||
Richard Salus | Senior Vice | Chief Financial | Richard Salus has served in | 77 | None4 |
2005 Market Street | President and | Officer since | various executive capacities at | ||
Philadelphia, PA 19103 | Chief Financial | November | different times at Delaware | ||
Officer | 2006 | Investments. | |||
October 1963 | |||||
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 Funds’ Manager, principal underwriter, and transfer agent. | |||||
3 In 1997, several funds managed by Voyageur Fund Managers, Inc. (the “Voyageur Funds”) were incorporated into the Delaware Investments® Family of Funds. Mr. Madison served as a director of the Voyageur Funds from 1993 until 1997. | |||||
4 David F. Connor, Daniel V. Geatens, David P. O’Connor, 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 Fund s. |
Aggregate Dollar Range of Equity Securities in | ||
Dollar Range of Equity Securities in the | All Registered Investment Companies Overseen | |
Name | Trust | by Trustee in Family of Investment Companies |
Interested Trustee | ||
Patrick P. Coyne | $50,001–$100,000 | Over $100,000 |
(Delaware Diversified Income Fund) | ||
Independent Trustees | ||
Thomas L. Bennett | None | $10,001- $50,000 |
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 U.S. Growth Fund) | ||
$10,001-$50,000 | ||
(Delaware Diversified Income Fund) | ||
Ann R. Leven | $10,001–$50,000 | Over $100,000 |
(Delaware U.S. Growth Fund) | ||
Thomas F. Madison | None | $50,01 - $100,000 |
Janet L. Yeomans | $10,001–$50,000 | Over $100,000 |
(Delaware U.S. Growth Fund) | ||
J. Richard Zecher | None | Over $100,000 |
Total Compensation | |||
from the Investment | |||
Aggregate | Retirement Benefits | Companies in the | |
Compensation from | Accrued as Part of | Delaware Investments® | |
Trustee | the Trust | Fund Expenses | Complex1 |
Thomas L. Bennett | $53,785 | None | $208,333 |
John A. Fry | $53,169 | None | $205,833 |
Anthony D. Knerr | $53,048 | None | $205,000 |
Lucinda S. Landreth | $46,026 | None | $173,333 |
Ann R. Leven | $62,010 | None | $234,000 |
Thomas F. Madison | $52,516 | None | $203,333 |
Janet L. Yeomans | $47,995 | None | $185,833 |
J. Richard Zecher | $49,282 | None | $190,833 |
1 | Effective January 1, 2011, each Independent Trustee/Director will receive an annual retainer fee of $131,250 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 investments 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 $15,000. The Lead/Coordinating Trustee/Director of the Delaware Investments® Funds receives an additional annual retainer of $40,000. |
INVESTMENT MANAGER AND OTHER SERVICE PROVIDERS |
Management Fee Schedule | |
(as a percentage of average daily net assets) | |
Fund Name | Annual Rate |
Delaware Diversified Income 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 U.S. Growth 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 |
Fund | October 31, 2010 | October 31, 2009 | October 31, 2008 |
Delaware Diversified Income Fund | $30,519,960 earned | $18,622,514 earned | $14,912,383 earned |
$30,519,960 paid | $18,622,514 paid | $14,912,383 paid | |
$0 waived | $0 waived | $0 waived | |
Delaware U.S. Growth Fund | $3,806,075 earned | $3,705,483 earned | $5,441,374 earned |
$2,985,277 paid | $2,189,838 paid | $4,418,044 paid | |
$820,798 waived | $1,515,645 waived | $1,023,330 waived |
Delaware Diversified Income Fund | |||
Class A Shares | |||
Total Amount of | Amounts | ||
Underwriting | Reallowed to | Net Commission | |
Fiscal Year Ended | Commissions | Dealers | to DDLP |
10/31/10 | $10,372,309 | $9,198,256 | $1,174,053 |
10/31/09 | $6,654,587 | $5,840,822 | $813,765 |
10/31/08 | $4,058,776 | $3,552,871 | $505,905 |
Delaware U.S. Growth Fund | |||
Class A Shares | |||
Total Amount of | Amounts | ||
Underwriting | Reallowed to | Net Commission | |
Fiscal Year Ended | Commissions | Dealers | to DDLP |
10/31/10 | $42,454 | $35,133 | $7,321 |
10/31/09 | $52,118 | $43,648 | $8,470 |
10/31/08 | $75,056 | $62,752 | $12,304 |
Fiscal Year Ended | Class A | Class B | Class C |
10/31/10 | $0 | $41,520 | $219,001 |
10/31/09 | $0 | $96,769 | $157,680 |
10/31/08 | $54,628 | $94,332 | $158,050 |
Fiscal Year Ended | Class A | Class B | Class C |
10/31/10 | $0 | $2,965 | $568 |
10/31/09 | $0 | $7,974 | $696 |
10/31/08 | $3,332 | $20,605 | $2,802 |
Fiscal year ended | Fiscal year ended | Fiscal year ended | ||||||
Fund | October 31, 2008 | October 31, 2009 | October 31, 2010 | |||||
Delaware Diversified Income Fund | $1,114,792 | $1,420,435 | $2,379,327 | |||||
Delaware U.S. Growth Fund | $302,824 | $201,576 | $205,782 |
Fiscal year ended | Fiscal year ended | Fiscal year ended | ||||||
Fund | October 31, 2008 | October 31, 2009 | October 31, 2010 | |||||
Delaware Diversified Income Fund | $159,256 | $202,919 | $342,569 | |||||
Delaware U.S. Growth Fund | $43,260 | $28,797 | $29,612 |
PORTFOLIO MANAGERS |
Total Assets in Accounts | ||||
No. of Accounts with | with | |||
Total Assets | Performance- | Performance- | ||
No. of Accounts | Managed | Based Fees | Based Fees | |
Jeffrey S. Van Harte | ||||
Registered Investment | 27 | $5.1 billion | 3 | $1.4 billion |
Companies | ||||
Other Pooled Investment | 0 | $0 | 0 | $0 |
Vehicles | ||||
Other Accounts | 36 | $3.6 billion | 4 | $467.0 million |
Christopher J. Bonavico | ||||
Registered Investment | 29 | $6.1 billion | 3 | $1.4 billion |
Companies | ||||
Other Pooled Investment | 0 | $0 | 0 | $0 |
Vehicles | ||||
Other Accounts | 44 | $3.7 billion | 4 | $467.0 million |
Daniel J. Prislin | ||||
Registered Investment | 25 | $5.0 billion | 3 | $1.4 billion |
Companies | ||||
Other Pooled Investment | 0 | $0 | 0 | $0 |
Vehicles | ||||
Other Accounts | 42 | $3.5 billion | 4 | $467.0 million |
Christopher M. Ericksen | ||||
Registered Investment | 24 | $4.9 billion | 3 | $1.4 billion |
Companies | ||||
Other Pooled Investment | 0 | $0 | 0 | $0 |
Vehicles | ||||
Other Accounts | 35 | $3.5 billion | 4 | $467.0 million |
Paul Grillo | ||||
Registered Investment | 16 | $14.2 billion | 0 | $0 |
Companies | ||||
Other Pooled Investment | 0 | $0 | 0 | $0 |
Vehicles | ||||
Other Accounts | 23 | $3.0 billion | 0 | $0 |
Thomas H. Chow | ||||
Registered Investment | 12 | $14.5 billion | 0 | $0 |
Companies | ||||
Other Pooled Investment | 0 | $0 | 0 | $0 |
Vehicles | ||||
Other Accounts | 11 | $4.1 billion | 0 | $0 |
Total Assets in Accounts | ||||
No. of Accounts with | with | |||
Total Assets | Performance- | Performance- | ||
No. of Accounts | Managed | Based Fees | Based Fees | |
Roger A. Early | ||||
Registered Investment | 18 | $17.9 billion | 0 | $0 |
Companies | ||||
Other Pooled Investment | 0 | $0 | 0 | $0 |
Vehicles | ||||
Other Accounts | 43 | $6.2 billion | 0 | $0 |
Kevin P. Loome | ||||
Registered Investment | 16 | $13.1 billion | 0 | $0 |
Companies | ||||
Other Pooled Investment | 0 | $0 | 0 | $0 |
Vehicles | ||||
Other Accounts | 13 | $3.4 billion | 0 | $0 |
Wen-Dar Chen | ||||
Registered Investment | 2 | $9.7 billion | 0 | $0 |
Companies | ||||
Other Pooled Investment | 0 | $0 | 0 | $0 |
Vehicles | ||||
Other Accounts | 2 | $1.2 billion | 0 | $0 |
J. David Hillmeyer* | ||||
Registered Investment | 0 | $0 | 0 | $0 |
Companies | ||||
Other Pooled Investment | 0 | $0 | 0 | $0 |
Vehicles | ||||
Other Accounts | 0 | $0 | 0 | $0 |
Laura A. Ostrander* | ||||
Registered Investment | 0 | $0 | 0 | $0 |
Companies | ||||
Other Pooled Investment | 0 | $0 | 0 | $0 |
Vehicles | ||||
Other Accounts | 0 | $0 | 0 | $0 |
* | Mr. Hillmeyer and Ms. Ostrander did not begin managing Delaware Diversified Income Fund until after the end of the Fund’s most recent fiscal year end. |
Name | Dollar Range |
Paul Grillo | Over $1 million |
Wen-Dar Chen | $10,001 - $50,000 |
Thomas H. Chow | $10,001 - $50,000 |
Roger A. Early | none |
Kevin P. Loome | none |
Name | Dollar Range |
Jeffrey S. Van Harte | $1 - $10,000 |
Christopher J. Bonavico | $500,001 - $1 million |
Daniel J. Prislin | $10,001 - $50,000 |
Christopher M. Ericksen | $50,001 - $100,000 |
TRADING PRACTICES AND BROKERAGE |
2008 | 2009 | 2010 |
$471,488 | $68,436 | $37,209 |
2008 | 2009 | 2010 |
$464,990 | $459,848 | $274,266 |
Value of Securities | |||
Fund | Regular Broker/Dealer | Held | |
Delaware Diversified Income Fund | BANK OF NEW YORK MELLON CORP | $3,440,738 | |
CITIGROUP INC | $1,396,002 | ||
DEUTSCHE POST AG | $397,017 | ||
JPMORGAN CHASE | $422,568 | ||
WACHOVIA CORP | $271,706 |
CAPITAL STRUCTURE |
PURCHASING SHARES |
Delaware U.S. Growth Fund | ||||
Class A | Class B | Class C | Class R | |
Advertising | $791 | --- | $73 | --- |
Annual/Semiannual Reports | $246 | --- | $164 | $156 |
Broker Sales Charges | --- | --- | $19,181 | --- |
Broker Trails* | $226,834 | $4,411 | $103,503 | --- |
Commissions to Wholesalers | $22,882 | $6 | $1,636 | $339 |
Interest on Broker Sales Charges | --- | $19,146 | $129 | --- |
Promotional-Other | $2,262 | --- | $238 | $1 |
Prospectus Printing | $1,183 | --- | $185 | $84 |
Wholesaler Expenses | $17,742 | $26,459 | $4,290 | $10,947 |
Total | $271,940 | $50,022 | $129,399 | $11,527 |
Delaware Diversified Income Fund | ||||
Class A | Class B | Class C | Class R | |
Advertising | $29,827 | --- | $12,970 | --- |
Annual/Semiannual Reports | $518 | --- | $305 | $167 |
Broker Sales Charges | --- | $218,810 | $9,715,212 | --- |
Broker Trails* | $6,341,235 | $120,286 | $4,015,014 | $323,862 |
Commissions to Wholesalers | $3,775,048 | $17 | $1,766,315 | $150,937 |
Interest on Broker Sales Charges | --- | $14,386 | $160,689 | --- |
Promotional-Other | $51,050 | --- | $18,198 | $74 |
Prospectus Printing | $12,981 | --- | $4,945 | $610 |
Wholesaler Expenses | --- | $207 | $1,781,234 | $297,539 |
Total | $10,210,659 | $353,706 | $17,474,882 | $773,189 |
* | 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. |
INVESTMENT PLANS |
DETERMINING OFFERING PRICE AND NET ASSET VALUE |
REDEMPTION AND EXCHANGE |
DISTRIBUTIONS AND TAXES |
PERFORMANCE INFORMATION |
FINANCIAL STATEMENTS |
PRINCIPAL HOLDERS |
Fund Name | Class | Shareholders Name and Address | Percentage |
DELAWARE DIVERSIFIED | A | CITIGROUP GLOBAL MARKETS, INC. | 5.84% |
INCOME FUND | ATTN: PETER BOOTH, 7TH FLOOR | ||
333 W 34TH ST | |||
NEW YORK NY 10001-2402 | |||
A | MLPF&S FOR THE SOLE | 5.66% | |
BENEFIT OF ITS CUSTOMERS | |||
ATTENTION: FUND ADMIN | |||
4800 DEER LAKE DRIVE E, 2ND FL | |||
JACKSONVILLE FL 32246-6484 | |||
A | MORGAN STANLEY SMITH BARNEY | 5.49% | |
HARBORSIDE FINANCIAL CENTER | |||
PLAZA 2 3RD FL | |||
JERSEY CITY NJ 07311 | |||
A | PRUDENTIAL INVESTMENT | 5.15% | |
MGMT SVC | |||
FBO MUTUAL FUND CLIENTS | |||
MAIL STOP NJ 05-11-20 | |||
3 GATEWAY CTR FL 11 | |||
100 MULBERRY ST | |||
NEWARK NJ 07102 |
A | UBS WM USA | 20.17% | |
OMNI ACCOUNT M/F | |||
ATTN DEPARTMENT MANAGER | |||
499 WASHINGTON BLVD FL 9 | |||
JERSEY CITY NJ 07310-2055 | |||
R | MLPF&S FOR THE SOLE | 48.69% | |
BENEFIT OF ITS CUSTOMERS | |||
ATTENTION: FUND ADMIN | |||
4800 DEER LAKE DRIVE E, 2ND FL | |||
JACKSONVILLE FL 32246-6484 | |||
B | MLPF&S FOR THE SOLE | 12.88% | |
BENEFIT OF ITS CUSTOMERS | |||
ATTENTION: FUND ADMIN | |||
4800 DEER LAKE DRIVE E, 2ND FL | |||
JACKSONVILLE FL 32246-6484 | |||
C | CITIGROUP GLOBAL MARKETS, INC. | 8.18% | |
ATTN: PETER BOOTH, 7TH FLOOR | |||
333 W 34TH ST | |||
NEW YORK NY 10001-2402 | |||
C | MLPF&S FOR THE SOLE BENEFIT OF | 34.29% | |
ITS CUSTOMERS | |||
ATTENTION: FUND ADMIN 4800 | |||
DEER LAKE DRIVE E, 2ND FL | |||
JACKSONVILLE FL 32246-6484 | |||
C | MORGAN STANLEY SMITH BARNEY | 7.14% | |
HARBORSIDE FINANCIAL CENTER | |||
PLAZA 2 3RD FL | |||
JERSEY CITY NJ 07311 | |||
C | UBS WM USA | 9.65% | |
OMNI ACCOUNT M/F | |||
ATTN DEPARTMENT MANAGER | |||
499 WASHINGTON BLVD FL 9 | |||
JERSEY CITY NJ 07310-2055 | |||
I | MLPF&S FOR THE SOLE | 45.76% | |
BENEFIT OF ITS CUSTOMERS | |||
ATTENTION: FUND ADMIN | |||
4800 DEER LAKE DRIVE E, 2ND FL | |||
JACKSONVILLE FL 32246-6484 | |||
I | PRUDENTIAL INVESTMENT | 24.08% | |
MGMT SVC | |||
FBO MUTUAL FUND CLIENTS | |||
MAIL STOP NJ 05-11-20 | |||
3 GATEWAY CTR FL 11 | |||
100 MULBERRY ST | |||
NEWARK NJ 07102 | |||
DELAWARE U.S. GROWTH | A | PRUDENTIAL INVESTMENT | 41.35% |
FUND A | MGMT SVC | ||
FBO MUTUAL FUND CLIENTS | |||
MAIL STOP NJ 05-11-20 | |||
3 GATEWAY CTR FL 11 | |||
100 MULBERRY ST | |||
NEWARK NJ 07102 |
B | CITIGROUP GLOBAL MARKETS, INC. | 13.81% | |
ATTN: PETER BOOTH, 7TH FLOOR | |||
333 W 34TH ST | |||
NEW YORK NY 10001-2402 | |||
C | CITIGROUP GLOBAL MARKETS, INC. | 5.82% | |
ATTN: PETER BOOTH, 7TH FLOOR | |||
333 W 34TH ST | |||
NEW YORK NY 10001-2402 | |||
C | MLPF&S FOR THE SOLE | 11.59% | |
BENEFIT OF ITS CUSTOMERS | |||
ATTENTION: FUND ADMIN | |||
4800 DEER LAKE DRIVE E, 2ND FL | |||
JACKSONVILLE FL 32246-6484 | |||
I | C/O M&I TRUST CO NA | 11.41% | |
ATTN MF VALLEE & CO FBO VA | |||
11270 W PARK PL STE 400 | |||
MILWAUKEE WI 53224-3638 | |||
I | JP MORGAN CHASE BANK TRUSTEE | 5.06% | |
FBO CADENCE DESIGN SYS INC | |||
401K PLAN | |||
PO BOX 419784 | |||
KANSAS CITY MO 64141-6784 | |||
I | NFS LLC | 6.23% | |
FEBO BROWN BROTHERS | |||
HARRIMAN & CO | |||
INV MGMT SVC TOM WILSON | |||
140 BROADWAY FL 6 | |||
NEW YORK NY 10005-1108 | |||
I | PRUDENTIAL INVESTMENT | 22.32% | |
MGMT SVC | |||
FBO MUTUAL FUND CLIENTS | |||
MAIL STOP NJ 05-11-20 | |||
3 GATEWAY CTR FL 11 | |||
100 MULBERRY ST | |||
NEWARK NJ 07102 | |||
R | FRONTIER TRUST COMPANY | 5.47% | |
FBO UNITED COMMUNITY BANK | |||
401(K) PS PLAN | |||
PO BOX 10758 | |||
FARGO ND 58106 | |||
R | FRONTIER TRUST CO | 11.00% | |
FBO OMNIBUS-VARIOUS | |||
RETIREMENT PLANS | |||
PO BOX 10758 | |||
FARGO ND 58106-0758 | |||
R | ING | 9.48% | |
ENHANCED K-CHOICE | |||
TRUSTEE: RELIANCE TRUST | |||
COMPANY | |||
400 ATRIUM DRIVE | |||
SOMERSET NJ 08873 |
R | LINCOLN LIFE & ANNUITY CO | 10.57% | |
OF NY | |||
1300 S CLINTON ST | |||
FORT WAYNE IN 46802-3506 | |||
R | LINCOLN NATIONAL LIFE INS CO | 37.77% | |
1300 S CLINTON ST | |||
FORT WAYNE IN 46802-3506 | |||
R | MG TRUST COMPANY | 5.66% | |
CUST FBO ZIMMERMAN PLUMBING | |||
& HEATING, INC. | |||
700 17TH ST STE 300 | |||
DENVER CO 80202-3531 |
Moody’s Investors Service - Bond Ratings |
Aaa | Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edge.” Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. |
Aa |
Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than Aaa bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements which make the long-term risks appear somewhat larger than in Aaa securities.
|
|
A
|
Bonds which are rated A possess many favorable investment attributes and are considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future.
|
|
Baa
|
Bonds that are rated Baa are considered medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
|
|
Ba
|
Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
|
|
B
|
Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
|
|
Caa
|
Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
|
|
Ca
|
Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
|
|
C
|
Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
|
Short-Term Debt Ratings
Moody’s short-term debt ratings are opinions of the ability of issuers to repay punctually senior obligations which have an original maturity not exceeding one year |
|
P-1 |
Issuers rated “PRIME-1” or “P-1” (or supporting institutions) have superior ability for repayment of senior short-term debt obligations.
|
P-2
|
Issuers rated “PRIME-2” or “P-2” (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations.
|
P-3
|
Issuers rated “PRIME-3” or “P-3” (or supporting institutions) have an acceptable ability for repayment of senior short-term debt obligations.
|
Municipal Note Ratings
Issuers or the features associated with Moody’s MIG or VMIG ratings are identified by date of issue, date of maturity or maturities or rating expiration date and description to distinguish each rating from other ratings. Each rating designation is unique with no implication as to any other similar issue of the same obligor. MIG ratings terminate at the retirement of the obligation while VMIG rating expiration will be a function of each issue’s specific structural or credit features. |
|
MIG 1/VMIG 1
|
This designation denotes best quality. There is present strong protection by established cash flows, superior liquidity support, or demonstrated broad-based access to the market for refinancing.
|
MIG 2/VMIG 2
|
This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group.
|
MIG 3/VMIG 3
|
This designation denotes favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established.
|
MIG 4/VMIG 4
|
This designation denotes adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
|
S&P’s - Bond Ratings
|
AAA
|
Debt rated AAA has the highest rating assigned by S&P to a debt obligation. Capacity to pay interest and repay principal is extremely strong.
|
AA
|
Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree.
|
|
A
|
Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.
|
|
BBB
|
Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories.
|
|
BB, B, CCC, and CC
|
Debt rated BB, B, CCC or CC is regarded, on balance, as predominately speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation and CC the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
|
|
C
|
This rating is reserved for income bonds on which no interest is being paid.
|
|
D
|
Debt rated D is in default, and payment of interest and/or repayment of principal is in arrears.
|
Commercial Paper Ratings
S&P’s commercial paper ratings are current assessments of the likelihood of timely payment of debt having an original maturity of no more than 365 days. |
|
A-1
|
The A-1 designation indicates that the degree of safety regarding timely payment is either overwhelming or very strong. A plus (+) designation is applied only to those issues rated A-1 which possess an overwhelming degree of safety.
|
A-2
|
Capacity for timely payment on issues with the designation A-2 is strong. However, the relative degree of safely is not as high as for issues designated A-1.
|
A-3
|
Issues carrying this designation have a satisfactory capacity for timely payment. They are, however, somewhat more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.
|
Municipal Note Ratings
An S&P municipal note rating reflects the liquidity concerns and market access risks unique to notes. Notes due in 3 years or less will likely receive a note rating. Notes maturing beyond 3 years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment: Amortization schedule (the larger the final maturity relative to other maturities, the more likely it will be treated as a note).
Sources of payment (the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note).
|
|
SP-1
|
Very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation.
|
SP-2
|
Satisfactory capacity to pay principal and interest.
|
SP-3
|
Speculative capacity to pay principal and interest.
|
Item 28. | Exhibits. The following exhibits are incorporated by reference to the Registrant’s previously filed documents indicated below, except as noted: | |||
(a) | Articles of Incorporation. | |||
(1) | Executed Agreement and Declaration of Trust (December 17, 1998) incorporated into this filing by reference to Post-Effective Amendment No. 12 filed November 22, 1999. | |||
(i) | Executed Certificate of Amendment (November 15, 2006) to the Agreement and Declaration of Trust incorporated into this filing by reference to the Registration Statement on Form N-14 (File No. 333-146274) filed September 24, 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. 29 filed December 30, 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. 29 filed December 30, 2009. | |||
(2) | Executed Certificate of Trust (December 17, 1998) incorporated into this filing by reference to Post-Effective Amendment No. 12 filed November 22, 1999. | |||
(b) | By-Laws. Amended and Restated By-Laws (November 16, 2006) incorporated into this filing by reference to the Registration Statement on Form N-14 (File No. 333-146274) filed September 24, 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. 12 filed November 22, 1999. | |||
(2) | By-Laws. Article II of the Amended and Restated By-Laws (November 16, 2006) incorporated into this filing by reference to the Registration Statement on Form N-14 (File No. 333-146274) filed September 24, 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. 30 filed February 26, 2010. | |||
(2) | Executed Investment Advisory Expense Limitation Letter (February 25, 2011) between Delaware Management Company (a series of Delaware Management Business Trust) and the Registrant attached as Exhibit No. EX-99.d.2. | |||
(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. 31 filed January 14, 2011. | |||
(ii) | Executed Distribution Expense Limitation Letter (February 25, 2011) between Delaware Distributors, L.P. and the Registrant attached as Exhibit No. EX- 99.e.1.ii. | |||
(2) | Dealer's Agreement (January 2001) incorporated into this filing by reference to Post- Effective Amendment No. 19 filed June 28, 2002. | |||
(3) | Vision Mutual Fund Gateway® Agreement (November 2000) incorporated into this filing by reference to Post-Effective Amendment No. 19 filed June 28, 2002. | |||
(4) | Registered Investment Advisers Agreement (January 2001) incorporated into this filing by reference to Post-Effective Amendment No. 19 filed June 28, 2002. | |||
(5) | Bank/Trust Agreement (August 2004) incorporated into this filing by reference to Post- Effective Amendment No. 23 filed December 27, 2004. | |||
(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. 28 filed February 27, 2009. | |||
(2) | Executed Securities Lending Authorization 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. 1 to the Registration Statement on Form N-14 (File No. 333-146274) filed February 20, 2008. | |||
(i) | Executed Amendment (September 22, 2009) to the Securities Lending Authorization Agreement attached as Exhibit No. EX-99.g.2.i. | |||
(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. 30 filed February 26, 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. 17 filed December 28, 2001. | |||
(i) | Executed Amendment No. 1 to Schedule A (June 28, 2002) to the Shareholder Services Agreement incorporated into this filing by reference to Post-Effective Amendment No. 20 filed December 31, 2002. | |||
(ii) | Executed Letter Amendment (August 23, 2002) to the Shareholder Services Agreement incorporated into this filing by reference to Form N-14 (File No. 333- 109743) filed October 16, 2003. | |||
(iii) | Executed Schedule B (June 1, 2009) to the Shareholder Services Agreement incorporated into this filing by reference to Post-Effective Amendment No. 29 filed December 30, 2009. |
(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. 1 to the Registration Statement on Form N-14 (File No. 333-146274) filed February 20, 2008. | |||
(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. 31 filed January 14, 2011. | |||
(i) | Amendment No. 2 (January 31, 2011) to Schedule A of the Fund Accounting and Financial Administration Oversight Agreement attached as Exhibit No. EX- 99.h.3.i. | |||
(i) | Legal Opinion. | |||
(1) | Opinion and Consent of Counsel (June 28, 2002) incorporated into this filing by reference to Post-Effective Amendment No. 19 filed June 28, 2002. | |||
(2) | Opinion and Consent of Counsel with respect to Delaware International Bond Fund to be filed by amendment. | |||
(j) | Other Opinions. Consent of Independent Registered Public Accounting Firm (February 2011) attached as Exhibit No. EX-99.j. | |||
(k) | Omitted Financial Statements. Not applicable. | |||
(l) | Initial Capital Agreements. Not applicable. | |||
(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. 17 filed December 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. 17 filed December 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. 17 filed December 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. 25 filed February 22, 2006. | |||
(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. 30 filed February 26, 2010. | |||
(o) | Reserved. | |||
(p) | Codes of Ethics. |
(1) | Code of Ethics for the Delaware Investments' Family of Funds (February 2010) incorporated into this filing by reference to Post-Effective Amendment No. 30 filed February 26, 2010. | ||
(2) | Code of Ethics for Delaware Investments (Delaware Management Company, a series of Delaware Management Business Trust, and Delaware Distributors, L.P.) (February 2010) incorporated into this filing by reference to Post-Effective Amendment No. 30 filed February 26, 2010. | ||
(q) | Other. Powers of Attorney (May 17, 2007) incorporated into this filing by reference to Post-Effective Amendment No. 27 filed February 28, 2008. | ||
Item 29. | Persons Controlled by or Under Common Control with Registrant. None. | ||
Item 30. | Indemnification. Article VII, Section 2 (November 15, 2006) of the Agreement and Declaration of Trust incorporated into this filing by reference to the Registration Statement on Form N-14 (File No. 333-146274) filed September 24, 2007. Article VI of the Amended and Restated By-Laws (November 16, 2006) incorporated into this filing by reference to the Registration Statement on Form N-14 (File No. 333-146274) filed September 24, 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® 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 Income Funds, Delaware Group Limited-Term Government Funds, Delaware Group State Tax-Free 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 Manager’s 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.
The following persons serving as directors or officers of the Manager have held the following positions during the past two 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 with | Other Positions and Offices |
Business Address | with Manager | 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. Hogan1 | 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 | |
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 | |||
Philip N. Russo | Executive Vice | None | Mr. Russo has served in various |
President/Chief | executive capacities within | ||
Administrative Officer | Delaware Investments | ||
Theodore K. Smith | Executive Vice | None | Mr. Smith has served in various |
President/Retail Product, | executive capacities within | ||
Sales, and Marketing | Delaware Investments | ||
Douglas L. Anderson | Senior Vice President – | None | Mr. Anderson has served in |
Operations/Anti-Money | various executive capacities | ||
Laundering Officer | within Delaware Investments | ||
Joseph R. Baxter | Senior Vice | Senior Vice President/Head | Mr. Baxter has served in |
President/Head of | of Municipal Bond | various executive capacities | |
Municipal Bond | Investments | within Delaware Investments | |
Investments/Senior | |||
Portfolio Manager | |||
Christopher S. Beck | Senior Vice | Senior Vice | Mr. Beck has served in various |
President/Chief | President/Senior Portfolio | executive capacities within | |
Investment Officer— | Manager | Delaware Investments | |
Small Cap Value Equity | |||
Michael P. Buckley | Senior Vice | Senior Vice | Mr. Buckley has served in |
President/Director of | President/Director of | various executive capacities | |
Municipal Research | Municipal Research | within Delaware Investments | |
Stephen J. Busch | Senior Vice President – | Senior Vice President– | Mr. Busch has served in various |
Investment Accounting | Investment Accounting | executive capacities within | |
Delaware Investments | |||
Michael F. Capuzzi | Senior Vice President — | Senior Vice President — | Mr. Capuzzi has served in |
Investment Systems | Investment Systems | various executive capacities | |
within Delaware Investments | |||
Lui-Er Chen2 | Senior Vice | Senior Vice | Mr. Chen has served in various |
President/Senior | President/Senior Portfolio | executive capacities within | |
Portfolio Manager/Chief | Manager/Chief Investment | Delaware Investments | |
Investment Officer, | Officer, Emerging Markets | ||
Emerging Markets and | |||
Healthcare | |||
Thomas H. Chow | Senior Vice | Senior Vice | Mr. Chow has served in various |
President/Senior | President/Senior Portfolio | executive capacities within | |
Portfolio Manager | Manager | Delaware Investments | |
Stephen J. Czepiel3 | Senior Vice | Senior Vice | Mr. Czepiel has served in |
President/Senior | President/Senior Portfolio | various executive capacities | |
Portfolio Manager | Manager | within Delaware Investments | |
Chuck M. Devereux | Senior Vice | Senior Vice | Mr. Devereux has served in |
President/Director of | President/Senior Research | various executive capacities | |
Credit Research | Analyst | within Delaware Investments | |
Roger A. Early4 | Senior Vice | Senior Vice | Mr. Early has served in various |
President/Co-Chief | President/Senior Portfolio | executive capacities within | |
Investment Officer— | Manager | Delaware Investments | |
Total Return Fixed | |||
Income Strategy |
Name and Principal | Positions and Offices | Positions and Offices with | Other Positions and Offices |
Business Address | with Manager | Registrant | Held |
Stuart M. George | Senior Vice | Senior Vice President/Head | Mr. George has served in |
President/Head of Equity | of Equity Trading | various executive capacities | |
Trading | within Delaware Investments | ||
Edward Gray | Senior Vice | Vice President/Senior | Mr. Gray has served in various |
President/Chief | Portfolio Manager | executive capacities within | |
Investment Officer— | Delaware Investments | ||
International Value | |||
Equity | |||
Paul Grillo | Senior Vice President/ | Senior Vice | Mr. Grillo has served in various |
Co-Chief Investment | President/Senior Portfolio | executive capacities within | |
Officer—Total Return | Manager | Delaware Investments | |
Fixed Income Strategy | |||
James L. Hinkley | Senior Vice | None | Mr. Hinkley has served in |
President/Director of | various executive capacities | ||
Wealth Management | within Delaware Investments | ||
Jeffrey M. Kellogg | Senior Vice | Senior Vice | Mr. Kellogg has served in |
President/Mutual Funds | President/Mutual Funds | various executive capacities | |
within Delaware Investments | |||
Kevin P. Loome5 | Senior Vice | Senior Vice | Mr. Loome has served in |
President/Senior | President/Senior Portfolio | various executive capacities | |
Portfolio Manager/Head | Manager/Head of High | within Delaware Investments | |
of High Yield | Yield Investments | ||
Investments | |||
Christopher McCarthy | Senior Vice | None | Mr. McCarthy has served in |
President/Sub-Advisory | various executive capacities | ||
Sales and Relationship | within Delaware Investments | ||
Management | |||
Timothy D. McGarrity | Senior Vice | None | Mr. McGarrity has served in |
President/Financial | various executive capacities | ||
Services Officer | within Delaware Investments | ||
Francis X. Morris | Senior Vice | Senior Vice President/Chief | Mr. Morris has served in |
President/Chief | Investment Officer — Core | various executive capacities | |
Investment Officer — | Equity | within Delaware Investments | |
Core Equity | |||
Brian L. Murray, Jr. | Senior Vice | Senior Vice President/ | Mr. Murray has served in |
President/Chief | Chief Compliance Officer | various executive capacities | |
Compliance Officer | within Delaware Investments | ||
Susan L. Natalini | Senior Vice | None | Ms. Natalini has served in |
President/Marketing & | various executive capacities | ||
Shared Services | within Delaware Investments | ||
D. Tysen Nutt | Senior Vice | Senior Vice President/Chief | Mr. Nutt has served in various |
President/Chief | Investment Officer, | executive capacities within | |
Investment Officer, | Large Cap Value Focus | Delaware Investments | |
Large Cap Value Focus | Equity | ||
Equity | |||
Philip O. Obazee | Senior Vice | Senior Vice | Mr. Obazee has served in |
President/Structured | President/Structured | various executive capacities | |
Products and Derivatives | Products and Derivatives | within Delaware Investments | |
Manager | Manager |
Name and Principal | Positions and Offices | Positions and Offices with | Other Positions and Offices |
Business Address | with Manager | Registrant | Held |
David P. O’Connor | Senior Vice | Senior Vice | Mr. O’Connor 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 | |||
Jeffrey W. Rexford | Senior Vice | None | Mr. Rexford has served in |
President/Sub-Advisory | various executive capacities | ||
and Relationship | within Delaware Investments | ||
Management | |||
Richard Salus | Senior Vice President/ | Senior Vice President/Chief | Mr. Salus has served in various |
Controller/Treasurer | Financial Officer | executive capacities within | |
Delaware Investments | |||
Senior Vice President/Chief | |||
Financial Officer – Optimum | |||
Fund Trust | |||
Jeffrey S. Van Harte6 | Senior Vice | Senior Vice President/Chief | Mr. Van Harte has served in |
President/Chief | Investment Officer — | various executive capacities | |
Investment Officer — | Focus Growth Equity | within Delaware Investments | |
Focus Growth Equity | |||
W. Alex Wei | Senior Vice | None | Mr. Wei has served in various |
President/Head of | executive capacities within | ||
Structured Credit | Delaware Investments | ||
Investment/Chief | |||
Quantitative Analyst | |||
Babak Zenouzi7 | Senior Vice | Senior Vice | Mr. Zenouzi has served in |
President/Chief | President/Senior Portfolio | various executive capacities | |
Investment Officer— | Manager | within Delaware Investments | |
REIT Equity | |||
Gary T. Abrams | Vice President/Senior | Vice President/Senior | Mr. Abrams has served in |
Equity Trader | Equity Trader | various executive capacities | |
within Delaware Investments | |||
Christopher S. Adams | Vice President/Portfolio | Vice President/Portfolio | Mr. Adams has served in |
Manager/Senior Equity | Manager/Senior Equity | various executive capacities | |
Analyst | Analyst | within Delaware Investments | |
Damon J. Andres | Vice President/Senior | Vice President/Senior | Mr. Andres has served in |
Portfolio Manager | Portfolio Manager | various executive capacities | |
within Delaware Investments | |||
Wayne A. Anglace8 | Vice President/Credit | Vice President/Credit | Mr. Anglace has served in |
Research Analyst | Research Analyst | various executive capacities | |
within Delaware Investments | |||
Margaret MacCarthy Bacon9 | Vice | Vice President/Investment | Ms. Bacon has served in various |
President/Investment | Specialist | executive capacities within | |
Specialist | Delaware Investments | ||
Patricia L. Bakely | Vice President/Assistant | None | Ms. Bakely has served in |
Controller | various executive capacities | ||
within Delaware Investments | |||
Kristen E. Bartholdson10 | Vice President/Portfolio | Vice President/Portfolio | Ms. Bartholdson has served in |
Manager | Manager | various executive capacities | |
within Delaware Investments |
Name and Principal | Positions and Offices | Positions and Offices with | Other Positions and Offices |
Business Address | with Manager | Registrant | Held |
Todd Bassion11 | Vice President/ Portfolio | Vice President/Portfolio | Mr. Bassion has served in |
Manager | Manager | various executive capacities | |
within Delaware Investments | |||
Jo Anne Bennick | Vice President/15(c) | Vice President/15(c) | Ms. Bennick has served in |
Reporting | Reporting | various executive capacities | |
within Delaware Investments | |||
Richard E. Biester | Vice President/Equity | Vice President/Equity | Mr. Biester has served in |
Trader | Trader | various executive capacities | |
within Delaware Investments | |||
Sylvie S. Blender | Vice President/Sub- | None | Ms. Blender has served in |
Advisory Client Services | various executive capacities | ||
within Delaware Investments | |||
Christopher J. Bonavico12 | Vice President/Senior | Vice President/Senior | Mr. Bonavico has served in |
Portfolio | Portfolio Manager/Equity | various executive capacities | |
Manager/Equity Analyst | Analyst | within Delaware Investments | |
Vincent A. Brancaccio | Vice President/Senior | Vice President/Senior | Mr. Brancaccio has served in |
Equity Trader | Equity Trader | various executive capacities | |
within Delaware Investments | |||
Kenneth F. Broad13 | Vice President/Senior | Vice President/Senior | Mr. Broad has served in various |
Portfolio | Portfolio Manager/Equity | executive capacities within | |
Manager/Equity Analyst | Analyst | Delaware Investments | |
Kevin J. Brown14 | Vice President/ | Vice President/ | Mr. Brown has served in |
Senior Investment | Senior Investment | various executive capacities | |
Specialist | Specialist | within Delaware Investments | |
Mary Ellen M. Carrozza | Vice President/Client | Vice President/Client | Ms. Carrozza has served in |
Services | Services | various executive capacities | |
within Delaware Investments | |||
Stephen G. Catricks | Vice President/Portfolio | Vice President/Portfolio | Mr. Catricks has served in |
Manager | Manager | various executive capacities | |
within Delaware Investments | |||
Wen-Dar Chen15 | Vice President/Portfolio | Vice President/Portfolio | Mr. Chen has served in various |
Manager—International | Manager | executive capacities within | |
Debt | Delaware Investments | ||
Anthony G. Ciavarelli | Vice President/ | Vice President/Associate | Mr. Ciavarelli has served in |
Associate General | General Counsel/Assistant | various executive capacities | |
Counsel/Assistant | Secretary | within Delaware Investments | |
Secretary | |||
David F. Connor | Vice President/Deputy | Vice President/Deputy | Mr. Connor has served in |
General | General Counsel/Secretary | various executive capacities | |
Counsel/Secretary | within Delaware Investments | ||
Vice President/Deputy General | |||
Counsel/Secretary – Optimum | |||
Fund Trust | |||
Michael Costanzo | Vice | Vice President/Performance | Mr. Costanzo has served in |
President/Performance | Analyst Manager | various executive capacities | |
Analyst Manager | within Delaware Investments | ||
Kishor K. Daga | Vice | Vice President/Derivatives | Mr. Daga has served in various |
President/Derivatives | Operations | executive capacities within | |
Operations | Delaware Investments |
Name and Principal | Positions and Offices | Positions and Offices with | Other Positions and Offices |
Business Address | with Manager | Registrant | Held |
Cori E. Daggett | Vice President/Counsel/ | Vice President/Associate | Ms. Daggett has served in |
Assistant Secretary | General Counsel/Assistant | various executive capacities | |
Secretary | within Delaware Investments | ||
Craig C. Dembek16 | Vice President/Senior | Vice President/Senior | Mr. Dembek has served in |
Research Analyst | Research Analyst | various executive capacities | |
within Delaware Investments | |||
Kevin C. Donegan | Vice President/Business | None | Mr. Donegan has served in |
Manager | various executive capacities | ||
within Delaware Investments | |||
Camillo D’Orazio | Vice | Vice President/Investment | Mr. D’Orazio has served in |
President/Investment | Accounting | various executive capacities | |
Accounting | within Delaware Investments | ||
Christopher M. Ericksen17 | Vice President/Portfolio | Vice President/Portfolio | Mr. Ericksen has served in |
Manager/Equity Analyst | Manager/Equity Analyst | various executive capacities | |
within Delaware Investments | |||
Joel A. Ettinger | Vice President – | Vice President – Taxation | Mr. Ettinger has served in |
Taxation | various executive capacities | ||
within Delaware Investments | |||
Devon K. Everhart | Vice President/Senior | Vice President/Senior | Mr. Everhart has served in |
Research Analyst | Research Analyst | various executive capacities | |
within Delaware Investments | |||
Joseph Fiorilla | Vice President – Trading | Vice President – Trading | Mr. Fiorilla has served in |
Operations | Operations | various executive capacities | |
within Delaware Investments | |||
Charles E. Fish | Vice President/Senior | Vice President/Senior | Mr. Fish has served in various |
Equity Trader | Equity Trader | executive capacities within | |
Delaware Investments | |||
Clifford M. Fisher | Vice President/Credit | Vice President/Senior | Mr. Fisher has served in various |
Analyst | Municipal Bond Trader | executive capacities within | |
Delaware Investments | |||
Patrick G. Fortier18 | Vice President/Portfolio | Vice President/Portfolio | Mr. Fortier has served in |
Manager/Equity Analyst | Manager/Equity Analyst | various executive capacities | |
within Delaware Investments | |||
Paul D. Foster | Vice | None | Mr. Foster has served in various |
President/Investment | executive capacities within | ||
Specialist — Emerging | Delaware Investments | ||
Growth Equity | |||
Jamie Fox | Vice President/Head of | None | Mr. Fox has served in various |
Investment Only | executive capacities within | ||
Delaware Investments | |||
Denise A. Franchetti | Vice President/Portfolio | Vice President/Portfolio | Ms. Franchetti has served in |
Manager/Senior | Manager/Municipal Bond | various executive capacities | |
Research Analyst | Credit Analyst | within Delaware Investments | |
Lawrence G. Franko19 | Vice President/ Senior | Vice President/ Senior | Mr. Franko has served in |
Equity Analyst | Equity Analyst | various executive capacities | |
within Delaware Investments | |||
Daniel V. Geatens | Vice President/Director | Vice President/Treasurer | Mr. Geatens has served in |
of Financial | various executive capacities | ||
Administration | within Delaware Investments | ||
Gregory A. Gizzi20 | Vice President/ Head | Vice President/ Head | Mr. Gizzi has served in various |
Municipal Bond Trader | Municipal Bond Trader | executive capacities with | |
Delaware Investments | |||
Gregg J. Gola21 | Vice President/Senior | Vice President/Senior High | Mr. Gola has served in various |
High Yield Trader | Yield Trader | executive capacities within | |
Delaware Investments |
Name and Principal | Positions and Offices | Positions and Offices with | Other Positions and Offices |
Business Address | with Manager | Registrant | Held |
Christopher Gowlland22 | Vice President/Senior | Vice President/Senior | Mr. Gowlland has served in |
Quantitative Analyst | Quantitative Analyst | various executive capacities | |
within Delaware Investments | |||
Edward Gray23 | Vice President/Senior | Vice President/Senior | Mr. Gray has served in various |
Portfolio Manager | Portfolio Manager | executive capacities within | |
Delaware Investments | |||
David J. Hamilton | Vice President/Research | Vice President/Credit | Mr. Hamilton has served in |
Analyst | Research Analyst | various executive capacities | |
within Delaware Investments | |||
Lisa L. Hansen24 | Vice President/Head of | Vice President/Head of | Ms. Hansen has served in |
Focus Growth Equity | Focus Growth Equity | various executive capacities | |
Trading | Trading | within Delaware Investments | |
Scott Hastings | Vice President/Equity | None | Mr. Hastings has served in |
Analyst | various executive capacities | ||
within Delaware Investments | |||
Sharon L. Hayman | Vice President/Sub- | None | Ms. Hayman has served in |
Advisory Client Services | various executive capacities | ||
within Delaware Investments | |||
Gregory M. Heywood25 | Vice President/Portfolio | Vice President/Portfolio | Mr. Heywood has served in |
Manager/Equity Analyst | Manager/Equity Analyst | various executive capacities | |
within Delaware Investments | |||
Sharon Hill | Vice President/Head of | Vice President/Head of | Ms. Hill has served in various |
Equity Quantitative | Equity Quantitative | executive capacities within | |
Research and Analytics | Research and Analytics | Delaware Investments | |
J. David Hillmeyer26 | Vice President/Corporate | Vice President/Corporate | Mr. Hillmeyer has served in |
Bond Trader | Bond Trader | various executive capacities | |
within Delaware Investments | |||
Chungwei Hsia27 | Vice President/ | Vice President/ Senior | Mr. Hsia has served in various |
Emerging and Developed | Research Analyst | executive capacities within | |
Markets Analyst | Delaware Investments | ||
Cynthia Isom | Vice President/Portfolio | Vice President/Portfolio | Ms. Isom has served in various |
Manager | Manager | executive capacities within | |
Delaware Investments | |||
Stephen M. Juszczyszyn28 | Vice | Vice President/Structured | Mr. Juszczyszyn has served in |
President/Structured | Products Analyst/Trader | various executive capacities | |
Products Analyst/Trader | within Delaware Investments | ||
Kelly McKee | Vice President/Equity | None | Ms. McKee has served in |
Analyst | various executive capacities | ||
within Delaware Investments | |||
Nancy Keenan | Vice President/Product | None | Ms. Keenan has served in |
Manager | various executive capacities | ||
within Delaware Investments | |||
Anu B. Kothari29 | Vice President/ Equity | Vice President/ Equity | Ms. Kothari has served in |
Analyst | Analyst | various executive capacities | |
within Delaware Investments | |||
Roseanne L. Kropp | Vice President/ Senior | Vice President/Senior Fund | Ms. Kropp has served in various |
Fund Analyst - High | Analyst – High Grade | executive capacities within | |
Grade | Delaware Investments | ||
Nikhil G. Lalvani | Vice President/ Portfolio | Vice President/Portfolio | Mr. Lalvani has served in |
Manager | Manager | various executive capacities | |
within Delaware Investments |
Name and Principal | Positions and Offices | Positions and Offices with | Other Positions and Offices |
Business Address | with Manager | Registrant | Held |
Anthony A. Lombardi | Vice President/Senior | Vice President/Senior | Mr. Lombardi has served in |
Portfolio Manager | Portfolio Manager | various executive capacities | |
within Delaware Investments | |||
Kent Madden | Vice President/Equity | None | Mr. Madden has served in |
Analyst | various executive capacities | ||
within Delaware Investments | |||
John P. McCarthy30 | Vice President/Senior | Vice President/Senior | Mr. McCarthy has served in |
Research Analyst/Trader | Research Analyst/Trader | various executive capacities | |
within Delaware Investments | |||
Brian McDonnell31 | Vice | Vice President/Structured | Mr. McDonnell has served in |
President/Structured | Products Analyst/Trader | various executive capacities | |
Products Analyst/Trader | within Delaware Investments | ||
Michael S. Morris | Vice President/Portfolio | Vice President/Portfolio | Mr. Morris has served in |
Manager/Senior Equity | Manager/Senior Equity | various executive capacities | |
Analyst | Analyst | within Delaware Investments | |
Terrance M. O’Brien32 | Vice President/ Fixed | Vice President/ Fixed | Mr. O’Brien has served in |
Income Reporting | Income Reporting Analyst | various executive capacities | |
Analyst | with Delaware Investments | ||
Constantine Mylonas | Vice President/Product | None | Mr. Mylonas has served in |
Manager | various executive capacities | ||
within Delaware Investments | |||
Donald G. Padilla | Vice President/Portfolio | Vice President/Portfolio | Mr. Padilla has served in |
Manager/Senior Equity | Manager/Senior Equity | various executive capacities | |
Analyst | Analyst | within Delaware Investments | |
Marlene Petter | Vice | None | Ms. Petter has served in various |
President/Marketing | executive capacities within | ||
Communications | Delaware Investments | ||
Daniel J. Prislin33 | Vice President/Senior | Vice President/Senior | Mr. Prislin has served in various |
Portfolio | Portfolio Manager/Equity | executive capacities within | |
Manager/Equity Analyst | Analyst | Delaware Investments | |
Gretchen Regan | Vice | Vice President/Quantitative | Ms. Regan has served in various |
President/Quantitative | Analyst | executive capacities within | |
Analyst | Delaware Investments | ||
Carl Rice | Vice President/Senior | Vice President/Senior | Mr. Rice has served in various |
Investment Specialist, | Investment Specialist, | executive capacities within | |
Large Cap Value Focus | Large Cap Value Focus | Delaware Investments | |
Equity | Equity | ||
Joseph T. Rogina | Vice President/Equity | Vice President/Equity | Mr. Rogina has served in |
Trader | Trader | various executive capacities | |
within Delaware Investments | |||
Debbie A. Sabo34 | Vice President/Equity | Vice President/Equity | Ms. Sabo has served in various |
Trader – Focus Growth | Trader – Focus Growth | executive capacities within | |
Equity | Equity | Delaware Investments | |
Kevin C. Schildt | Vice President/Senior | Vice President/Senior | Mr. Schildt has served in |
Municipal Credit Analyst | Municipal Credit Analyst | various executive capacities | |
within Delaware Investments | |||
Bruce Schoenfeld35 | Vice President/Equity | Vice President/Equity | Mr. Schoenfeld has served in |
Analyst | Analyst | various executive capacities | |
within Delaware Investments | |||
Brian Scotto | Vice | None | Mr. Scotto has served in various |
President/Government | executive capacities within | ||
and Agency Trader | Delaware Investments | ||
Richard D. Seidel | Vice President/Assistant | None | Mr. Seidel has served in various |
Controller/Assistant | executive capacities within | ||
Treasurer | Delaware Investments |
Name and Principal | Positions and Offices | Positions and Offices with | Other Positions and Offices |
Business Address | with Manager | Registrant | Held |
Catherine A. Seklecki | Vice President/Sub- | None | Ms. Seklecki has served in |
Advisory Client Services | various executive capacities | ||
within Delaware Investments | |||
Parshv V. Shah | Vice President/Equity | None | Mr. Shah has served in various |
Analyst | executive capacities within | ||
Delaware Investments | |||
Barry Slawter | Vice President/Editorial | None | Mr. Slawter has served in |
Services | various executive capacities | ||
within Delaware Investments | |||
Molly Thompson | Vice President/Product | None | Ms. Thompson has served in |
Manager | various executive capacities | ||
within Delaware Investments | |||
Junee Tan-Torres36 | Vice President/ | Vice President/ Structured | Mr. Tan-Torres has served in |
Structured Solutions | Solutions | various executive capacities | |
within Delaware Investments | |||
Robert A. Vogel, Jr. | Vice President/Senior | Vice President/Senior | Mr. Vogel has served in various |
Portfolio Manager | Portfolio Manager | executive capacities within | |
Delaware Investments | |||
Nael H. Wahaidi | Vice | None | Mr. Wahaidi has served in |
President/Quantitative | various executive capacities | ||
Analyst | within Delaware Investments | ||
Jeffrey S. Wang37 | Vice President/ Equity | Vice President/ Equity | Mr. Wang has served in various |
Analyst | Analyst | executive capacities within | |
Delaware Investments | |||
Michael G. Wildstein38 | Vice President/ Senior | Vice President/ Senior | Mr. Wildstein has served in |
Research Analyst | Research Analyst | various executive capacities | |
within Delaware Investments | |||
Kathryn R. Williams | Vice President/Associate | Vice President/Associate | Ms. Williams has served in |
General | General Counsel/Assistant | various executive capacities | |
Counsel/Assistant | Secretary | within Delaware Investments | |
Secretary | |||
Guojia Zhang39 | Vice President/Equity | Vice President/Equity | Mr. Zhang has served in various |
Analyst | Analyst | executive capacities within | |
Delaware Investments | |||
Douglas R. Zinser40 | Vice President/Senior | Vice President/Credit | Mr. Zinser has served in various |
Research Analyst | Research Analyst | executive 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. | |
(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 |
Theodore K. Smith | Executive Vice President | None |
Douglas L. Anderson | Senior Vice President | None |
Jeffrey M. Kellogg | Senior Vice President | None |
Brian L. Murray, Jr. | Senior Vice President | Senior Vice President/Chief |
Compliance Officer | ||
David P. O’Connor | Senior Vice President/ General | Senior Vice President/Strategic |
Counsel | Investment Relationships and | |
Initiatives/General Counsel | ||
Richard Salus | Senior Vice | Senior Vice President/Chief |
President/Controller/Treasurer/ | Financial Officer | |
Financial Operations Principal | ||
Trevor M. Blum | Vice President | None |
Mary Ellen M. Carrozza | Vice President | None |
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/Assistant Secretary |
Daniel V. Geatens | Vice President | Vice President |
Edward M. Grant | Vice President | None |
Audrey Kohart | Vice President | Vice President - Financial Planning |
and Reporting | ||
Marlene D. Petter | Vice President | None |
Richard D. Seidel | Vice President/Assistant | None |
Controller/Assistant Treasurer | ||
Michael T. Taggart | Vice President | None |
Molly Thompson | Vice President | None |
Kathryn R. Williams | Vice President/Assistant Secretary | Vice President/Associate General |
Counsel/Assistant Secretary |
(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 at 2005 Market Street, Philadelphia, PA 19103-7094 and 430 W. 7th Street, Kansas City, MO 64105. | |
Item 34. | Management Services. None. | |
Item 35. | Undertakings. Not applicable. |
DELAWARE GROUP ADVISER FUNDS | |||
By: | /s/ Patrick P. Coyne | ||
Patrick P. Coyne | |||
Chairman/President/Chief Executive Officer |
Signature | Title | Date | |||
/s/ Patrick P. Coyne | Chairman/President/Chief Executive Officer | February 28, 2011 | |||
Patrick P. Coyne | (Principal Executive Officer) and Trustee | ||||
Thomas L. Bennett | * | Trustee | February 28, 2011 | ||
Thomas L. Bennett | |||||
John A. Fry | * | Trustee | February 28, 2011 | ||
John A. Fry | |||||
Anthony D. Knerr | * | Trustee | February 28, 2011 | ||
Anthony D. Knerr | |||||
Lucinda S. Landreth | * | Trustee | February 28, 2011 | ||
Lucinda S. Landreth | |||||
Ann R. Leven | * | Trustee | February 28, 2011 | ||
Ann R. Leven | |||||
Thomas F. Madison | * | Trustee | February 28, 2011 | ||
Thomas F. Madison | |||||
Janet L. Yeomans | * | Trustee | February 28, 2011 | ||
Janet L. Yeomans | |||||
J. Richard Zecher | * | Trustee | February 28, 2011 | ||
J. Richard Zecher | |||||
Richard Salus | * | Senior Vice President/Chief Financial Officer | February 28, 2011 | ||
Richard Salus | (Principal Financial Officer) |
*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) |
Exhibit No. | Exhibit | ||
EX-99.d.2 | Executed Investment Advisory Expense Limitation Letter (February 25, 2011) between Delaware Management Company (a series of Delaware Management Business Trust) and the Registrant | ||
EX-99.e.1.ii | Executed Distribution Expense Limitation Letter (February 25, 2011) between Delaware Distributors, L.P. and the Registrant | ||
EX-99.g.2.i | Executed Amendment (September 22, 2009) to the Securities Lending Authorization Agreement | ||
EX-99.h.3.i | Amendment No. 2 (January 31, 2011) to Schedule A to the Fund Accounting and Financial Administration Oversight Agreement | ||
EX-99.j | Consent of Independent Registered Public Accounting Firm (February 2011) |
This ‘485BPOS’ Filing | Date | Other Filings | ||
---|---|---|---|---|
1/1/13 | ||||
2/28/12 | 485BPOS | |||
1/1/12 | ||||
Filed on / Effective on: | 2/28/11 | |||
2/25/11 | ||||
2/3/11 | ||||
1/31/11 | N-Q | |||
1/14/11 | 485APOS | |||
1/1/11 | ||||
12/31/10 | ||||
12/22/10 | ||||
11/30/10 | ||||
10/31/10 | 24F-2NT, N-CSR, NSAR-B | |||
6/30/10 | N-PX | |||
4/30/10 | N-CSR, NSAR-B | |||
2/26/10 | 485BPOS | |||
2/18/10 | 497 | |||
1/4/10 | 497 | |||
1/1/10 | ||||
12/31/09 | ||||
12/30/09 | 485APOS, N-CSR, NSAR-B | |||
10/31/09 | 24F-2NT, 24F-2NT/A, N-CSR, NSAR-B | |||
9/22/09 | ||||
8/18/09 | ||||
6/30/09 | N-PX, NSAR-A | |||
6/1/09 | ||||
2/27/09 | 485BPOS | |||
2/26/09 | ||||
12/31/08 | ||||
10/31/08 | 24F-2NT, N-CSR, NSAR-B | |||
9/30/08 | N-Q | |||
2/28/08 | 485BPOS | |||
2/20/08 | 485BPOS | |||
10/1/07 | ||||
9/24/07 | N-14 | |||
7/20/07 | ||||
5/31/07 | ||||
5/17/07 | ||||
11/16/06 | ||||
11/15/06 | ||||
10/31/06 | 24F-2NT, N-CSR, NSAR-B | |||
10/30/06 | ||||
2/22/06 | 485BPOS | |||
12/31/04 | ||||
12/27/04 | 485APOS | |||
10/16/03 | N-14 | |||
6/2/03 | ||||
5/15/03 | ||||
12/31/02 | 485BPOS | |||
10/28/02 | 497 | |||
8/23/02 | ||||
6/28/02 | 485BPOS | |||
12/28/01 | 485BPOS, N-30D | |||
4/19/01 | ||||
11/23/99 | 485BPOS, N-8A/A | |||
11/22/99 | 485BPOS | |||
8/16/99 | ||||
12/17/98 | ||||
12/29/97 | ||||
9/19/97 | PRES14A | |||
7/17/97 | ||||
5/1/97 | ||||
5/6/96 | ||||
5/3/96 | DEF 14A, PRES14A | |||
4/26/96 | ||||
2/23/96 | ||||
11/29/93 | ||||
8/10/93 | ||||
List all Filings |
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 3/01/24 Delaware Group Adviser Funds N-14/A 12:15M Pietrzykowski Kris… R/FA 2/27/24 Delaware Group Adviser Funds 485BPOS 2/27/24 27:5.5M Digital Publishi… Inc/FA 1/18/24 Delaware Group Adviser Funds N-14 14:13M Pietrzykowski Kris… R/FA 2/27/23 Delaware Group Adviser Funds 485BPOS 2/28/23 29:4.9M Digital Publishi… Inc/FA 2/25/22 Delaware Group Adviser Funds 485BPOS 2/25/22 31:5.3M Digital Publishi… Inc/FA 5/19/21 Delaware Group Adviser Funds N-14/A 6:1.7M DG3/FA 5/18/21 Delaware Group Adviser Funds N-14/A¶ 5/18/21 7:1.7M DG3/FA 4/09/21 Delaware Group Adviser Funds N-14¶ 4/09/21 7:1.3M Pietrzykowski Kris… R/FA 2/25/21 Delaware Group Adviser Funds 485BPOS 2/26/21 24:7M Digital Publishi… Inc/FA |